Musk’s desperate cash grab as Twitter struggles
Elon Musk has made a desperate and embarrassing move that reveals exactly how wrong his biggest gamble ever has gone.
The head of Elon Musk’s family office has asked the same investors who helped the billionaire to buy Twitter just a few months ago to purchase yet more stock, in a desperate plea for cash as the social media company falls into turmoil.
Jared Birchall, a former Morgan Stanley banker, approached Twitter’s shareholders late last week, the Australian Financial Review reported.
He offered them new shares in the company at $US52.40 ($A78) – the same price Mr Musk paid to take the company private.
Twitter has been in free fall since Mr Musk’s takeover in October, as Mr Musk went to war with tech giant Apple and sent dramatic emails to what remains of the company’s staff.
And he may not be head of the company for much longer, after promising to “abide by” a poll asking users whether he should quit as CEO. The result came back with 57.5% of people calling on him to resign.
Want to stream your news? Flash lets you stream 25+ news channels in 1 place. New to Flash? Try 1 month free. Offer available for a limited time only >
Mr Birchall and Mr Musk reportedly planned to cold call investors to encourage them to buy more shares – some of whom criticised the desperate act.
“Everything has been done haphazardly and roughly,” said investment adviser Ross Gerber, who invested in the Twitter deal in October and confirmed he had received the offer.
“They’re doing it because they’re out of money. I don’t think [Mr Musk] expected such a big drop in revenue.”
Mr Birchall, however, put a positive spin on things.
His note to investors said Twitter was “pleased to announce a follow-on equity offering for common shares at the original price and terms”, the AFR reported. The note did not say how much extra cash Twitter hoped to raise, but claimed the company aimed to stop the fundraising by the end of the year.
The new funds would go towards business expansion, including a “hiring spree” of programmers to build a “super app” that could process payments, among other services, Mr Birchall’s note added.
Meanwhile, the social media company is bleeding cash and faces heavy interest payments on its debts.
Mr Musk bought Twitter after a dramatic and lengthy legal row back, racking up about $US13 billion ($A19 billion) in debt and outside equity of about US$7 billion ($A10 billion) in the process – all as advertisers fled the platform, taking their revenue with them.
Mr Musk has been racing to cut costs ever since, laying off about half of Twitter’s staff.
He has been accused of abandoning Tesla in his Twitter pursuits, as he plunged the car maker’s valuation to its lowest level in two years – pushing himself out of the richest man in the world slot in the process.
Mr Musk sold $US3.6 billion ($A5.3 billion) in Tesla stock last week alone. The new sales came despite Mr Musk’s assurance there would be “no further TSLA sales” to support the Twitter deal back in April.
On Tuesday, he tweeted: “At risk of stating obvious, beware of debt in turbulent macroeconomic conditions, especially when Fed keeps raising rates.”
US is in danger of shutting down, again
The possibility of a US government shutdown is now looming large after a deadlocked Congress was unable to pass an extension.
Bleak warning over Aussie interest rates
An economist has warned Australia has been left “exposed to inflation that’s really destructive” on the eve of RBA’s next rates decision.
40,000 Aussies at risk after huge data breach
Nearly 40,000 Aussie tradies have been put at risk after a popular hardware chain suffered a major data leak.