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Hey friends 👋 ,

Happy Monday and welcome to the sixth issue of Through the Noise!

Today we're finding out how Elon Musk is financing his $44B bid for Twitter.

It's time to strap in and enjoy.

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How is Elon Musk paying $44 billion for Twitter?

The $44B deal can be broken down into 4 segments.

1. Elon Musk's equity commitment ($20.1B)

2. Debt financing secured by Twitter shares ($13B)

3. Outside investors ($7.14B)

4. Margin loan secured by Tesla shares ($6.25B)

1. Elon Musk's equity commitment ($20.1B)

Musk is putting down his wealth as the foundation to the deal.

This consists of $20.1B with the rest split through debt financing, outside investors and a margin loan.

2. Debt financing secured by Twitter shares ($13B)

Banks, including Morgan Stanley are providing $13B in debt secured against Twitter itself.

This is 7x Twitter's projected 2022 EBITDA.

3. Outside investors ($7.14B)

Musk secured commitments from 19 investors.

There are some big hitters.

Most notably:

• Saudi Prince Alwaleed Bin Talal ($1.89B)

• Larry Ellison ($1B)

• Sequoia ($800M)

• Andreessen Horowitz ($400M)

• Qatar's sovereign wealth fund ($375M)

4. Margin loan secured by Tesla shares ($6.25B)

Musk was originally taking $12.5B in margin loans to fund the transaction.

This has now been cut in half to $6.25B thanks to new equity commitments.

How the margin loans looked before new investors jumped on board:

6 of the 10 largest take-private deals since 2000 happened in 2007 driven by easy money and optimism for future earnings.

This didn't end well...

Many firms becoming saddled with debt, suffering difficulty servicing the interest payments when business ultimately declined.

Through the Noise Podcast

Last week we recorded the sixth episode of the Through the Noise podcast.

Our guest was Michael Girdley, a serial entrepreneur and investor based in San Antonio, Texas. He is the Chairman and Co-Founder of Dura Software, a hyper-niche software acquisition company that currently operates 9 businesses.

On the investing side, Michael is Co-Founder and Partner at the Geekdom Fund, a venture capital fund that invests in early-stage internet tech startups from pre-seed to seed. He is also the Co-Founder and Partner at Dry Line Partners, a private equity fund focused on B2B recurring revenue technology businesses

We had a ball recording this one, diving into:

• Effectuation to focus on the change you can make

• Cupid investing > angel investing

• Leveraging Twitter

Catch the episode on Spotify, Apple and Callin.

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That's all for today friends!

As always feel free to reach out @thealexbanks as I'd love to hear your feedback.

Thanks for reading and I'll catch you next Monday.

Alex