Where will Elon Musk get the cash for Twitter?

By Tom Maloney

Elon Musk and Twitter Inc. reached an agreement for the world’s richest man to buy the social networking platform for $44 billion, resolving the pressing question of whether the company’s board would consent to the leveraged buyout deal.

On Musk’s side, though, there remains a mystery: How is he going to cover the $21 billion equity portion of the transaction that he’s personally guaranteed?

Musk, 50, has outlined the $13 billion in bank financing secured by the social-media company and the $12.5 billion backed by a pledge of some of his $170 billion Tesla Inc. stake. But he’s been short on details about how he’ll fund the remainder.

There’s little doubt he can come up with the money. Musk is the world’s richest person, with a fortune of $257 billion, according to the Bloomberg Billionaires Index. However, he has just about $3 billion in cash and somewhat liquid assets, according to Bloomberg estimates.

That leaves him with the following options:

Other investors

One path for Musk is finding like-minded investors who buy into his vision for Twitter to join him in his purchase. That would mean some of the equity portion comes from new or existing shareholders.

He’s already hinted that such a strategy may be on the cards. After his initial offer to buy Twitter, Musk said at a TED event that "the intent is to retain as many shareholders as is allowed by the law".

Private U.S. companies are generally limited to fewer than 2,000 shareholders, meaning most retail investors won’t continue to own Twitter if the buyout closes.

But larger shareholders, like Twitter founder Jack Dorsey, might choose to keep their holdings in the company if they believe in Musk’s vision. Dorsey’s stake is worth almost $1 billion. Bloomberg News reported Monday that Musk is lining up equity partners and continuing talks with other potential co-investors.

On the other hand, Musk’s statement at the TED event that he "doesn’t care about the economics" could scare off some potential investors.

Stake sales

Even if Musk can’t round up many other equity investors, he has the financial firepower to go at it mostly alone, thanks to the crown jewel of his enormous fortune: His stake in Tesla.

After pledging shares to cover his $12.5 billion margin loan, Musk will still own unpledged shares in the car company worth about $21.6 billion, based on Tesla’s closing price Monday. After taxes, that sale would come close to covering his full commitment, though a lot will depend on the price he gets for the stock.

That strategy comes with its own set of risks. For one, concerns about Musk needing to sell some of his shares may already be weighing on the electric carmaker’s stock price. It’s down about 8% since the beginning of the month.

Selling his stakes in his private companies, SpaceX and The Boring Company, is possible but unlikely because they they’re so much less liquid.

Musk may be even richer than calculated

Musk’s cash estimate is based on filings related to publicly traded shares and news reports, but much of the information on his private finances is limited. If his portfolio of investments has outperformed the market, for instance, Musk could be wealthier than the Bloomberg estimate and he might not need new sources of funding to cover the $21 billion.

Musk said in July he owned Bitcoin, Ether and Dogecoin. While it’s not clear how much he holds or for how long he’s owned them, the first two cryptocurrencies have gained about 720% and 2,600%, respectively, since March 2020, a much steeper rally than the roughly 90% advance in the S&P 500 Index. Dogecoin, meanwhile, surged almost 30% on Monday after Musk agreed to buy Twitter.