Elon Musk is slowly but surely filling his $21 billion hole. It’s actually pretty impressive, when you think about it, especially when you take into account the pie-in-the-sky projections he’s been peddling. There aren’t many among us who could personally buy a company that struggles to make money, for $44 billion, and then pay for it by mortgaging the company itself; margining some $60 billion of stock in another company; and finally going hat-in-hand to friends and investors to find a large portion of $21 billion of additional equity. But that’s exactly what Elon is in the process of methodically doing to buy Twitter.
According to a new S.E.C. filing, Elon has attracted another $7.139 billion in fresh equity from outsiders. The filing also reveals that the $12.5 billion margin loan that Morgan Stanley, Bank of America, Barclays and other banks were providing to him appears to have been reduced now to $6.25 billion. There’s no explanation why, of course, but that will take some pressure off his Tesla stock: If Elon is only getting a margin loan for $6.25 billion, instead of $12.5 billion, he only has to put up Tesla stock worth $25 billion as collateral, as opposed to $60 billion. That’s a big difference. In short, this new structure decreases the risk Elon is putting on Tesla, but increases his task of finding even more equity.
So, given the new filing, let’s recalculate. His new equity commitment is for $27.25 billion, of which he’s pledged $7 billion (the conjectured after-tax proceeds of the $8.5 billion of Tesla stock he recently sold) of his own money, plus another $7.139 billion from an eclectic group that includes $1 billion from his friend Larry Ellison, $800 million from the venture capital firm Sequoia Capital, and $700 million from a firm I’ve never heard of, VyCapital, which is based in Dubai and was started in 2013 by Alexander Tamas, a former technology M&A banker at Goldman, in London, and a former partner of DST Global, back when it was still based in Moscow. Somehow, Elon got this new group of investors to buy off on his wacky projections for Twitter. Keeping in mind that, being generous, Twitter had about $1 billion of EBITDA in 2021, he’s telling investors—according to a circulating PowerPoint presentation—that Twitter will generate $3.2 billion in “free cash flow” in 2025 and then $9.4 billion in 2028 while also reducing Twitter’s reliance on advertising and exploding Twitter’s payments business. Ya right.