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Elon Musk’s takeover financing deal could clip Twitter’s wings | Elon Musk

If you want to know who the world’s richest man has on speed dial, then a regulatory filing on Thursday provided an insight. Elon Musk announced a score of new backers for his $44bn (£35.6bn) Twitter takeover, including Oracle tycoon Larry Ellison, the crypto market’s leading trading platform, the Qatari sovereign wealth fund and a Saudi prince.

If this was Tesla’s boss displaying his power network, it was also an admission that – despite recent words to the contrary – the numbers behind his audacious bid do matter. Discussing his offer last month, Musk said: “I don’t care about the economics at all.” For some of Wall Street’s biggest banks, Tesla’s shareholders and even Twitter users, the economics are very important indeed.

The initial funding package behind the takeover, which requires shareholder approval,was initially split into three elements: $21bn in equity, or Elon Musk’s own cash; $12.5bn of loans secured against Musk’s shares in Tesla, the electric carmaker that he runs; and a further $13bn in loans from a group of seven banks, secured against Twitter itself.

That changed on Thursday. According to a filing with the US Securities and Exchange Commission (SEC), the equity commitment had risen to $27.25bn, helped by a group of 18 investors including Ellison ($1bn), the Binance trading platform ($500m) and Qatar Holding ($375m), an investment arm of the Gulf state’s wealth fund. They are putting in $7.1bn, plus a contribution from the Saudi Arabian investor Prince Alwaleed bin Talal, who also plans to roll his $1.9bn Twitter stake into the deal rather than cashing out.

As part of this reshuffle, the loans secured against Musk’s 15.7% stake in Tesla have been halved to $6.25bn. The bank loan commitment stays the same.

Musk’s comment about the economics of the bid, in an interview at a TED conference in mid-April, came before he confirmed hastily put-together funding for a takeover. It was a move that swayed shareholders in Twitter and the company’s board, who accepted the bid days later. But the off-the-cuff nature of his comments belie the serious nature of the financial commitments the Tesla tycoon is making. Some experts point to a high-risk structure, regardless of last week’s changes – and what it means for the company he is buying.

“Musk hasn’t provided a lot of detail about his business plan for the company,” says Jill Fisch, a professor of business law at the University of Pennsylvania. “Although he has taken steps to reduce his risk by bringing in additional investors, he still has a lot of personal exposure financially, he is paying a high price based on Twitter’s existing business model and he has large loans from the banks. Given the size of Musk’s personal financial exposure, he will be under pressure to run Twitter to make money, both to manage his own financial risk and to repay the bank financing.”

First, let’s look at Musk’s commitment. Last month he revealed he had sold $8.5bn worth of shares in Tesla since announcing the takeover, presumably to help fund the deal. His stake in Tesla, which forms the core of his wealth, is integral to financing the deal. If you strip out new investors and Prince Talwaleed’s stake, plus Musk’s own $3.9bn stake in Twitter, he still needs to provide around $14.3bn of equity for the deal. A simple reading of this would be: he owns $155bn in Tesla shares, so contributing just over $14bn should be easy.

But it is not quite as straightforward as that. According to a filing with the SEC, Musk has already pledged 92.3m of his 163m Tesla shares as “collateral to secure certain personal indebtedness”. Then there is the $6.25bn already pledged for the deal – in an arrangement known as a margin loan, where the borrower could be required to make good any shortfall in the value of the shares that the debt is secured against.

Presuming the loan-to-value ratio of 20% in the original margin loan agreement is carried over, this means a further 35.8m shares are tied up. So, looking at Musk’s total shareholding, this leaves him with about 35m unpledged shares worth $30bn. In theory, these could be pledged or sold to raise the remaining $14bn of cash needed for the deal. But Musk tweeted on 29 April that he had “No further TSLA sales planned after today”.

Drew Pascarella, a senior lecturer of finance at Cornell University, says he would be surprised if Morgan Stanley, the Wall Street bank that has played the lead role in the debt financing, had not carried out some form of due diligence on Musk’s commitment. “There is no way Morgan Stanley would have proceeded as they did unless they had looked in Elon’s eyes and seen some evidence that he could come up with that money.”

