Can Elon Musk Make Twitter’s Numbers Work?

Still, the interest rates on the loans reflect the risk that they might not get paid back. The banks don’t hold on to 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 stock, or he could cede some part of his ownership of Twitter, diluting his stake.

Tesla had a market value of $902 billion as of Friday, but its shares have fallen by nearly 20 percent since Mr. Musk first revealed, in early April, that he had bought a big stake in Twitter. If Twitter’s finances go south, forcing Mr. Musk to sell more Tesla stock to pay Twitter’s debts or pledge more shares as collateral for his personal loans, it could put further pressure on Tesla’s stock price. Mr. Musk doesn’t take a salary from Tesla but is paid in stock that is released based on performance milestones that include the company’s share price.

Since Mr. Musk first disclosed his stake, the tech-heavy Nasdaq index has fallen more than 10 percent, making his offer appear even more generous. “It’s a high price and your shareholders will love it,” Mr. Musk said in a letter to Twitter’s board. Although the social media company’s stock had traded higher than Mr. Musk’s offer just six months ago, it slumped far below that price early this year and looked unlikely to return to those highs any time soon.

Mr. Musk has considered teaming up with investment firms in his bid to buy Twitter, which would reduce the amount of money he would personally have to invest. He could still partner with a firm or other investors like family offices to help raise cash, according to two people with knowledge of the discussions.

Thoma Bravo, a technology-focused buyout firm, has expressed willingness to provide some financing, but nothing has been decided yet. Apollo, an alternative asset manager, also looked at a possible deal where it would extend a loan on preferred terms.

If the deal math becomes unpalatable for Mr. Musk, he has an out: a breakup fee of $1 billion. For a man with an estimated fortune well over $200 billion, that’s a small price to pay.


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