Elon Musk’s Cash Needs Under Fresh Scrutiny After Big Tesla Sale

Musk, Tesla’s chief executive officer, dumped another $6.9 billion worth of shares on Aug. 5, according to regulatory filings. Combined with his sales in April, when he launched his $44 billion bid to buy the social-media platform, he has raised about $15 billion in cash from reducing his stake in the electric carmaker, which makes up the bulk of his $250.2 billion fortune.

The world’s richest person said he made the move now “to avoid an emergency sale of Tesla stock” in the event he was forced to close his Twitter deal.

Back in April, Musk also said he had no plans to sell more Tesla stock.

But the deal has taken a different shape than he initially envisioned. At the onset, Musk lined up $13 billion in bank financing, $12.5 billion in margin loans backed by his Tesla shares and pledged another $21 billion himself. 

Within weeks, he secured $7.1 billion of new financing commitments from outside investors, including Larry Ellison, Sequoia Capital and Binance. That ultimately led Musk to drop plans to use a margin loan, instead increasing the size of the deal’s equity component to $33.5 billion. While it’s possible he’s locked in additional commitments since then, none has been disclosed. Musk also already owns Twitter shares worth $4 billion at his $54.20 offer price.

That leaves $22.4 billion he’d need to fund the remaining equity commitments, assuming his partners don’t back out. Musk hinted that this is “hopefully unlikely,” but if they did it would leave him on the hook for $29.5 billion.

Regardless, before the most recent sales, he only had about $11 billion in cash, according to the Bloomberg Billionaires Index.

“It seems more likely that this is the beginning of a tranche of sales, since we calculate approximately a $20 billion shortfall in the event of a forced purchase of Twitter,” Neil Campling, head of TMT research at Mirabaud Equity Research, said in a report.

After the most recent sales he has an $18.1 billion cash position, according to the Bloomberg wealth index. The estimate is based on filings related to publicly traded shares and news reports, and assumes a market rate of performance.

Musk, 51, has attempted to terminate his acquisition of Twitter amid a broad decline in technology stocks, citing issues with how it calculates the number of bots on its platform. The social media company has sued to force Musk to go through with the deal, and a trial is scheduled for October.

Twitter shares jumped 3.9% to $44.49 at 10:50 a.m. in New York, after briefly touching the highest since May 12. Tesla rose 2% to $867.18, about in line with the broad 1.8% advance in the S&P 500 Index.

Even if Musk isn’t ordered to buy Twitter through a contractual remedy known as specific performance, he may need the cash. A judge could make him pay a $1 billion breakup fee. Or, rather than wait for a make-or-break ruling, the two sides could reach a settlement. Some analysts have estimated that sum could be anywhere from $5 billion to $10 billion, which Musk could likely cover after his latest sales. 

A settlement in excess of $1 billion was seen as the most-likely outcome in a Bloomberg survey of 1,562 respondents, including portfolio managers and retail traders, conducted in late July. About 75% say he won’t end up owning Twitter.

Musk said he would buy Tesla stock again if the Twitter deal doesn’t close.

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