Speculation is rife that controversial billionaire Elon Musk is not planning to buy Twitter after making one of the largest offers in history but instead is using the deal to offload some of his Tesla holdings.
Musk, the world’s richest person, according to Forbes magazine, made a $44 billion offer to take Twitter private, claiming the social media platform had a lot of potential. The board of Twitter accepted his offer, but the deal is yet to be settled as it awaits shareholder and regulatory approval.
Musk is estimated to be worth some $273 billion mostly due to his shareholding in electric vehicle maker Tesla which he runs. He also leads the aerospace firm SpaceX.
In the wake of the offer, filings with the U.S. Securities and Exchange Commission (SEC), have shown that Musk sold roughly $8.4 billion worth of Tesla shares in the last week of March. He said he planned to use it for the Twitter buyout and there were “no further TSLA sale planned”.
Apart from the shares, Musk secured $25.5 billion of fully committed debt, including $12.5 billion in loans against his Tesla stock.
Some have said Musk could develop cold feet and back out of the Twitter deal. If he does not pull the rug, then he could make Twitter “worse”, according to fellow billionaire Bill Gates.
“Musk is just pretending to buy Twitter to unload more Tesla shares and will find some dumb reason why he “can’t do it”,” @buccocapital tweeted.
Tesla’s market value has been shrinking since April 4, when he disclosed that he had attained a 9.2 percent stake in the social media platform. Investors are selling Tesla shares, concerned that Twitter’s inability to generate income would dampen Musk’s asset holdings with a huge debt.
Tesla value dropped more than $100 billion – 12 percent of its $1 trillion-plus capitalization – on April 26 after Musk announced he is plowing into his takeover of the social media giant. Musk pledged billions of dollars worth of his Tesla shares as collateral for his $44 billion takeover of Twitter.
Musk would could become the most indebted CEO in America if the Twitter deal goes through, with two-thirds of the amount needed to finance the buy coming out of his own pocket, according to CNBC.
That presents another problem. Musk’s $250 billion wealth is largely tied to Tesla, meaning he will need to liquidate a large amount to make payment. More than $90 billion of his shares have already been pledged to loans, according to research firm Audit Analytics.
But despite these concerns, safeguards have been put in place to make sure that it will be costly for Musk to back out of the Twitter deal. The agreement includes $1 billion fee that Musk – or Twitter – would have to pay if they renege on the contract, Reuters reported.
There is even a “specific performance” clause wedged into the contract by Twitter lawyers which could theoretically force Musk to buy the company if he threatens to back out, though in practice this could probably be settled by adding to the break fee.
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As the deal goes through the hoops and investors come around to Musk’s quest to acquire the social media giant, he is now expected to become the next Twitter CEO, albeit temporarily, after the takeover is completed, according to CNBC’s David Faber.
Photo: Elon Musk attends The Metropolitan Museum of Art Costume Institute benefit gala, May 2, 2022, in New York. (Photo by Evan Agostini/Invision/AP) / Photo: Tesla shares rally as 5:1 split goes into effect. (STRF/STAR MAX/IPx 2020 8/31/20)