more on Twitter

The Wall Street Journal reported yesterday that Twitter held discussions last month with outside investors about a possible new $3 billion equity raising, apparently at the same $54.20/share price he paid for the company earlier last year.

It’s not clear whether this is new news or elaboration of stories about an equity raising that were circulating a few weeks ago. Several things about the article, which Elon Musk has tweeted is not 100% accurate, are interesting, though:

–no successful offering has been announced, suggesting that even Twitter/Musk fans find the $54.20 price too steep. Is a lower offering price possible? Hard to know, since it’s possible Musk has either formal or informal agreements with backers to protect them against dilution of their holding, that is, that is, that he won’t sell new shares below the $54.20 price

–the WSJ says Fidelity has written down the value of the Twitter shares it bought as part of the Musk takeover from $54.20 each to a bit less than $25. This would make it doubly hard for any fiduciary (someone who isn’t friends/family of Musk) to pay more

–the proceeds of an offering would presumably go to redeem a $3 billion variable interest rate bridge loan. This loan has an escalating interest rate that appears to me to be 14.5% now and will rise to something like 16% by the end of its first year. If I’ve read the offering document correctly (no guarantee I have), this loan turns into a seven-year, non-prepayable term loan if it is not repaid during year one. That would be over $3 billion in total interest payments locked in

I wonder, too, what effect Musk’s Twitter problems may have on the brand image of Tesla. There’s the possibility that the Twitter turnaround won’t go well, tarnishing his image as a quirky but ultimately savvy businessman. More important, I think, is a newspaper article that popped up in my email yesterday, expressing outrage at the list of anti-semitic hate writers who have been allowed back on Twitter. Not a good look for someone wanting to sell cars to the general public.

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