Even for the world’s richest person, $43 billion is a steep price.
Elon Musk’s proposed all-cash offer to buy Twitter Inc. represents about one-sixth of his $259.3 billion fortune. Yet the vast majority of that wealth is tied to his stake in Tesla Inc., the electric carmaker he co-founded that has surged in value over the past two years and lifted him to the top of the Bloomberg Billionaires Index.
The purchase isn’t straightforward, but Musk has several financing paths. One option is to sell some Tesla shares outright. Another is borrowing against them to stage a leveraged buyout, possibly with outside partners. Musk, 50, currently has about $3 billion in cash or other somewhat liquid assets after spending $2.6 billion buying a 9.1 percent stake in Twitter in recent months, according to Bloomberg calculations.
For Musk to raise the additional $36 billion in cash needed to buy the rest of Twitter would require selling about 36.5 million Tesla shares, or more than a fifth of his stake. Such an exit could risk a slide in the company’s share price -- not to mention potentially raise questions about the commitment, financial and otherwise, of its chief executive officer.
His other option is to borrow against his positions in Tesla and space exploration company SpaceX.
“This becomes a hostile takeover offer which is going to cost a serious amount of cash,” said Neil Campling, head of TMT research at Mirabaud Equity Research. “He will have to sell a decent piece of Tesla stock to fund it, or a massive loan against it.”