Recently, Elon Musk has been the talk of the town. After disclosing his intentions at buying Twitter, his name has become a buzzword. But it’s not an ordinary deal. Yesterday, CNBC published an article, in which the author says that once the deal is over, the world’s richest person will become America’s most leveraged CEO.
You have seen too many headlines saying that Elon Musk is buying Twitter for $44 billion. This is too much. But what’s more interesting, it turns out two-thirds of financing ought to come out of Elon Musk’s own pocket. No one doubts that his pocket is deep. According to the latest report, his net worth is about $265 billion. However, to get hands on Twitter, Elon Musk has two sell millions of shares in Tesla, SpaceX, and The Boring Co. Yes, he is the richest man on the globe but his money is tied up in stocks of the mentioned companies. Plus, Musk has to pledge millions more to raise the necessary cash.
Elon Musk Will Become The Largest Stock-debtor CEO
As his SEC filings show, Musk’s financing plan includes $13 billion in bank loans and $21 billion in cash. The latter should be formed from selling Tesla shares. Moreover, there is a $12.5 billion margin loan, using his Tesla stock as collateral. However, to get this money, Musk has to pledge about $65 billion in Tesla shares. This is about a quarter of his current total. This is a bank requirement for high-beta stocks.
As a reminder, before the Twitter bid, Elon Musk had pledged 88 million Tesla shares for margin loans. If believing a research firm Audit Analytics, he has more than $90 billion of shares pledged for loans. In other words, Elon Musk is not only the richest person in the world but also the largest stock-debtor in dollar terms among executives and directors. For instance, Larry Ellison, Oracle’s chairman and chief technology officer, ranks second with “only” $24 billion.
Of course, these numbers are mind-blowing for ordinary people. But big guys go big. We mean Elon Musk owns 170 million Tesla shares. Combined with 73 million in options give him a potential stake in Tesla of 23%. This is more than $214 billion. The rest of his net worth comes from his shares in SpaceX that exceed 50% and from other ventures.
Another reason why Elon Musk is rolling deeper is that other companies run strict anti-pledging policies. Simply put, two-thirds of S&P 500 companies do not allow their executives to pledge company shares for loans. If compared with Tesla and Elon Musk, only 3% of S&P 500 companies allow share pledging by executives.