There’s a sudden squall of something off-smelling coming from Tesla CEO Elon Musk’s planned $US44 ($61) billion Twitter deal. The prolific tweeter has already pushed the bounds of verbal agreements surrounding the Twitter buyout, but now that a new round of funding has come down the pike, some are questioning just how solid the financing for the deal truly is.
In Securities and Exchange Commission documents filed Wednesday, Musk’s Twitter bid acquired new funding to the tune of $US7 ($10) billion from multiple investors, including big investments from a class of the Tesla founder’s big tech/financial “Super Friends.” This includes a $US1 ($1) billion pledge from Oracle founder and Tesla stakeholder Larry Ellison, plus millions more from Sequoia Capital Fund, VyCapital, as well as smaller drops from the likes of crypto exchange platform Binance.
Tech bros are getting in on the game as well. Notorious big tech bankroller Ben Horowitz said his venture capital firm a16z is putting $US400 ($555) million into the deal, saying in a tweet “Elon is the one person we know and perhaps the only person in the world who has the courage, brilliance, and skills to fix all of these and build the public square that we all hoped for and deserve.”
1/First some news, we are joining Elon Musk’s bid for Twitter and investing $400MM into the company.
— benahorowitz.eth (@bhorowitz) May 5, 2022
All this money might seem like a shot in the arm for the deal, but the move also cuts prior commitments from Morgan Stanley in half, from $US12.5 ($17) billion to $US6.25 ($9) billion in margin loans against Tesla stock, as pointed out by Axios. Most of the contributions are relatively small money compared to the total deal. The SEC filings also say that Musk is increasing cash and equity funding for the deal from $US21 ($29) billion to $US27.5 ($38) billion.
Shares have not increased up to Musk’s $US54.20 ($75) asking price either, though they have narrowed to the closest gap since the Tesla CEO announced his deal in April, according to Bloomberg.
Some analysts look at this new funding as a smart move that shows there’s a stronger backing for the deal across multiple sectors, but Axios wrote that there’s still a question of where Musk’s $US20 ($28) billion of equity is going to come from, especially as Musk said he won’t cash out any more of the billions of dollars he has holed up in Tesla stocks after he sold $US8.4 ($12) billion worth of shares last week. Axios also noted that if the deal goes through, Musk could be looking at billions of dollars in debt and employee stock compensation that will need to be paid off with Twitter revenue. Twitter only made approximately $US513 ($712) million in profit this year.
Musk will need to come up with some truly ingenious ways to make Twitter much more profitable to finance this rope he’s tying around his own leg. So far, the only idea he’s shown publicly is charging commercial and government users to tweet, so… no, not revolutionary at all.
Not to mention, the new Twitter owner is now expected to take over as CEO of the company, unnamed sources told CNBC, taking over from current CEO Parag Agrawal. In a previous tweet mentioning Agrawal’s job prospect, he seemed pretty philosophical about the possibility of his ouster.
Thank you but don’t feel for me. What matters most is the service and the people improving it.
— Parag Agrawal (@paraga) April 27, 2022
And Twitter staffers are apparently feeling the pressure as well. Bloomberg reported Wednesday that employees were given a sort of backhanded pep talk, where many asked why they should even create anything new for the app if their new owner plans to make major changes to the platform, potentially leading to a mass exodus of employees or a big round of layoffs. In interviews at the Met Gala Monday, Musk seemed very nonchalant about the idea that his new potential employees look at him the same way a rat does a speeding subway train.
All this is not to say stock owners aren’t trying to put on a strained smile and suck up to the new potential owner (or perhaps make veiled retorts behind gritted teeth). Saudi Arabian Prince Alwaleed bin Talal pledged around $US1 ($1).9 billion to Musks takeover by promising to buy 35 million shares in the company. The prince tweeted at Musk yesterday “I believe you will be an excellent leader for @Twitter to propel & maximise its great potential.”
Great to connect with you my “new” friend @elonmusk🤝🏻
I believe you will be an excellent leader for @Twitter to propel & maximise its great potential@Kingdom_KHC & I look forward to roll our ~$1.9bn in the “new” @Twitter and join you on this exciting journey
— الوليد بن طلال (@Alwaleed_Talal) May 5, 2022
The tweet was in the same thread as the Saudi prince saying he thought the company would be worth more than Musk’s asking price per share. Musk originally retorted by mentioning Saudi Arabia’s harsh crackdowns on free speech, implying that Twitter should be beholden to Saudi money.