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Ask HN: How does Elon Musk have $43B of liquid cash?

1 points by nyjah ↗ HN
Does anyone have a better understanding of this? Is it from pumping and dumping crypto? I understand he is super duper rich, but I don't understand / have a hard time comprehending a number as large as $43B.

10 comments

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minimaxir
He does not have $43B liquid, which is why there are a lot of questions on how he would actually execute a hostile takeover.
trixie_
You have a bank agree to underwrite it because you have the collateral and when the purchase is made then figure out all the details. A large chunk of it will no doubt be re-sold to private investors.
nyjah
Wow, thats wild, I hadn't even thought that he would then take that and sell it to private investors. Presumably at a higher price and make the money right back? Thanks for responding and great input!
WheelsAtLarge
He may not but he can use his tesla stock plus however much he can borrow against his twitter equity assuming he gets control of twitter. Similar to the way people buy homes, you only need a down payment and the bank lends you the rest.

But from the point of view of the twitter stockholders they get 100% cash from musk for their shares.

It seems he might not have the financing in place so twitter have doubts about the offer. In theory, he can sell his tesla stock and have the money at hand. It's very unlikely for him to do that.

nyjah
Thanks for the input. I really appreciate the answer. One question. Can he borrow against the twitter equity he just bought previous to this offer or he can borrow against future twitter equity he is acquiring with this offer?
WheelsAtLarge
In theory he can borrow against any and all equity he has control over but only the lending banks decide what they are willing to lend on. They will want to know exactly what he wants to do with the company and how he will repay the loan before they agree on anything. On the one hand the banks love the idea of lending the money since they will get a truck load of money in service fees and interest. On the other hand banks don't like high risk so they will only lend if they know that they can get their money back.

So the answer is, only the banks know exactly what equity they will use for the loan. All these mega loans are unique.

BTW, it's unlikely that any one bank will make the complete loan. They will gather a bunch of other banks and investment firms to come up with the money. Eventually the loan will be turned in to bonds that will be sold as investments for companies with lots of cash such as insurance companies and retirement funds. The short term profits are in the service fees that will be generated by the takeover activity.

nyjah
I can't explain why this is so fascinating to me. Thanks for the great responses, I really appreciate it. I have no background knowledge of "mega loans" - what a fascinating concept. And I didn't realize that would evolve into bonds that will get purchased as investments for insurance and retirement type funds. That makes a lot of sense. Feel free to let this be, you've answered my initial question and more, but I am gonna rattle off a few follow ups.

Its unlikely one bank will make the complete loan, is it also impossible? As in, does 1 bank have that kind of money to put up? And what percentage of the loan do you think the service fees will be? Probably in the millions, but not a billion or billions? How common is a mega loan? These are minor follow ups, if you have any input great, if not all good too, I'm going to try to find some more info on the web and read some stuff. Genuinely appreciate the great responses.

WheelsAtLarge
I find it interesting too. I guess it's the idea of all that money moving around and how it's done.

"mega loan" is my term. I just didn't have any other term for the super super large loans.

'Its unlikely one bank will make the complete loan, is it also impossible?" Don't really know but any one bank that would make a loan that size would carry too much risk and would have to answer to someone on why they would make the loan and take such risk.

"And what percentage of the loan do you think the service fees will be?" I've heard of 1-3% for a $100 million loan. For $43B it would be less but it would be negotiated. I bet Musk would fight for every dollar.

"How common is a mega loan?" These type of loans are few and rare and there are only a handful of companies that can arrange them. Morgan Stanley is advising Musk.

Here's an article I read regarding who he picked.

https://www.bloomberg.com/news/articles/2022-04-14/goldman-s...

anamax
If Musk has competent financial planners, he has assets with various amounts of liquidity, including pre-arranged lines of credit.

It would probably take him a while to get more than his supposed net-worth. However, getting $10-15B might be < 24 hours.