Shulou(Shulou.com)11/24 Report--

December 25 (Xinhua) as Elon Musk (Elon Musk) injected huge amounts of money into Twitter to stabilize it, the share price of his electric carmaker Tesla plummeted, testing his huge wealth and borrowing ability.

Musk has been trying to boost Twitter since he bought the troubled social media company for $44 billion. Because of the rapid decline in Tesla's shares in recent months, his method of raising money by selling or mortgaging Tesla's shares has become more and more complicated.

In the past, Musk has always been a "poor" billionaire, relying on loans backed by mortgage stocks for his personal expenses and business investments. At the same time, he still holds a large number of Tesla shares and profits from its rising value.

But Tesla's market capitalization has shrunk by about $700 billion this year, causing Mr Musk's personal wealth to plummet. Before Tesla's market capitalization fell sharply, after years of growth, Mr Musk could easily raise money by mortgaging shares rather than cashing out through share sales.

At the end of last year, just as Tesla's share price peaked, Mr Musk began selling Tesla shares totaling more than $39 billion, including $3.5 billion last week. It is not clear how much liquidity Musk has, saying he paid more than $11 billion in taxes in 2021 and needs to prepare about $25 billion in cash as part of the Twitter deal.

Mr Musk's current holdings of Tesla shares, excluding exercisable shares, total 424 million shares, worth about $52 billion at Friday's closing price of $123.15 a share.

In short, under Tesla's rules, if Musk could use all these stocks as collateral, he would be allowed to borrow about $13 billion. This is only slightly more than he planned to borrow in April, but he only needed to use 40% of his shares as collateral. This shows that the collapse in Tesla's share price has reduced Musk's ability to borrow. Mr Musk later abandoned the margin loan to fund the deal because of investor concerns about risk.

However, Tesla's stock is not the only asset Musk owns, nor is it the only way for him to raise money. He also owns a large number of shares in space exploration company SpaceX and owns companies like The Boring Co. A startup like this.

"We are conducting emergency fire drills," Musk said in a public speech at Twitter Spaces. He said that through these painstaking efforts, Twitter is likely to break even next year.

Although Twitter has made little profit over the past decade, the financial situation of Twitter has been made more difficult by Mr Musk's debt to buy it and falling spending by advertisers who fear capriciousness under his leadership. Analysts estimate that debt payments alone add more than $1 billion a year to the company's cost burden. Twitter had sales of $5 billion last year, most of which came from advertising.

Mr Musk has experienced this before: Tesla was mired in debt and money at a time when the global economy was faltering, but he finally managed to get out of it.

These successes and investor enthusiasm for the company he leads made him once the richest man in the world. The fall in Tesla's market capitalization this year has lowered Mr Musk to the second richest person in the world, behind Bernard Arnault, chairman and chief executive of luxury goods group LVMH. Mr Musk's wealth is estimated to have fallen to about $140 billion as of Thursday local time, down from $340 billion a year ago, according to the Bloomberg Billionaires Index.

Musk can sell more Tesla shares at any time if he needs money, just as he did recently. But in the past, as Tesla's largest individual shareholder, Musk has always been reluctant to sell shares. At Tesla, Mr Musk lacks the kind of dual-equity system that gives control to the founders of Meta or Alphabet. Instead, Mr Musk's main interest in Tesla is that Mr Musk has effectively given himself a final veto over shareholder proposals in the past because of the company's demand for a majority of votes.

On Thursday, local time, Musk confirmed that he had sold some of his shares and promised not to sell them until 2025. Musk has made similar statements before, explaining: "I'm a little paranoid right now because I've been through two very serious recessions."

Although Musk has used margin loans before, the idea of mortgaging billions of dollars in Tesla stock loans to help Twitter is hugely risky. According to regulatory filings, Tesla's board limits shareholders' ability to borrow against shares to 25 per cent of the value of each dollar of the stock. Despite the fall in the share price, Mr Musk needs to continue to abide by the 25 per cent ceiling.

As Tesla described in a regulatory filing, the risk for the company's shareholders is that they may have to sell many shares at once to generate enough cash.

As of the most recent public filing, Mr Musk had pledged more than half of his stake in Tesla, excluding stock options he could exercise. But the pledge does not necessarily mean that the shares have actually been used as collateral for loans, the documents said.

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