Musk Wealth Is Flowing In As Fast As Twitter Can Use It

SpaceX owner and Tesla CEO Elon Musk speaks during the E3 gaming convention in Los Angeles, California, United States, June 13, 2019.

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NEW YORK, April 22 (Reuters Breakingviews) – Elon Musk can’t spend it fast enough. The chief executive of Tesla has set aside $46.5 billion in funding to find out more to buy Twitter , should he decide to give it a shot. That could involve him personally raising some $33 billion, on top of the $4 billion worth of Twitter stock he already owns. That could force him to sell most of his unsecured Tesla stock against loans. But for him and other Tesla shareholders, it’s less risky than it looks. Indeed, Tesla’s recent financial performance has triggered many more essentially free shares for Musk.

Mathematics works like that. At the end of 2021, Musk owned 173 million shares of the automaker, plus 59 million options exercisable within 60 days – combined, a 21% stake. According to a June 2021 regulatory filing, more than 88 million of those shares were already pledged against personal loans. For Twitter’s financial package, Morgan Stanley (MS.N) is providing a $12.5 billion loan that requires $62.5 billion of shares as collateral, or about 61 million shares at present value. If all the previous numbers still hold, that would leave some 23 million shares unpledged, worth about $24 billion remaining.

Musk has also pledged to provide an additional $21 billion in equity funding to the Twitter deal. Unless a co-bidder joins Musk — a possibility, with private equity firms reviewing the deal, according to media reports — that could mean selling nearly all of his unencumbered shares, ignoring any cash Musk might have under hand and any tax liability.

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Still, Tesla’s sparkling first-quarter numbers mean Musk has little to worry about, and perhaps Tesla investors shouldn’t worry that its shares are distressed either. The company’s results were enough, when combined with previous performance, to beat vesting requirements on three tranches of Musk’s mammoth salary package in 2018. Each gives him the right to buy 8.4 million shares at $70 each. In Tesla’s Friday morning stock price, it’s worth more than $24 billion, even replacing its largest possible outlay for Twitter.

Musk can’t win or even bid on Twitter. If he does, it could be with partners, which would reduce his personal investment. Either way, with wealth flowing in faster than he can use it, the multi-billionaire will always have financial fuel for his next entertainment.

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(This story corrects paragraph three to indicate that Musk has committed to provide an additional $21 billion in equity funding to the Twitter deal, not $21 million.)

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

BACKGROUND NEWS

– Elon Musk said in a securities filing on April 21 that he had lined up total funding of $46.5 billion to buy Twitter if he chose to launch a hostile bid. Musk, who is chief executive of electric car maker Tesla, has conditionally offered to buy the social network for $54.20 a share. He already owns more than 9% of the company.

– Morgan Stanley and other banks have pledged $13 billion in loans. The investment bank and other lenders also agreed to provide $12.5 billion in margin loans to Musk against Tesla shares. Musk has pledged to cover the remaining amount, including fees, which is estimated at $21 billion. Some private equity firms are considering participating in a possible deal, according to news reports.

– Combined with previous financial performance, Tesla’s first quarter results, released on April 20, were sufficient to exceed milestones that trigger the acquisition of three tranches of Musk’s 2018 salary package, pending board approval administration. Each tranche gives him the right to buy 8.4 million shares at $70 each. At Tesla’s stock price of $1,023 at 2:00 p.m. GMT on April 22, their total value to Musk is around $24 billion.

– As of Dec. 31, Musk owned 172.6 million Tesla shares and 59.1 million options exercisable within 60 days, according to a filing with regulators. As of June 30, 2021, 88.3 million of his shares in the automaker were pledged to secure personal debt.

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Editing by Richard Beales, Pranav Kiran and Sharon Lam

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and non-partisanship by principles of trust.

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