The Tesla chief executive has other sources of wealth, including Tesla shares already sold, his SpaceX rocket business and his Boring Company tunnelling firm. He is also in line to receive $20bn worth of Tesla share options (based on Friday’s share price), although he cannot cash these in for five years.

According to calculations by CreditSights, a credit research firm, the bank financing alone will leave Twitter highly leveraged once the deal is completed. Twitter’s gross indebtedness will be nine times its underlying Ebitda – a measure of profit – for 2021, says CreditSights.

“That is very high and certainly not a comfortable amount of leverage,” says Jordan Chalfin, a senior technology analyst at CreditSights. It is against the backdrop of these numbers that Musk has floated ideas such as charging a “slight” fee for commercial and government users, although it will stay free for casual users.The New York Times also reported on Friday that Musk expects to pay down the $800m-$900m debt interest costs with free cash flow that he expects to grow to $9.4bn by 2028, although in the short term it looks like it will be tight. According to Chaflin, a proxy for Twitter’s ability to cover its debt interest would be subtracting Twitter’s capital expenditure costs – $1bn last year – from the company’s Ebitda. Stock market analysts’ forecasts for Twitter Ebitda, according to a Reuters poll, is $1.4bn in 2022 and $1.8bn in 2023. It could be a squeeze.

“The extremely high levels of debt Elon plans to saddle Twitter with come at a high price – investment for growth,” says Cornell’s Pascarella. “A technology company like Twitter needs to invest in itself to continue to innovate and grow. Post deal, most of Twitter’s cash flow will be used not for investment, but to service debt.”Speaking about Twitter at a recent conference, Musk said: “I mean, I could technically afford it.” He can, but some users might have to pay.

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Culture

Top 10 Florida Cities Dominate The Business Startup Landscape In The U.S.

Top 10 Florida Cities And Business Startup Landscape In The U.S.

The Voice Of EU | Florida emerges as a hub for entrepreneurial endeavors, with its vibrant business landscape and conducive environment for startups. Renowned for its low corporate tax rates and a high concentration of investors, the Sunshine State beckons aspiring entrepreneurs seeking fertile grounds to launch and grow their businesses.

In a recent report by WalletHub, Florida cities dominate the list of the top 10 best destinations for business startups, showcasing their resilience and economic vitality amidst challenging times.

From Orlando’s thriving market to Miami’s dynamic ecosystem, each city offers unique advantages and opportunities for entrepreneurial success. Let’s delve into the chronologically listed cities that exemplify Florida’s prominence in the business startup arena.

1. Orlando Leads the Way: Orlando emerges as the most attractive market in the U.S. for business startups, with a remarkable surge in small business establishments. WalletHub’s latest report highlights Orlando’s robust ecosystem, fostering the survival and growth of startups, buoyed by a high concentration of investors per capita.

2. Tampa Takes Second Place: Securing the second spot among large cities for business startups, Tampa boasts a favorable business environment attributed to its low corporate tax rates. The city’s ample investor presence further fortifies startups, providing essential resources for navigating the initial years of business operations.

3. Charlotte’s Diverse Industries: Claiming the third position, Charlotte stands out for its diverse industrial landscape and exceptionally low corporate taxes, enticing companies to reinvest capital. This conducive environment propels entrepreneurial endeavors, contributing to sustained economic growth.

4. Jacksonville’s Rising Profile: Jacksonville emerges as a promising destination for startups, bolstered by its favorable business climate. The city’s strategic positioning fosters entrepreneurial ventures, attracting aspiring business owners seeking growth opportunities.

5. Miami’s Entrepreneurial Hub: Miami solidifies its position as a thriving entrepreneurial hub, attracting businesses with its dynamic ecosystem and strategic location. The city’s vibrant startup culture and supportive infrastructure make it an appealing destination for ventures of all sizes.

6. Atlanta’s Economic Momentum: Atlanta’s ascent in the business startup landscape underscores its economic momentum and favorable business conditions. The city’s strategic advantages and conducive policies provide a fertile ground for entrepreneurial ventures to flourish.

