In these hours we see Elon Musk even soup. The businessman achieved his goal and bought Twitter for $44 billion in cash. This deal is sure to be remembered for years to come. However, there are issues related to the transaction that are still not entirely clear, such as the origin of the funds committed by the tycoon. Or some of them, at least.

Let’s assume that yes, Elon Musk is the richest man in the world, and his fortune is estimated over $250,000 million. But that doesn’t mean you’ve withdrawn the money you need to buy the social network from one of your bank accounts. The reality is much more complex and, in fact, some small details have yet to be resolved.

After Musk submitted his initial purchase offer and Twitter’s board of directors activated the poison pill, the businessman moved on to the next step in his plan: to show he had enough funding to handle the acquisition. In a document submitted to the US Securities and Exchange Commission (SEC), he assured that $46.5 billion complete an offer to pay $54.20 per social media share.

To raise such a sum, Elon Musk found his main “squire” at Morgan Stanley. The US financial institution has submitted two letters of commitment to the SEC: one to finance a $13,000 million debt against social network assets; D another for a $12.5 billion loan on the security of a part of Tesla shares owned by a businessman of South African origin. Bank of America, Barclays and BNP Paribas, among other banks, also participated in both. Participation by these institutions is, of course, not free and will require interest payments of about $1 billion a year.

Remaining $21 billion were personally guaranteed by Elon Musk, although it is not yet known how he will face that responsibility. And back to what was said above: it does not depend on how rich the protagonist is, but on the available liquidity.

Elon Musk and the “secret” $21 billion to buy Twitter

Elon Musk / Twitter

Elon Musk has yet to figure out how he will get the $21 billion in cash he personally promised to buy Twitter. Analysts believe that the businessman is considering several options, although some of them seem more feasible than others.

Musk is estimated to have about $3 billion in cash and liquid assets to date. But if you’re willing to spend all that money to buy Twitter, you still have to make up a very significant difference.

The most acceptable option for this watch would be get co-investors. To do this, Elon Musk will be testing the ground among existing Twitter shareholders, at least among those with the most participation. It will be necessary to see if Jack Dorsey gets any influence in this sense.

But that wouldn’t be his only card, as he could also join forces with other companies to secure the money he needs. Some days name Thomas Bravo, a fund that buys firms in the technology sector, as one of the possible partners that could accompany Musk on this crusade. It’s worth noting that the said company has already sounded like a potential interested party to buy Twitter on its own, although it clearly didn’t succeed.

Is it possible to sell shares of Tesla and SpaceX?

Tesla Model S Plaid
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In accordance with Financial TimesElon Musk has not ruled out selling some of his Tesla shares to get the $21 billion in cash he pledged to buy Twitter. However, this would not be the tycoon’s first choice, but one of the last he could consider. Why? Because I would have to pay a monumental amount of taxes.

Recall that the CEO of Tesla does not receive a salary or bonus for holding the specified position in the company, but receives compensation in the form of shares. A) Yes, You only need to pay taxes when you sell them and receive capital gains from them.. This was controversial as early as 2021, when Musk promised to sell 10% of his shares in Tesla; a move that was made with a ruse, as the real goal was to get liquidity to exercise an option that would allow him to buy more shares – about 23 million – for only $6.23 each when the real price was between 900 and 1000 dollars. .

So, in the last year alone, Elon Musk paid $ 11 billion in taxes, while from 2014 to 2018 he allocated only $ 445 million for his tax liabilities.

So, if a sale of Tesla shares is out of the question, why not consider selling your stake in SpaceX or The Boring Company, which are private. However, they wouldn’t give him enough liquidity either meet the $21 billion commitment.

Alternative ways of financing

bloomberg raises an interesting possibility related to Elon Musk’s interest in cryptocurrencies. The quoted means indicates that the tycoon maybe even richer than I thought, thanks to their investments in bitcoin and other crypto assets. Thus, the possibility of obtaining cash through the indicated alternative route would not be too far-fetched.

In any case, this is just a guess. Logically, it is not known how much of his personal fortune he set aside for these assets.and if (at any rate) he would be ready to part with them.

By comparison, in 2021 Tesla bought Bitcoin for $1.5 billion with the intention of using it as a means of payment for its electric vehicles; however, it gave up shortly thereafter due to the negative environmental impact of mining.

Then Elon Musk himself announced that his company would not sell the bitcoins he owned (they are currently worth almost $2 billion) and that he would only use them when the mining method was energy sustainable.

Will Elon Musk use the US tax code to buy Twitter?

Elon Musk / Tesla / Twitter

Speculation about how Elon Musk will get the $21 billion he personally promised to buy Twitter rekindled an old rivalry with Senator Elizabeth Warren. A US lawmaker who openly accused the tycoon of tax evasion has charged him again in recent hours.

“This deal is dangerous for our democracy. Billionaires like Elon Musk are governed by a different set of rules than everyone else, accumulating power for their own benefit. We need a wealth tax and strict rules to hold big tech companies accountable,” he wrote. he’s on twitter.

To this are added analysts who assure that the businessman uses his tax-free wealth and US tax law to buy Twitter. As we said, selling your Tesla shares for liquidity would be counterproductive because it would make you pay more taxes.

But this is not the case with loans that use such shares as collateral, such as the $12.5 billion loan from Morgan Stanley and its partners. And as if that wasn’t enough, Elon Musk also benefits from tax deduction for interest on this debt.

If you look at Musk’s “income” under our tax code, you can see that this guy is really rich, but not rich enough to buy Twitter. When you look at a more complete definition of their income – with parts that are not included in taxable income under our tax rules and therefore not taxed – you begin to understand how Twitter can buy.

Statement by Steve Wamhoff, Director of Federal Fiscal Policy, US Institute for Taxation and Economic Policy, to Bloomberg.

In the meantime, while there is no exact data, everything that is said on this topic will be based on assumptions. However, Elon Musk will have to close the source of the missing pledged funds as soon as possible. It is expected that the purchase of Twitter will be completed before the end of this year..


Source: Hiper Textual

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