The $TWTR Counter-attack Against $TSLA

Oh man, I missed this one yesterday:

CNBC headline: Twitter shareholders vote to boot Silver Lake co-CEO Durban, a longtime Musk backer, from board


Twitter shareholders on Wednesday voted to boot Egon Durban, the co-CEO and managing director of private equity firm Silver Lake, from its board of directors as the company navigates through testy negotiations with would-be buyer Elon Musk.

Durban’s firm has worked on deals with Musk in the past. But the private equity businessman didn’t receive enough votes from Twitter investors at the company’s shareholder meeting to be reelected to the board.

The tally comes after Musk agreed to buy Twitter in a deal worth $44 billion. News of the acquisition sent shock waves through Twitter’s investor base and across its workforce. But with Twitter’s stock falling alongside the rest of the market, Musk has since expressed deep reluctance about the deal, claiming the company hasn’t been truthful or transparent about the prevalence of bots on the network.

Also yesterday, more breaking news on the Twitter “deal.”

Antoine Gara
NEW: Elon Musk has allowed his margin loan to expire. His equity commitment is now $33.5bn

More on Elon now having to up his personal stake:…

Elon Musk, the billionaire CEO of electric automaker Tesla, will increase his personal commitment in his Twitter takeover bid to $33.5 billion, according to an SEC filing dated May 24.

The revised financing plan would provide an additional $6.25 billion in equity for the buyout—an amount that would be enough to liquidate the same amount of margin loans against Tesla stock that was already reduced earlier this month.

That would bring the equity financing component of the deal to $33.5 billion, up from the $27.25 billion Musk disclosed earlier in May.

p.s. Elon said this on 28 APR 22:

Bloomberg’s Matt Levine:

Why would he scrap the margin loan? Well, it’s important to point out that I don’t know anything. But I can do some simple arithmetic:

* If he gets $6.25 billion of margin loan at a 20% LTV, he will need to pledge $31.25 billion of Tesla stock to get the margin loan.

* If he replaces that with $6.25 billion of equity, he could sell $8.2 billion of Tesla stock to raise that money. The top effective federal capital gains tax rate is 23.8%, and the top Texas capital gains tax rate is zero, so if he sells $8.2 billion of stock that will generate about $6.25 billion of after-tax proceeds.

* $8.2 billion is less than $31.25 billion.

Tesla’s stock has gone down a lot since the initial announcement of the deal. Musk owns about 163 million Tesla shares, of which about 92.3 million are pledged to secure other loans, leaving him about 70.6 million free shares. When Musk first got his margin loan commitment on April 20, 2 those shares were worth about $69 billion, more than enough to cover a $12.5 billion margin loan at a 20% loan-to-value ratio. As of Tuesday’s close, they were worth about $44.4 billion, which would support about an $8.9 billion margin loan. That’s cutting it a little close. To get the $6.25 billion margin loan at the current low-to-mid-$600s Tesla stock prices, Musk would have to pledge most of his remaining shares.

A margin loan is a way to turn stock into cash at a 20% efficiency rate: Musk can pledge $5 of stock to get $1 of margin loan. But just selling the stock turns it into cash at about a 76.2% efficiency rate: He can sell $1 of stock to get back $0.76 of cash (after taxes). Of course if he sells a huge chunk of stock that will drive down the price, but still. If Musk sold all of his remaining unpledged Tesla shares at $500 per share — way below current prices — he’d raise about $35 billion, or call it $27 billion after tax, far more than he needs. 3 Whereas pledging all those shares for a margin loan, even at a $650 stock price, would only raise about $9 billion.