Head of Elon Musk’s Family Office Approaches Investors for New Funds
The head of Elon Musk’s family office has approached investors who helped the billionaire buy Twitter Inc. for US$44 billion in October to try and raise new funds as the social media company continues to bleed cash and faces heavy interest payments on its debts.
Approach to Raise New Funds Amid Heavy Losses
Jared Birchall, a former Morgan Stanley banker, approached Twitter’s shareholders on Thursday afternoon, according to two people familiar with the matter. He offered new shares in the company at US$54.20 — the same price Musk paid to take the company private.
What This Means for Investors and the Company
The move comes as Twitter continues to struggle financially, with heavy interest payments on its debts and a significant drop in revenue. The company has been laying off staff and cutting costs in an effort to stay afloat, but it appears that may not be enough.
Investors Receiving Offers for New Shares
Ross Gerber, an investment adviser who invested in the Twitter deal in October, confirmed he had received the latest offer from Birchall. He expressed concerns about the financial health of the company and the potential risks involved in investing in new shares.
High-Profile Investors Who Helped Fund Musk’s Buyout
A number of high-profile investors wrote big cheques to help fund Musk’s Twitter buyout in exchange for equity stakes, including Sequoia Capital, Andreessen Horowitz, Oracle Corp. co-founder Larry Ellison and cryptocurrency exchange Binance.
Banks Facing Significant Losses on Financing Package
Banks including Morgan Stanley, Bank of America and Barclays face significant losses on the financing package they provided. Twitter has to pay annual interest of about US$1 billion on the loan, which is a significant burden for the company.
Musk’s Recent Share Sales
Between Monday and Wednesday, Musk sold US$3.6 billion in Tesla inc., the electric vehicle maker he founded and leads. It was his fourth sale of Tesla stock this year, bringing his total disposals to almost US$40 billion.
Market Reaction to Musk’s Twitter Deal
The sales came despite Musk saying there would be ‘no further TSLA sales’ to support the Twitter deal back in April. The move has raised concerns about the financial health of both Twitter and Tesla.
What This Means for Credit Investors
The banks that underwrote the Twitter buyout debt are desperate to sell the high-risk loans on to credit investors and move it off their balance sheets. However, significant discounts demanded by investors would result in losses that could easily top US$1 billion.
Conclusion
Elon Musk’s efforts to raise new funds for Twitter come amid a challenging financial environment. The company continues to struggle financially, with heavy interest payments on its debts and a significant drop in revenue. Investors are likely to be cautious about investing in new shares, given the risks involved.
