- Elon Musk’s bid for Twitter grew more serious on Thursday after the billionaire filed a new SEC filing.
- The filing revealed that Musk has received commitments from several banks to fund his proposed acquisition of the social media company.
- Musk could be on the hook for $1 billion in annual interest payments if he succeeds in his takeover bid for Twitter.
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Elon Musk’s proposed offer for Twitter got a lot more serious on Thursday, and if the deal is successful, the deal could cost Musk about $1 billion in annual interest payments.
In a filing with the SEC on Thursday, Musk revealed that he has received multiple commitment letters from banks to fund his proposed acquisition of Twitter. As it turns out, borrowing billions of dollars costs a lot in annual interest payments.
While Musk plans to fund nearly half of the deal with his own money, he also plans to use a mix of debt and lines of credit to raise the funds needed to purchase any outstanding Twitter stock he doesn’t own. for $54.20 per share.
According to the filing, Musk has received a pledge from banks that have offered him a $13 billion loan to Twitter if he buys the company, using a mix of secured bank loans and junk bonds. Additionally, Musk has received a letter from his banks offering to loan him an additional $12.5 billion for the acquisition, which will be funded by his Tesla stock, which is worth $62.5 billion, or about one third of his share would be secured.
Finally, the filing states that Musk has committed to financing the acquisition with $21 billion from his own resources.
But with those commitments, it’s going to cost Musk a lot of money to ultimately fund the transaction and retain ownership of Twitter. The potential interest rates listed in the commitments vary from just under 6% to around 11%.
Based on the various amounts of debt Musk would incur to fund the transaction, Bloomberg’s Matt Levine calculates that the world’s richest person would be left with about $1 billion in annual interest payments. Additionally, there’s a risk that Musk would be forced to post more of his stake as collateral if Tesla’s share price falls.
Given that Musk is less concerned about Twitter’s underlying profits and more concerned about free speech and censorship issues on the platform, it’s unclear how well the company will perform financially under Musk’s ownership. A drop in Twitter’s profits would likely mean Musk has to reach into his personal pocket to service annual debt interest payments.
Based on previous comments he’s made, he might not mind.
“It’s not a way to make money,” Musk said in a recent TED interview. “My strong intuitive feeling is that having a public platform that is maximally familiar and inclusive is extremely important. So the future of civilization, but you don’t care about the economy at all.”