We had noted in a previous post that Elon Musk’s soaring net worth on the back of a blistering rally in Tesla shares boded well for the prospects of a compromise with Twitter vis-à-vis the stalled takeover deal. Well, our observation proved to be quite prescient as the CEO of Tesla has now disclosed the liquidation of Tesla shares worth billions of dollars in a likely move to pre-fund his Twitter-related financing commitments ahead of a possible compromise. Bear in mind that Elon Musk and Twitter are headed toward a legal showdown in October, where the social media platform hopes to legally compel Musk to consummate his pledge to take Twitter private. For his part, Musk has cited the uncertainty around the quantum of bots that proliferate on Twitter as a major stumbling block to the implementation of the takeover agreement at the original offer price of $54.20 per share. To wit, Elon Musk has now filed six Form 4s with the SEC (you can peruse these documents here, here, here, here, here, and here), disclosing the sale of 7,924,107 Tesla shares. Cumulatively, this liquidation spree has netted Musk nearly $7 billion ($6.9 billion to be exact) in proceeds. Elon Musk has now sold around $32 billion worth of Tesla shares over the past 12-month period. Toward the end of 2021, the CEO of Tesla had sold roughly $16 billion worth of shares to pay off tax liabilities. Then, in April-May, Musk had sold around $8.5 billion worth of Tesla shares to fund his equity commitments under the original Twitter takeover deal. Under the terms of the original $44 billion deal, Elon Musk was seeking $46.5 billion in financing, where he was personally required to cough up around $21 billion from his own resources, and the residual $22 billion was expected to materialize in the form of loans and bank financing, including a $12.5 billion margin loan which had necessitated $62.5 billion in unencumbered collateral. With over half of Musk’s Tesla stake already pledged to underwrite existing loans at the time, the margin loan had created severe problems for the CEO of Tesla. Musk was eventually able to preclude the entirety of the margin loan by increasing his equity commitments and seeking $7.1 billion in additional funding from the likes of Larry Ellison, Binance, Sequoia, and the Saudi prince Al Waleed. This brings us to the crux of the matter. Twitter shares are currently up around 5 percent in pre-market trading. This indicates growing euphoria among Twitter investors vis-à-vis an early out-of-court settlement between Elon Musk and the social media giant. Of course, it remains likely that the purchase price of Twitter will end up getting renegotiated lower.
In the (hopefully unlikely) event that Twitter forces this deal to close and some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock. — Elon Musk (@elonmusk) August 10, 2022 For now, it appears that Elon Musk is done with selling his Tesla stake unless some of his equity partners in the Twitter deal “don’t come through.” Do you think Elon Musk and Twitter will be able to resolve their dispute amicably in the near future? Let us know your thoughts in the comments section below.
