The Financial Times: ‘With $1.5 Billion Bill Due at Month-End, Elon Musk’s Options Aren’t Great’

Tabby Kinder, Richard Waters, and Eric Platt, reporting for The Financial Times:

The bill for Elon Musk’s purchase of Twitter is coming due, with the billionaire facing unpalatable options on the company’s enormous debt pile, ranging from bankruptcy proceedings to another costly sale of Tesla shares. Three people close to the entrepreneur’s buyout of Twitter said the first installment of interest payments related to $13 billion of debt he used to fund the takeover could be due as soon as the end of January. That debt means the company must pay about $1.5 billion in annual interest payments. [...]

Musk’s personal equity investment in Twitter of about $26 billion would be effectively wiped out in the event of a bankruptcy, alongside other equity stakeholders such as Sequoia Capital, Oracle co-founder Larry Ellison, and Saudi Prince Alwaleed bin Talal. In the queue for repayment, their investments would be behind the banks that have loans secured against Twitter’s assets, as well as the company’s unsecured lenders and trade creditors.

Boy, you’d just hate to see it.

Meanwhile, with Tesla’s stock falling 65 percent last year and Musk selling heavily, the value of his stake in the company has plunged to about $50 billion, from $170 billion when he offered to buy Twitter in April last year. That has left him with far less room to raise cash by collateralizing more shares. One alternative would be to exercise some of his stock options, though that would leave him with a large — and immediate — tax bill. The biggest concern for Tesla investors has been if Twitter continues to bleed cash then Musk may have to sell more stock. [...]

Technology equity analyst Dan Ives at Wedbush Securities said that Twitter was worth closer to $15 billion today than the $44 billion Musk paid for it.

Heck, Tesla’s stock is down 25 percent in the last month alone. Heartbreaking.

Wednesday, 18 January 2023