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Research Shows Elon Musk Is About to Become Largest Stock-Debtor with Twitter Buyout

UTC by Ibukun Ogundare · 3 min read
Research Shows Elon Musk Is About to Become Largest Stock-Debtor with Twitter Buyout
Photo: Depositphotos

Musk also lost over $20 billion from his net worth this week after Tesla stock declined 12% on 26th April.

According to ESG programs service provider ISS Corporate Solutions, Tesla CEO Elon Musk is about to become the largest stock-debtor in dollar terms among other executives if his Twitter deal is successful. The Twitter board accepted the buyout offer from Elon Musk earlier in the week. The publicly-traded company will eventually become privately held when the transaction is eventually finalized. Stakeholders and regulatory approvals, along with other standard closing conditions, are the factors delaying the takeover.

The agreement was that Musk would buy Twitter outrightly for $44 billion. Despite being the world’s richest man, a large percentage of his wealth is in Tesla stock. The businessman also has a significant portion of his wealth in SpaceX and The Boring Co. equities. Meanwhile, two-thirds of the required funds for the buyout will have to come from his personal pocket. As a result, Musk may have to sell up to a million of his TSLA shares to raise the cash. As a matter of fact, ISS Corporate Solutions explained that the CEO would need to pledge millions more to amass the required funds.

Musk Financing Plan for Twitter Acquisition

A short while ago, Musk said he had garnered $46.5 billion in debt and equity financing as he intensified efforts to buy Twitter. The billionaire acquired about $25.5 billion in debt financing from Wall Street’s giants, including Morgan Stanley (NYSE: MS). Other contributors to the debt financing are Mizuho Bank, BNP Paribas, the Bank of America, Societe Generale, and Senior Funding Inc. Specifically, Musk’s SEC filing shows that his financing plan includes $13 billion in bank loans and $21 billion in cash. Also, the plan consists of a $12.5 billion margin loss with his TSLA holdings as collateral.

Research firm Audit Analytics revealed that the billionaire has over $90 billion of shares pledged for loans. The calculation makes Musk the most indebted CEO in the US. With the stock debt, Musk is ahead of the second-ranked stock debtor in dollars, Oracle’s chairman Larry Ellison with $24 billion.

Notably, Musk has been receiving new stock options as part of his 2018 compensation plan, giving him a lot of cushions. He recently got an additional 25 million options this month. Although he can not sell the new options, he can borrow against them.

He has a potential stake of 23% in Tesla with his 170 million TSLA shares and 73 million in options. His 23% ownership of the EV company is valued at more than $214 billion. The world’s richest man also has some of his net worth in his over 50% stake in SpaceX.

Jun Frank, managing director at ICS Advisory, ISS Corporate Solution, said:

“Pledging of shares by executives is considered a significant corporate governance risk. If an executive with significant pledged ownership fails to meet the margin call, it could lead to sales of those shares, which can trigger a sharp drop in stock price.”

Musk lost over $20 billion from his net worth this week after Tesla stock declined 12% on 26th April. The company has accounted for nearly a 13% loss in the last five days.

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Ibukun Ogundare

Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.

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