I’ve seen so much confusion about who is funding what, I am compelled to publish this here for constant reference.

From Matt Levine writing in Money Stuff on 21 April 2022:

Elon Musk needs about $46.5 billion to buy Twitter at $54.20 per share: about $39.4 billion to pay for the 91% of Twitter’s stock that he doesn’t currently own, about $4.3 billion of debt to refinance and various miscellaneous costs. To pay that, he has:

  1. A letter from his banks offering to lend $13 billion to Twitter, if he buys it, with $7 billion of that coming in the form of senior secured bank loans and $6 billion coming in the form of junk bonds.
  2. A letter from his banks offering to lend him $12.5 billion personally, secured by $62.5 billion worth of his Tesla Inc. stock. At yesterday’s closing price, that comes to about 64 million shares, or about one-third of his Tesla stake.
  3. An agreement with himself to put up the other $21 billion, give or take.

Musk is on the hook for most of this funding. The value of these loans depend upon Musk’s personal fortune (the margin loan, and the $21 billion from somewhere). However, there is $13 billion which depends on the value of Twitter itself. If Musk drives the value of Twitter into the ground, yes, his banks are stuck collecting Twitter (the company) since it is the collateral for that $13 billion dollar loan.

Elon Musk does not seem like the type to blow up his net worth on an ill-fated roll of the dice with Twitter. He might not have a solid business plan for it, but I would feel confident in saying he’s not tossing $33 billion into the wind.

Find Matt Levine at Bloomberg.