Tesla (NASDAQ:TSLA) shares have been hammered over the past couple of days as the specter of a veritable volley of stock liquidation from Elon Musk to finance his Twitter (NYSE:TWTR) takeover move took its toll, with the EV giant’s share price declining over 12 percent between the 25th and the 29th of April. Since then, however, Tesla’s share price has partially recouped recent losses, spurred by a relief rally of sorts in the broader market amid increased certainty on the Federal Reserve’s future rate hike trajectory. Now, though, the math surrounding Musk’s $44 billion Twitter gambit is finally turning more favorable, as per the recent reporting from the NY Post. As we had detailed in a post last week, the CEO of Tesla has arranged $46.5 billion in financing for his Twitter move, where Musk is required to cough up around $21 billion from his own resources, and the residual $22 billion expected to materialize in the form of loans bank financing, including a $12.5 billion margin loan with a loan-to-value ratio of 20 percent. The terms surrounding the margin loan are particularly onerous, as we had flagged last week. For instance, the loan requires Musk to post unencumbered collateral worth at least $62.5 billion, thereby precluding Musk’s sizable stake in Tesla in the form of options. After the recent liquidation of his Tesla stake, which saw Musk selling $8.5 billion worth of shares, the CEO of Tesla now owns 162.963 million shares worth $155.241 billion, based on yesterday’s closing price. However, as per the calculation by Bloomberg, over half of Musk’s total Tesla stake is already pledged to underwrite existing personal loans. This means that if the Tesla stock price were to fall below $837, Musk wouldn’t be able to post sufficient collateral for the margin loan facility. Of course, there remained the possibility that Musk would choose to utilize his recent cash repository to draw down existing debt, thereby releasing a vast majority of his Tesla stake from any encumbrance or pledge-based obligations. However, the CEO of Tesla now seems to have taken another route. The New York Post is now out with information that Musk is tapping the financial resources of his old backers to bolster his Twitter bid. Another possibility is that the CEO of Tesla partners with the private equity firm Thoma Bravo. Bear in mind that the firm had expressed interest in taking over Twitter a few weeks back. The impetus behind these potential collaborations stems from Musk’s desire to limit his exposure to the Twitter deal to around $15 billion, including his current stake of 9.2 percent in Twitter, worth around $3.4 billion.
Update: The $12.5 Margin Loan That the CEO of Tesla Acquired to Fund Twitter Takeover Deal Has Now Been Reduced to $6.25 Billion
— *Walter Bloomberg (@DeItaone) May 5, 2022 As per the latest filing with the SEC, Musk’s margin loan commitment has decreased to $6.25 billion. This means that the CEO of Tesla will now be required to post a collateral of just $31.25 billion instead of the original $62.5 billion.
— *Walter Bloomberg (@DeItaone) May 5, 2022 This has been made possible as Musk has now secured $7.1 billion in new financing from Larry Ellison, Binance, Sequoia, and the Saudi prince Al Waleed, thereby increasing the equity commitments to the Twitter deal to $27.25 billion from the original $21 billion.
