Still, the interest rates on the loans reflect the risk that they may not be repaid. The banks don’t hold the 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, perhaps by selling more Tesla stock, or he could part of his property from Twitter, thereby diluting his interest.
Tesla had a market cap of $902 billion on 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 deteriorate, forcing Musk to sell more Tesla stock to pay Twitter’s debts or pledge more stock as collateral for his personal loans, it could put further pressure on Tesla’s stock price. Mr. Musk does not receive a salary from Tesla, but is paid in shares that are released based on performance milestones, including the company’s stock price.
Since Mr. Musk first disclosed his stake, the tech-heavy Nasdaq index has fallen more than 10 percent, making his offerings seem even more generous. “It’s a high price and your shareholders will love it,” Musk said in a letter to the Twitter board. Although the social media company’s shares traded higher than Mr. Musk’s bid just six months ago, it fell well below that price early this year and seemed unlikely to return to those heights anytime soon.
Mr. Musk has considered partnering with investment firms in his bid to buy Twitter, which would reduce the amount of money he would personally have to invest. According to two people with knowledge of the discussions, he could still partner with a company or other investors such as family offices to raise money.
Thoma Bravo, a technology-focused buyout company, has agreed to provide some financing, but nothing has been decided yet. Apollo, an alternative wealth manager, was also eyeing a potential deal under which it would provide a loan on preferential terms.
If the deal math gets distasteful for Mr. Musk, he has a way out: a $1 billion cancellation fee. For a man with an estimated fortune of over $200 billion, that’s a small price to pay.
