Musk Took on a $12.5 Billion Personal Loan Secured by His $62.5 Billion Worth of Tesla Stock

Feature Image: HackerNoon’s Midjourney AI, Prompt “richest man or most indebted man”

FACTUAL ALLEGATIONS

IV. The financing structure

55. At the time of signing, the financing for the transaction had three components: loans to the post-closing Twitter, a personal loan on margin to Musk (against his Tesla stock), and an equity commitment from Musk himself.

56. The loans to Twitter, of up to $13 billion in the aggregate, are promised by Morgan Stanley Senior Funding, Inc. and other lenders in a debt commitment letter dated April 25, 2022. The committed financing comprises a $6.5 billion term loan, a $500 million revolving credit facility, and $6 billion of bridge financing. Although the debt commitment letter requires Musk to assist the lenders in marketing the debt, his failure to do so does not release the lenders from their obligation to fund and the financing is not conditioned on the lenders’ ability to market the debt. The lenders’ obligation is subject only to the closing of the merger itself and certain other conditions the satisfaction of which lies in defendants’ control.

57. The margin loan of $12.5 billion to Musk personally was promised by Morgan Stanley Senior Funding, Inc. and other lenders in a margin loan commitment letter also dated April 25, 2022. The loan was to be secured by $62.5 billion worth of Musk’s Tesla stock — about 62 million shares at the time of signing.

58. Under an equity commitment letter dated April 20, 2022, Musk also personally agreed to contribute to or otherwise provide to Parent $21 billion of equity capital to be used to fund the purchase price. Because much of his net worth is tied up in Tesla shares, Musk would need to sell — indeed, has already sold — millions of those shares to fund his equity commitment.

59. The structure of Musk’s financing meant that the merger could become significantly more expensive for him if Tesla’s stock price were to decline (and significantly less expensive if Tesla’s stock price were to rise). For the equity component, the lower Tesla’s stock price was, the more shares of Tesla Musk would need to sell to provide the cash he committed. For the margin loans, a substantial decline in Tesla’s stock price would require Musk to pledge more shares or cash as collateral to the financing sources.