7. Fort Worth’s Business-Friendly Environment: Fort Worth emerges as a prime destination for startups, offering a business-friendly environment characterized by low corporate taxes. The city’s supportive ecosystem and strategic initiatives facilitate the growth and success of new ventures.

8. Austin’s Innovation Hub: Austin cements its status as an innovation hub, attracting startups with its vibrant entrepreneurial community and progressive policies. The city’s robust infrastructure and access to capital foster a conducive environment for business growth and innovation.

9. Durham’s Emerging Entrepreneurship Scene: Durham’s burgeoning entrepreneurship scene positions it as a promising destination for startups, fueled by its supportive ecosystem and strategic initiatives. The city’s collaborative culture and access to resources contribute to the success of new ventures.

10. St. Petersburg’s Thriving Business Community: St. Petersburg rounds off the top 10 with its thriving business community and supportive ecosystem for startups. The city’s strategic advantages and favorable business climate make it an attractive destination for entrepreneurial endeavors.

Despite unprecedented challenges posed by the COVID-19 pandemic, the Great Resignation, and high inflation, these top Florida cities remain resilient and well-equipped to overcome obstacles, offering promising opportunities for business owners and entrepreneurs alike.


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European Startup Ecosystems Awash With Gulf Investment – Here Are Some Of The Top Investors

European Startup Ecosystem Getting Flooded With Gulf Investments

The Voice Of EU | In recent years, European entrepreneurs seeking capital infusion have widened their horizons beyond the traditional American investors, increasingly turning their gaze towards the lucrative investment landscape of the Gulf region. With substantial capital reservoirs nestled within sovereign wealth funds and corporate venture capital entities, Gulf nations have emerged as compelling investors for European startups and scaleups.

According to comprehensive data from Dealroom, the influx of investment from Gulf countries into European startups soared to a staggering $3 billion in 2023, marking a remarkable 5x surge from the $627 million recorded in 2018.

This substantial injection of capital, accounting for approximately 5% of the total funding raised in the region, underscores the growing prominence of Gulf investors in European markets.

Particularly noteworthy is the significant support extended to growth-stage companies, with over two-thirds of Gulf investments in 2023 being directed towards funding rounds exceeding $100 million. This influx of capital provides a welcome boost to European companies grappling with the challenge of securing well-capitalized investors locally.

Delving deeper into the landscape, Sifted has identified the most active Gulf investors in European startups over the past two years.

Leading the pack is Aramco Ventures, headquartered in Dhahran, Saudi Arabia. Bolstered by a substantial commitment, Aramco Ventures boasts a $1.5 billion sustainability fund, alongside an additional $4 billion allocated to its venture capital arm, positioning it as a formidable player with a total investment capacity of $7 billion by 2027. With a notable presence in 17 funding rounds, Aramco Ventures has strategically invested in ventures such as Carbon Clean Solutions and ANYbotics, aligning with its focus on businesses that offer strategic value.

Following closely is Mubadala Capital, headquartered in Abu Dhabi, UAE, with an impressive tally of 13 investments in European startups over the past two years. Backed by the sovereign wealth fund Mubadala Investment Company, Mubadala Capital’s diverse investment portfolio spans private equity, venture capital, and alternative solutions. Notable investments include Klarna, TIER, and Juni, reflecting its global investment strategy across various sectors.

Ventura Capital, based in Dubai, UAE, secured its position as a key player with nine investments in European startups. With a presence in Dubai, London, and Tokyo, Ventura Capital boasts an international network of limited partners and a sector-agnostic investment approach, contributing to its noteworthy investments in companies such as Coursera and Spotify.

Qatar Investment Authority, headquartered in Doha, Qatar, has made significant inroads into the European startup ecosystem with six notable investments. As the sovereign wealth fund of Qatar, QIA’s diversified portfolio spans private and public equity, infrastructure, and real estate, with strategic investments in tech startups across healthcare, consumer, and industrial sectors.

