Elon Musk Just Bought Twitter: What You Need to Know


Elon Musk bought Twitter for $44 billion on Apr. 25. The deal included a whopping $54.20 per share, which was all paid in cash. While some applaud his success, others question his motives for the future of Twitter.

Musk plans on making the company private, meaning that the company will not have its stocks available on the free market. This is bad news for companies like The Vanguard Group or Morgan Stanley looking to stake a portion in Twitter. 

The 50-year-old billionaire and personally proclaimed “free-speech absolutist” will now have access to what can and cannot be censored on Twitter. The ethics of the deal do not sit right with some as many think that Elon could have used the money for more philanthropic purposes like solving the majority of the world’s hunger problem. 

“I do a lot of things philanthropically,” the Tesla CEO told Entertainment Tonight at the 2022 Met Gala on May 2. “Really my companies are intended to do good for the future of humanity.”

The South African cited Tesla as an example of how he “is trying to accelerate advances in sustainable transport and energy,” and added that SpaceX–in addition to putting humans on Mars–is “providing internet to lesser [served] people of the world.” 

Just this January, Musk gave away $5.7 billion worth of Tesla shares to charity. According to US Weekly, Musk also claimed that his SpaceX’s Starlink terminals are helping give connectivity to the “hardest hit” areas of Ukraine, which has currently been at war with Russia since Feb. 20. 

Not all of his ambitions are seemingly clear. While he is paying two thirds of the $44 billion out-of-pocket, he recently got $7 billion from friends and investors on May 5. 

Buying Twitter is very risky and worrisome for Tesla investors, including billions of dollars for Musk in personal debt. If it goes wrong, this can burn Tesla shareholders and strain Twitter’s finances. When Musk took a large stake in Twitter early last month, Tesla shares dropped 24% in a period that the S&P 500 declined 9.5%.

The Tesla shares appear to be part of the deal.

Even though Elon Musk is paying roughly $20 billion in cash, a $6.25 billion loan backed with a large Tesla share can explain how he plans on financing this deal. 

Analysts say that it’s hard to think of a deal where an individual can rack up a large sum of debt against shares–an economic margin loan–to help pay for another company. Musk’s margin loan, essentially taking stocks from Tesla to fund the deal for Twitter is bad news for Tesla investors.

“Even if he’s able to finance it, it just is not a sensible deal from a financial perspective,” said Aswath Damodaran, professor of finance at New York University’s Stern School of Business.

However, Elon Musk has demonstrated his ability to build two large, successful companies at once. After some stumbles, Tesla became a leading competitor all the while Musk’s startup rocket company became the epiphany of American spaceflight. 

The money question is: will Elon Musk be able to do it again?