Technology

Elon Musk is trying to sell Twitter shares to raise capital

Investors flocked to buy the stock at the strike price of $54.20 as the social media company was losing money

The head of Elon Musk’s family office has been in touch with the investor who helped the billionaire buy Twitter for $44 billion in October to try and raise new funds. That’s because the social media company continues to lose money and faces hefty interest payments on its debts.

Jared Birchall, a former Morgan Stanley banker, spoke to Twitter shareholders on Thursday afternoon, according to two people familiar with the matter. He offered new shares in the company for $54.20 – the same price Musk paid to take the company private.

Its note to investors, first reported by Semafor, said Twitter was “pleased to announce a continuation offer of common stock at original price and terms,” ​​according to a person who received it.

The memo did not detail how much Twitter expects to raise at the upcoming fundraiser. However, the company said it would complete the fundraising by the end of the year.

“It was all done in a haphazard and crude way,” said investment adviser Ross Gerber, who invested in the Twitter deal in October and confirmed receiving the latest offer. “They did it because they ran out of money. I don’t think [Musk] expected sales to drop that much.”

A second person whose company accepted the offer said Musk indicated that the investment capital would be used to fund business expansion, including “hiring” programmers to build “super apps” that could process payments with other services, among other things.

Burchall and Musk plan to hold a series of talks with Twitter investors looking to increase their stake in the company, the person said.

Musk bought Twitter after a dramatic six-month legal battle, funding the acquisition with about $13 billion in debt and about $7 billion in debt.

But he has since struggled to cut costs, including laying off about half of Twitter’s workforce after advertisers left the platform over concerns about his content moderation strategy and jeopardizing its $5 billion dollar-a-year ad business.

A number of high-profile investors wrote big checks to fund Musk’s acquisition of Twitter in exchange for an equity stake, including Sequoia Capital, Andreessen Horowitz, Oracle co-founder Larry Ellison, and cryptocurrency exchange Binance.

Banks such as Morgan Stanley, Bank of America and Barclays experienced significant losses from the financial packages they provided. Twitter, which lost about $221 million in 2021, will have to pay about $1 billion in annual interest on those loans.

Between Monday and Wednesday, Musk sold $3.6 billion to Tesla, the electric vehicle maker he founded and runs. It was Tesla’s fourth sale of stock this year, bringing its total sales to nearly $40 billion.

The sale came despite Musk saying “there will be no further TSLA sales” to support Twitter’s April deal.

On Tuesday, Musk tweeted, “At the risk of stating the obvious, be careful with debt in volatile macroeconomic conditions, especially if the Fed continues to raise interest rates.”

Banks in debt to buy Twitter are scrambling to sell subprime loans to credit investors and take them off their balance sheets. However, the significant concessions demanded by investors would result in losses that could easily exceed $1 billion, people familiar with the matter told the Financial Times.

Musk could not be reached for comment Friday. Twitter did not respond to requests for comment.

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