Twitter shares rally as Musk gets $7.1B commitment for buyout

Posted: 5 May 2022 1:46 pm
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The money pledged by investors including Oracle Co-founder Larry Ellison helps ensure that Musk will be able to complete the $54.20-a-share buyout of Twitter, and the news sends shares closer to that price tag.

Twitter (TWTR) shares rallied Thursday after Tesla (TSLA) CEO Elon Musk raised $7.1 billion in equity commitment from investors to help fund his acquisition of the social media platform. That moves the world’s richest man a step closer to completing the deal.
Shares are up more than 3% at this writing on what thus far is a huge down day for the market.
The commitments include the 34.9 million Twitter shares controlled by Saudi Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud. That eliminates the risk that the prince will block Musk’s takeover after he previously tweeted that the buyout price of $54.20 doesn’t come close to the “intrinsic value” of the social media company.
Musk’s filing with the Securities and Exchange Commission also said the margin loans committed for the deal was reduced to $6.25 billion, from $12.5 billion. The margin loans are backed by the billionaire’s Tesla shares.

The billionaire is expected to become the temporary CEO of Twitter for a few months after his $44 billion takeover of Twitter, CNBC reported.

Here’s what the filing means for Twitter shareholders

The equity commitments from investors including $1 billion from Oracle cofounder Larry Ellison and $500 million from Binance helps ensure the deal will be completed and Twitter shareholders will get the $54.20 payout. That’s better than the $50.65 price, if they cash out today.
The news that Musk will become temporary CEO of Twitter also signals a succession plan is already in the works, helping smooth out the transition once he takes over the company.
Twitter shares held on to gains, rising 3.2% at 12:03 p.m. in New York even as the tech-heavy Nasdaq index tumbled 5.2%. Negative sentiment continues to plague the stock market amid lingering concerns over persistently high inflation and the growing risk of recession.

Here’s what it means for Tesla shareholders

Musk’s need for margin loans tied to the Twitter deal was almost halved to $6.25 billion. That lessens the risk the billionaire will need to sell Tesla shares to fully finance his purchase of the social media platform.
The Tesla CEO has sold $8.5 billion of the company’s stock to help fund his takeover of Twitter. That has fueled the recent selloff in Tesla shares. Raising cash for Twitter from other shareholders may curb the bleeding in Tesla shares.
Musk’s assumption of the CEO role in Twitter, though temporary, could also divide his attention. That could take him away from the task of making sure the electric car maker meets its production and sales target. Of course, any miss in sales or production could drag down Tesla share prices.

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At the time of publication, Luzi Ann Javier doesn’t own shares of Twitter or Tesla

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