Elon Musk Should Find More Cash for Twitter Deal After Margin Loan Canceled

Elon Musk has to raise significantly more money to fund his $44 billion acquisition of Twitter after allowing the cancellation of a $6.25 billion marginal loan commitment backed by his shares in electric car maker Tesla.

After giving up a margin loan, the amount of capital that Musk must secure to complete the deal is now $33.5 billion, according to a regulatory filing from him on Wednesday.

It’s the latest development in his effort to buy Twitter. Earlier this month, the Tesla CEO sparked speculation that he was planning to walk away from the deal after claiming it “cannot move forward” until the social media company provides proof of the number of fake accounts. He later added that he “remains committed to it [the] takeover” but indicated that he might want to renegotiate the acquisition price.

Musk is seeking to raise additional funds for his show by asking existing Twitter shareholders such as co-founder Jack Dorsey to renew their shares of stock, which will reduce the amount of cash he will need to put into the deal.

The margin loan commitment, originally valued at $12.5 billion, was halved earlier this month when Musk raised $7.14 billion from a select list of investors including Larry Ellison, the billionaire founder of Oracle. Binance cryptocurrency exchange; and Sequoia Capital Venture Capital.

Funding the deal without a margin loan will take the pressure off Tesla shares, which lost $125 billion in value the day after the Twitter deal was announced. The automaker’s stock has fallen 25 percent since the takeover was agreed.

“This will remove some of the leverage from the deal,” said Dan Ives of Wedbush Securities, who sees only a 50 percent chance of a Musk deal being completed. “High stakes poker continues.”

When Musk announced a $46.5 billion financing package to Twitter, more than a dozen lenders led by Morgan Stanley lined up to provide a secured loan for $62.5 billion of his Tesla stock.

Eliminating the margin loan component and increasing the amount of cash needed to fund the deal will lead to further scrutiny of how Musk plans to fund the equity portion of the deal.

Shares on Twitter traded well below the $54.20 per share that Musk agreed to. After Musk’s latest revelation on Wednesday, they rose more than 5 percent in after-hours trading to $39.20.

Musk’s $44 billion acquisition of Twitter, which would be one of the largest leveraged acquisitions, has been mired in controversy from the start. He has said he will allow former US President Donald Trump to return to the platform, examine content modification policies, and fight the spread of bots.