The best summary of the Twitter buyout I can find online is here:
https://corporatefinanceinstitute.com/resources/equities/elon-twitter-buyout/
Which states:
“Musk will borrow US$12.5 billion using a margin loan collateralized by Musk’s ownership of Tesla stock. If we use a recent Tesla price of US$850/share and a 20% Loan-to-Value, this implies that Musk will need to pledge roughly 73.5 million Tesla shares to secure this margin loan. These shares are valued at roughly US$62.5 billion as shown below.
Per last year’s Tesla proxy statement (from August 2021), Musk has roughly 88.3 million shares already pledged as collateral to secure certain personal indebtedness as shown below. He currently owns approximately 172.6 million Tesla shares. Assuming the 88.3 million shares are still pledged as other collateral, and including the shares pledged for the margin loan, Musk has pledged 94% of his Tesla stock ownership.
In summary, Musk is contributing US$21.0 billion in equity financing, but also US$12.5 billion via a margin loan on his existing Tesla ownership. However, Musk is also searching for other potential equity investors (including convertible security owners) to contribute equity to the buyout. If Musk doesn’t find any equity partners, he will effectively be responsible for US$33.5 billion, which represents 72% of the Twitter buyout total of US$46.5 billion.”
This article posts a worst-case-scenario for Elon because we know he got last minute investors with some crypto firms and the Saudis. Also, keep in mind Elon has been on a Tesla selling spree since the article was written. All of these things contribute to protecting him from a margin call.
Any better resources that can help pinpoint the moment Elon gets margin called, then fails said margin call, or anyone who is current on the maths for this particular subject?
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