Musk loses $46 billion in Tesla wealth in one day, highlighting transaction risk

Elon Musk can’t afford too many days like Tuesday.

That’s when its stake in Tesla fell more than $32 billion ($46 billion), after the electric car maker’s shares fell the most since September 2020.

Elon Musk can’t afford too many days like Tuesday.Credit:PA

For Musk, this type of volatility is nothing new. Sharp declines have periodically hit Tesla’s stock over the past two years, but have been offset by even bigger gains, a trend that has catapulted it to the top of the list of the world’s richest people.

This time, however, there’s more at stake for Musk, who is about 24 hours away from announcing a deal to buy Twitter for $44 billion in one of the biggest takeovers in history.

To fund the deal, Musk, 50, accepted $13 billion in bank financing backed by the social media company, $12.5 billion secured by part of his Tesla stake and another $21 billion. in equity. Based on Tesla’s Monday closing price, he could hedge his margin loan and still hold unpledged stock worth about $21.6 billion, or almost enough after tax to sell and fund the game. in cash of the agreement.

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That wiggle room narrowed after Tesla shares fell 12% to close Tuesday at US$876.42. He still has more than enough to collateralize the margin loan, but at the current price, he would only have $11.4 billion left in unencumbered shares. If the stock fell below $740, which it last did on Feb. 24, Musk wouldn’t have enough to cover the full $12.5 billion, according to Bloomberg calculations.

“Musk is taking a lot of risk using Tesla stock as collateral,” said Russ Mould, chief investment officer at AJ Bell. “If the electric car maker’s shares were to crater unexpectedly, it could create a lot of discomfort.”

Musk is the richest person in the world, with a fortune of $252 billion, according to the Bloomberg Billionaires Index.

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