Can Elon Musk make Twitter numbers work?
Yet interest rates on loans reflect the risk that they will not be repaid. The banks don’t hold the loans but sell them to other investors in the market, so if Twitter can’t pay its debts, Mr. Musk will either have to pay those investors, perhaps by selling more Tesla shares, or he could cede part of his ownership of Twitter, diluting his stake.
Tesla had a market value of $902 billion on Friday, but its shares have fallen nearly 20% since Mr. Musk first revealed in early April that he had bought a big stake in Twitter. If Twitter’s finances collapse, forcing Mr. Musk to sell more Tesla shares to pay Twitter’s debts or to pledge more shares as collateral for his personal loans, it could put further pressure on the company. Tesla stock price. Mr. Musk does not receive a salary from Tesla, but is paid in shares that are released based on performance milestones that include the company’s stock price.
Since Mr. Musk first disclosed his stake, the tech-heavy Nasdaq index has fallen more than 10%, making his offer even more generous. “It’s a high price and your shareholders are going to love it,” Mr. Musk said in a letter to the board of directors of Twitter. Although shares of the social media company traded higher than Mr Musk’s offer just six months ago, they fell well below that price earlier this year and it seems unlikely may they get back to those heights anytime soon.
Mr. Musk considered partnering with investment firms in his bid to buy Twitter, which would reduce the amount of money he would have to personally invest. It could still partner with a company or other investors like family offices to help raise funds, according to two people familiar with the discussions.
Technology-focused buyout company Thoma Bravo has expressed willingness to provide funding, but nothing has been decided yet. Apollo, an alternative asset manager, has also looked into a possible deal where it would provide a loan on concessional terms.
If the calculations of the deal get nasty for Mr. Musk, he has a way out: a $1 billion severance package. For a man whose fortune is estimated at over $200 billion, that’s a small price to pay.