Have Morgan Stanley’s bankers inhaled some of Elon Musk’s favourite herb? That’s one explanation for the debt package they’ve put together to fund the Tesla boss’s proposed Twitter buyout . But the loans look more rational if you peer through the smoke.
The financing, which Musk’s bankers hashed out in a few days, will have raised eyebrows on Wall Street. Twitter generated almost $1.5 billion of EBITDA last year, excluding a shareholder-litigation settlement. A Musk takeover would puff up the company’s leverage to a heady 8.6 times EBITDA, excluding cash on its balance sheet.
. That leaves lenders with little protection if growth goes into reverse. Such a scenario is all too plausible if Musk spooks advertisers by blazing his way through content-moderation rules in the interests of promoting free speech.A financial partner like Thoma Bravo might provide some reassurance, though it’s doubtful the buyout firm could restrain the billionaire. A better reason for hope is that Musk has lots of skin in the game.
Musk’s exposure is chunky even for a man of his net worth, which Forbes puts at $270 billion. That gives him good reason to care about the company’s financial health, even if he says he doesn’t. If Twitter keeps growing as analysts expect, leverage would fall to less than 7 times EBITDA by 2023.makes him an attractive private-banking client. Pleasing him boosts the bank’s chances of being involved in future deals involving Tesla and SpaceX.
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