![]() ![]() ![]() SolarCity, the solar-panel company founded by two of Musk's cousins, in which he had a sizable stake, also received significant support from Musk's firms before Tesla finally stepped in to buy the nearly-bankrupt company in 2016, absorbing its roughly $3 billion in debt. When Tesla was struggling in 2009, Musk borrowed $20 million from SpaceX to keep the carmaker afloat. He has previously used his various companies to support new or adjacent ventures, often with little visibility into how the money is flowing. This would repeat an old pattern for Musk. Given his track record, there's a good chance he'll fall back on Tesla, his richest company. That leaves Musk, who paid $44 billion for the most expensive impulse buy ever, with fewer options to keep Twitter afloat. This may be true, but this amount also corresponds with the hit I have calculated he likely took with his personal margin loans as Tesla's stock plunged 49% since the company's latest proxy filing on March 31. He did recently sell another $4 billion worth of shares, which he claimed was to help save Twitter. Musk, of course, could sell off more of his valuable stake in Tesla to continue funding the company. They have little recourse since, as they should have expected going in, Musk owns the lion's share of the company and has fired everyone with significant authority to challenge him. That's very bad news for Musk's fellow equity owners who, he even admitted, " obviously" paid too much in the first place. ![]() They are already facing losses of more than $500 million on the loans they arranged back in April, after spiking interest rates and Twitter's deteriorating financial prospects under Musk killed the market appeal on the proposed bonds arranged to fund the deal.Īnd with Twitter's LBO debt valued at just 50 to 60 cents on the dollar, the investors who contributed cash to help Elon buy Twitter might have already had their equity value wiped out. Musk's bankers, for example, are unlikely to be interested in loaning Twitter more cash. Unfortunately, Musk has burned bridges with the logical parties that could backstop Twitter's growing liquidity pressure. Tack on the $13 billion in pricey new debt and the roughly $1.29 billion in annual interest costs that Musk's leveraged buyout saddled the company with, and Twitter is running deep in the red as its cash circles the drain.īetween paying severance to thousands of fired employees and hiring new ones, plus rising costs for collateral damage Musk is creating, Twitter will likely consume considerable cash for a while as it tries to rebound - all while trying to stop the alarming exodus of vital advertising revenue Musk is fueling. ![]() Twitter used the $42 billion collected from the deal to buy back and retire its stock and whatever was left of the $6 billion in cash it reported at the end of June was used to retire the company's $5.29 billion in existing bonds. This strategy has left the social-media company with little, if any, cash cushion to fund its recovery. Musk cobbled together his Twitter funding primarily by selling off a major chunk of his stock in Tesla and taking out huge loans. And given his obsession with Twitter, they may well ask: How far will Elon go to save Twitter at Tesla's expense? How Musk could use Tesla to try and save Twitter But siphoning cash from Tesla, Musk's only profitable company, just as serious competition is toppling its dominance, should concern Tesla's investors. So now the question becomes: How does Musk keep his new purchase afloat? Having observed Musk in action for years there is one troubling option I suspect he may pursue: raid Tesla. I've analyzed how companies get into and then out of financial distress for more than 20 years, and I've never seen new management blow up a company as fast as Musk is destroying Twitter. Account icon An icon in the shape of a person's head and shoulders. ![]()
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