However, interest rates on loans reflect the risk that they will not be repaid. Banks don’t hold loans, they 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, maybe by selling more Tesla shares, or he can to cede part of its ownership of Twitter, diluting its share.
Tesla had a market value of $ 902 billion as of Friday, but its shares have fallen nearly 20 percent since Mr Musk first revealed in early April that he had bought a large stake in Twitter. If Twitter’s finances go south, forcing Mr. Musk to sell more shares of Tesla to pay off Twitter’s debts or pledge more shares as collateral for his personal loans, this could put additional pressure on Tesla’s share price. . Mr Musk does not take a salary from Tesla, but pays in stock, which is released on the basis of performance stages, which include the company’s share price.
Since Mr Musk first revealed his stake, the Nasdaq technology index has fallen more than 10 percent, making his proposal look even more generous. “It’s a high price and your shareholders will like it,” Mr Musk said in a letter to the Twitter board. Although shares of the social media company traded higher than Mr Musk’s offer just six months ago, they fell far below that price earlier this year and seemed unlikely to return to those peaks any time soon.
Mr Musk is considering merging with investment intermediaries in his offer to buy Twitter, which would reduce the amount of money he would personally have to invest. He could still partner with a company or other investors such as family offices to help raise money, according to two people familiar with the discussions.
Thoma Bravo, a technology-focused buyout firm, has said it wants to provide some funding, but nothing has been decided yet. Apollo, an alternative asset manager, has also considered a possible deal in which it will grant a loan on preferred terms.
If the math of the deal becomes unpleasant for Mr. Musk, he has an exception: a $ 1 billion separation fee. For a person with an estimated fortune of over $ 200 billion, that’s a small price to pay.
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