Twitter owner and CEO Elon Musk could potentially sell up to $3 billion USD in new Twitter shares to help repay part of the $13 billion debt the social media company took on as a result of his buyout — reports The Wall Street Journal.
According to the publication’s sources, Musk’s team discussed selling new Twitter shares to raise funds in December. The eccentric entrepreneur took Twitter private with a $44 billion acquisition back in October 2022.
Musk’s team has also told people familiar with Twitter’s finances that a successful equity raise would be used to pay back $3 billion in unsecured bridge loans that are part of the company’s $13 billion debt package and carry the highest interest rate, at 10% plus the secured overnight financing rate (which has been trending up and is currently 4.3%). Twitter’s first quarterly interest payment is due at the end of this month.
While The Wall Street Journal was unable to ascertain the status of the fundraising talks, the publication learned that Musk’s representatives reached out to several new and existing Twitter backers in mid-December about the prospect of raising new equity capital at the original Twitter takeover valuation.
Musk’s team had hoped to strike a deal to raise funds at the original takeover price by the end of 2022, as detailed in an email sent to prospective investors at the time. The email did not detail how much money Twitter was looking to raise or for what purpose.
Some potential backers said they refused to entertain the idea, citing concerns about Twitter’s financial performance. Following Musk’s takeover, the social media giant has faced financial difficulties, especially struggling to hold on to advertisers.
In November, Musk warned that Twitter could be on the road to bankruptcy after the company suffered “a massive drop in revenue.” Musk even had to sell some of his stake in Tesla to bail Twitter out at one point.
Since then, however, Twitter has regained its footing and Musk now projects that the company will be roughly cash-flow break-even this year. This was made possible, in no small part, by major belt-tightening that included significantly trimming down the company’s workforce.
Despite one recent report claiming that Twitter currently has fewer than 550 full-time engineers on staff, the company continues to maintain its platform and also develop new features for it.
The $13 billion of debt that was tacked on to Twitter following Musk’s acquisition is a huge anchor for the company. Paying some of it back should not only give Twitter some breathing room but also provide relief to the banks that backed Musk’s bid.
