Elon Musk will need to raise more capital to fund his $44 billion purchase of Twitter after letting a $6.25 billion line of credit secured by his shares in electric car maker Tesla expire.
Following the loss of the credit line, the amount of capital Musk needs to secure to complete the transaction now stands at $33.5 billion, according to documents he filed with U.S. regulators on Wednesday.
This is the latest twist in Musk’s effort to buy Twitter. Earlier this month, Tesla’s chief executive fueled speculation that he was planning to walk away from the transaction, after claiming it “couldn’t go ahead” without the company offering evidence as to its number of fake accounts. He later added that he “continued to maintain his commitment to the acquisition” but indicated he may wish to renegotiate the purchase price.
Musk is looking to raise additional capital for his offer by asking Twitter shareholders like Jack Dorsey, one of the company’s founders, to convert and include their equity stakes in the transaction, which would reduce the amount he would have to put into the deal.
The credit line, originally valued at $12.5 billion, was halved this month when Musk raised $7.14 billion from a cast of investors including Larry Ellison, the billionaire founder of Oracle; the Binance cryptocurrency exchange; and the venture capital group Sequoia Capital.
Financing the transaction without the line of credit will ease pressure on Tesla shares, which lost $125 billion in market value a day after the Twitter takeover was announced. Shares of the electric car maker have fallen by 25% since the transaction was announced.
In announcing his $46.5 billion financing package for the purchase of Twitter, Musk secured lines of credit from a dozen lending institutions, led by Morgan Stanley, offering $62.5 billion of his Tesla shares. as a guarantee.
Eliminating this component of the deal and raising the amount of cash he would need to fund the transaction will result in increased attention to how Musk plans to fund this portion of the transaction.
Twitter’s shares have been trading well below the $54.20 price at which Musk closed his takeover deal. After the entrepreneur’s latest revelation on Wednesday, they rose by more than 5% in post-market transactions, reaching $39.20.
Musk’s takeover of Twitter, a $44 billion transaction, would be one of the biggest leveraged buyouts ever and has been controversial from the start. The Tesla boss announced that he would allow former US President Donald Trump to return to the platform, review the content moderation rules that are in place and combat the proliferation of “bots”.
Translation by Paulo Migliacci
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