MetaVision Dubai, a newcomer to the scene, has swiftly garnered attention with six investments in European startups. Focusing on seed to Series A startups in the metaverse and Web3 space, MetaVision raised an undisclosed fund in 2022, affirming its commitment to emerging technologies and innovative ventures.

Investcorp, headquartered in Manama, Bahrain, has solidified its presence with six investments in European startups. With a focus on mid-sized B2B businesses, Investcorp’s diverse investment strategies encompass private equity, real estate, infrastructure, and credit management, contributing to its notable investments in companies such as Terra Quantum and TruKKer.

Chimera Capital, based in Abu Dhabi, UAE, rounds off the list with four strategic investments in European startups. As part of a prominent business conglomerate, Chimera Capital leverages its global reach and sector-agnostic approach to drive investments in ventures such as CMR Surgical and Neat Burger.

In conclusion, the burgeoning influx of capital from Gulf investors into European startups underscores the region’s growing appeal as a vibrant hub for innovation and entrepreneurship. With key players such as Aramco Ventures, Mubadala Capital, and Ventura Capital leading the charge, European startups are poised to benefit from the strategic investments and partnerships forged with Gulf investors, propelling them towards sustained growth and success in the global market landscape.


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China Reveals Lunar Mission: Sending ‘Taikonauts’ To The Moon From 2030 Onwards

China Reveals Lunar Mission

The Voice Of EU | In a bold stride towards lunar exploration, the Chinese Space Agency has unveiled its ambitious plans for a moon landing set to unfold in the 2030s. While exact timelines remain uncertain, this endeavor signals a potential resurgence of the historic space race reminiscent of the 1960s rivalry between the United States and the USSR.

China’s recent strides in lunar exploration include the deployment of three devices on the moon’s surface, coupled with the successful launch of the Queqiao-2 satellite. This satellite serves as a crucial communication link, bolstering connectivity between Earth and forthcoming missions to the moon’s far side and south pole.

Unlike the secretive approach of the Soviet Union in the past, China’s strategy leans towards transparency, albeit with a hint of mystery surrounding the finer details. Recent revelations showcase the naming and models of lunar spacecraft, steeped in cultural significance. The Mengzhou, translating to “dream ship,” will ferry three astronauts to and from the moon, while the Lanyue, meaning “embrace the moon,” will descend to the lunar surface.

Drawing inspiration from both Russian and American precedents, China’s lunar endeavor presents a novel approach. Unlike its predecessors, China will employ separate launches for the manned module and lunar lander due to the absence of colossal space shuttles. This modular approach bears semblance to SpaceX’s Falcon Heavy, reflecting a contemporary adaptation of past achievements.

Upon reaching lunar orbit, astronauts, known as “taikonauts” in Chinese, will rendezvous with the lunar lander, reminiscent of the Apollo program’s maneuvers. However, distinct engineering choices mark China’s departure from traditional lunar landing methods.

The Chinese lunar lander, while reminiscent of the Apollo Lunar Module, introduces novel features such as a single set of engines and potential reusability and advance technology. Unlike past missions where lunar modules were discarded, China’s design hints at the possibility of refueling and reuse, opening avenues for sustained lunar exploration.

China Reveals Lunar Mission: Sending 'Taikonauts' To The Moon From 2030 Onwards
A re-creation of the two Chinese spacecraft that will put ‘taikonauts’ on the moon.CSM

Despite these advancements, experts have flagged potential weaknesses, particularly regarding engine protection during landing. Nevertheless, China’s lunar aspirations remain steadfast, with plans for extensive testing and site selection underway.

Beyond planting flags and collecting rocks, China envisions establishing a permanent lunar base, the International Lunar Research Station (ILRS), ushering in a new era of international collaboration in space exploration.

While the Artemis agreements spearheaded by NASA have garnered global support, China’s lunar ambitions stand as a formidable contender in shaping the future of space exploration. In conclusion, China’s unveiling of its lunar ambitions not only marks a significant milestone in space exploration but also sets the stage for a new chapter in the ongoing saga of humanity’s quest for the cosmos. As nations vie for supremacy in space, collaboration and innovation emerge as the cornerstones of future lunar endeavors.


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