The Scoop
The managing director of Elon Musk’s family office is seeking new equity investors for Twitter as users revolt, advertisers flee, and debt payments loom, according to people familiar with the fundraising effort.
Musk’s money manager, Jared Birchall, reached out to potential investors this week, offering shares of Twitter at the same price, $54.20, that Musk paid to take the company private in October, the people said.
“Over recent weeks we’ve received numerous inbound requests to invest in Twitter,” Birchall wrote to investors in an email, which was reviewed by Semafor. “Accordingly, we are pleased to announce a follow-on equity offering for common shares at the original price and terms, targeting a year-end close.”
Ross Gerber, a Tesla investor who said he put less than $1 million in Musk’s original takeover of Twitter, confirmed that he was contacted Thursday evening about another funding round at the $44 billion valuation.
Gerber said he’s considering it but wants to get a clearer idea of what the plan is. “One could argue he has created value or destroyed value at Twitter. It’s hard to tell at this point,” he said.
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Liz’s view
Asking investors to pay full price for an asset whose value is rapidly collapsing is going to be a tough sell. Musk may have ideas that will save Twitter and clean up social media, but he’s running out of runway to do it.
Twitter took on $13 billion of debt to do the deal, which will carry annual interest payments of about $1 billion. That’s more cash than it generated last year– and that was before advertisers, turned off by Musk’s almost-anything-goes approach to policing content, fled the platform.
Musk is looking more financially strapped himself. He sold another $3.6 billion worth of Tesla shares Wednesday, presumably to put more equity into Twitter to lower its debt burden. It was the third time he’d sold Tesla stock since he said in April that he was done.
Musk himself has admitted he overpaid for Twitter, and is now asking people to pony up the same.
Room for Disagreement
But Musk’s backers are overwhelmingly economically irrational, driven more by fandom or shared ideology than financial returns.
“This is gonna work isn’t it,” Bloomberg’s Matt Levine, who has written some of the smartest takes on the Twitter drama, tweeted today. The basic bet here, he notes, is that there are equity investors who will pay 100 cents on the dollar for shares of private Twitter because they like Musk. Meanwhile, his bankers are stuck with debt they can’t sell even at steep discounts because no one buys bonds for the fun of it.
Notable
- “The way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk,” Levine wrote last year. This fundraising effort will test that.
- Birchall might consider starting with this list of CEOs who have been supportive of Musk’s management of Twitter in recent weeks. “As I’ve called around to C-suite executives and influential investors in Silicon Valley over the past few weeks, I’ve been surprised by how many are rooting for Mr. Musk — even if they won’t admit to it publicly,” NYT’s Kevin Roose writes.