In order to raise $44 billion to buy twitter, Elon Musk had to reduce his holdings of Tesla shares.
According to the documents of the U.S. Securities and Exchange Commission (SEC), musk continuously reduced its holdings of Tesla shares from April 26 to 28 U.S. time, including 4.415 million shares on April 26 and 27, with a total amount of $3.99 billion; On the 28th, 5.23 million shares were reduced, with a total amount of US $4.5 billion.
After three consecutive days of reduction, musk cashed in $8.5 billion in cash as a source of funds for the acquisition of twitter. According to the agreement released by twitter, musk has obtained $25.5 billion in debt and margin loan financing commitments, and will provide about $21 billion in equity financing commitments.
After three consecutive days of stock reduction, musk also said on twitter that he had no plan to continue to reduce his stock holdings. Affected by the news, Tesla‘s stock stopped its decline for three trading days and rebounded above $900 per share on April 29 Beijing time. However, there is still a gap between this and the capital scale promised by musk. It is unknown how to solve the remaining capital gap.
reducing Tesla holdings by less than 1%, musk in exchange for $8.5 billion
After twitter announced its acceptance of Musk’s acquisition plan on April 25, the market expected musk to raise funds by reducing Tesla’s shares, triggering a continuous sharp decline in Tesla from April 26 to 28, with a single day decline of 12% on April 26, the largest decline since September 2020.
However, for now, musk is one of the culprits of Tesla’s stock slump. According to the documents submitted by musk, a total of 9.645 million Tesla shares were reduced from April 26 to 28, with a total of US $8.49 billion.
Before the reduction, musk owned 17% of Tesla’s shares, equivalent to 172 million shares, which means that after the reduction, Musk’s shareholding in Tesla will decrease by less than 1%, and it is still Tesla’s largest shareholder.
According to the Bloomberg billionaire index, musk has a net worth of $252 billion and is currently the richest man in the world. However, most of his wealth comes from Tesla’s holdings and start-ups such as SpaceX, a space exploration technology company. Therefore, the funds for the acquisition of twitter will inevitably require musk to reduce Tesla’s shares.
After obtaining $8.5 billion in cash, musk promised not to reduce its holdings of Tesla shares, but there is still a big gap from its financial commitment to acquire twitter. According to the transaction details previously released by twitter, musk promised to pay $21 billion in cash, and the rest will come from his stock mortgage, mainly supported by consortia such as Morgan Stanley.
musk, Twitter or start layoff plan
Although musk said before the acquisition of twitter that the transaction did not consider economy, but only to ensure freedom of speech, musk explained his direction after the privatization of twitter in order to obtain the loan support of the consortium. According to Bloomberg, musk proposed to improve the monetization level of twitter, including increasing member income. In addition, he also proposed to lay off twitter to control costs, but did not disclose the specific layoff plan.
Musk also said before the acquisition that if he joined twitter, the remuneration of the company’s board members would become zero, equivalent to saving twitter $3 million.
However, twitter CEO Parag Agrawal said on April 29 that the company had not promised to cut costs before the completion of Twitter’s acquisition, which meant that Twitter had no intention of implementing layoff plans in the short term. It is understood that Parag Agrawal said after twitter accepted Musk’s acquisition plan that he would continue to serve as CEO of twitter until the acquisition was completed. In addition, twitter also said that the company has agreed to maintain the current welfare level of employees within one year after the completion of the transaction.
Judging from the first quarter earnings report released by twitter on April 28, the company’s commercialization operation is difficult to say successful. The first quarterly report showed that Twitter achieved a revenue of $1.2 billion, a year-on-year increase of 16%, the lowest growth rate in nearly six quarters. Moreover, the company’s costs and expenses reached $1.33 billion, a year-on-year increase of 36% and an operating loss of $128 million. Without the revenue from the sale of mobile advertising platform mopub, the company could not achieve a net profit of $513 million in the first quarter.
At present, the main revenue of twitter comes from advertising business, while the revenue of members and others decreased significantly in the first quarter, down 31% year-on-year. This part of the revenue accounts for less than one tenth of the total revenue of twitter.
Previously, musk mentioned that he would fight back against zombie users and spam on twitter. Another important measure is to enhance KOL’s activity on twitter. He personally named Taylor swift and Justin Bieber on twitter earlier. The former hasn’t tweeted in the past three months, while the latter only tweets once a year, but both are KOL, the sixth and second largest fans on twitter At present, Twitter has 229 million daily active users, of which 189.4 million are international users and only 31.5 million are American users.
