Elon Musk just reported some new friends — equity partners for his Twitter takeover, including some of the biggest names in Silicon Valley.
Driving the news: Musk has raised $7 billion in funding for his $44 billion purchase of Twitter, according to a filing released by the Securities and Exchange Commission on Wednesday.
- These are the first equity partners secured by Musk for his buyout of the social media company.
- Musk said in the filing that he has secured new investments from investors including Oracle co-founder Larry Ellison, Sequoia Capital, Brookfield and Fidelity, among others.
- The move also means that the $12.5 billion margin loan he received from Morgan Stanley to purchase Twitter is reduced to $6.25 billion.
Why it matters: Musk's acquisition is being covered as if it were a fait accompli. But it still could fall through.
What's happening: Twitter shares yesterday closed trading at a 10% discount to Musk's agreed takeover price, largely because the market doesn't entirely believe the deal will close, Axios' Felix Salmon writes.
- Musk owns hundreds of billions of dollars' worth of stock. But he can't pay for Twitter with Tesla stock, and he's said he's not going to sell any more Tesla shares.
Between the lines: The new list contains lots of big names, but each with relatively small dollar amounts, Axios' Dan Primack writes. (See the list.)
- The only $1 billion check comes from Larry Ellison. Mega-investors like Fidelity and Qatar's sovereign wealth fund come in at less than half of that.
- Overall, he secured around $7 billion.
Musk is now mortgaging Twitter itself to the tune of $6.25 billion, which will cost about $450 million per year to service.
- He's still borrowing $12.5 billion against his holdings of Tesla stock, which will cost him about $1.125 billion per year in interest and amortization costs.
- On top of the debt servicing costs, Musk also is going to have to pay Twitter employees cash to make up for the stock-based compensation they're currently receiving.
Add it all up and Musk is making roughly $2.5 billion of demands on Twitter's cashflow, while Twitter isn't throwing off anything like that much money. Its EBITDA over the last 12 months — its earnings before interest, taxes, depreciation and amortization — came to just $547 million.
- Musk is going to have to make Twitter vastly more profitable — and fast — if he wants to be able to cover his debt service costs and pay his employees.
Commitments:
- Lawrence J. Ellison Revocable Trust: $1 billion
- Sequoia Capital Fund, L.P.: $800 million
- VyCapital: $700 million
- Binance: $500 million
- AH Capital Management, LLC: $400 million
- Qatar Holding LLC: $375 million
- Aliya Capital Partners LLC: $350 million
- Fidelity Management & Research Company LLC: $316 million
- Brookfield: $250 million
- Strauss Capital LLC: $150 million
- BAMCO, Inc.: $100 million
- DFJ Growth IV Partners, LLC: $100 million
- Witkoff Capital: $100 million
- Key Wealth Advisors LLC: $30 million
- A.M. Management & Consulting: $25 million
- Litani Ventures: $25 million
- Tresser Blvd 402 LLC: $8.5 million
- Honeycomb Asset Management LP: $5 million
Go deeper: Everything Elon Musk wants to change about Twitter
Editor’s note: This story has been corrected to reflect that based on new information filed today, Musk is mortgaging Twitter itself to the tune of $6.25 billion (not $13 billion).
