Elon Musk won't take loan against Tesla shares to buy Twitter

Elon Musk will put up an additional $6.25 billion in equity financing to partially fund his $44 billion Twitter bid, dropping his plans to take a margin loan against the stake he holds in Tesla.

This takes the deal's total equity commitment to $33.5 billion, according to a new SEC filing.

When the deal was first announced last month, the world's richest man had initially planned to use $12.5 billion worth margin loan secured against his Tesla shares to fund the Twitter acquisition.

Musk, however, received new funding commitments earlier this month, cutting the margin loan he was planning to take from a group of lenders by half to $6.25 billion. The Tesla CEO has now reduced the margin loan component to zero.

This comes at a time when shares of Tesla have tanked around 30% after Musk announced his plan to buy microblogging platform Twitter.

To fund the deal, Musk is now seeking additional financing commitments from investors, including having discussions with Twitter co-founder Jack Dorsey, to give an option to stockholders to contribute their shares to the buyout.

Musk has already got financing commitments from 18 investors including crypto exchange Binance, venture capital firm Sequoia Capital, asset managers Brookfield and Fidelity for the Twitter buyout. Larry Ellison, the co-founder of Oracle, cut the biggest cheque worth $1 billion through his Lawrence J. Ellison Revocable Trust earlier this month.

Deal on hold?

On May 13, Musk said the acquisition deal to takeover Twitter has been temporarily put on hold as details are awaited to support the claims that spam and fake accounts do indeed represent less than 5% of users.

"20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher... Yesterday, Twitter's CEO publicly refused to show proof of <5%. This deal cannot move forward until he does (sic)," Musk tweeted.

This came after Twitter's chief executive Parag Agrawal posted a long thread on Twitter, saying the firm estimates that less than 5% of reported monetisable daily active users (mDAU) for the quarter are spam accounts.

Agrawal, however, rejected any external validation of the company's claims. Twitter doesn't believe that this specific estimation can be performed externally, given the "critical need to use both public and private information (which we can't share)", he said. "Externally, it's not even possible to know which accounts are counted as mDAUs (monetisable daily active users) on any given day."

Responding to the Twitter CEO, Musk said that the company should welcome external validation if their claims are true.

At a technology conference in Miami, Musk said that a lower price for his $44 billion Twitter bid was "not out of the question", fuelling rumours that the world's richest man is reconsidering the deal to acquire the social media platform.

Twitter's average daily active users (DAUs) stood at 229 million in the first quarter of 2022, up 15.9% compared to Q1 of the prior year. This includes 39.6 million DAUs in the U.S.

The company had overstated the number of daily active users for three years due to an error caused by its account linking feature.