Elon Musk says his takeover of Twitter is 'on hold.'

Bitcoin’s 50% crash erases all of Elon Musk’s gains on Tesla balance sheet

By Shawn Tully

May 11, 2022 8:00 PM EDT


In early 2021, Elon Musk bestowed the landmark endorsement that, more than any other high-profile purchase, sent Bitcoin on a moonshot and clinched its status as a mainstream investment. Musk famously purchased $1.5 billion in the king of cryptocurrencies using spare cash on the EV maker’s balance sheet, a highly unorthodox move since most companies abhor putting their war chests at risk. In public statements, Musk and CFO Zach Kirkhorn expressed great pride in pioneering a new practice of wagering to make big money on dollars virtually every other enterprise just wants to keep safe. Kirkhorn declared on last year’s Q1 conference call that the purpose was to “get some return” on cash “not immediately being used for operations.” In a SEC filing weeks earlier, Kirkhorn went so far as adding a second title to his rank as CFO: “Master of Coin.”

But so far, the grand experiment’s proved a bust. On the morning of May 11, Bitcoin dropped below $29,400, erasing all of Musk’s once-sumptuous gains, and though it rebounded later in the day, it’s now hovering near the break-even point.

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https://fortune.com/2022/05/11/bitcoin-crash-elon-musk-holdings-tesla-balance-sheet/

Elon Musk's Tesla Loses Money in Bitcoin Rout

The manufacturer of high-end electric vehicles had invested in bitcoin in February 2021.

Luc Olinga
May 10, 2022 3:05 PM EDT

The few established companies that have added bitcoin to their balance sheets are now beginning to see this investment go awry. Tesla invested $1.5 billion in virtual currency on Feb. 8, 2021, and said it was beginning to accept it as payment for buying Tesla cars.

The move came days after Chief Executive Elon Musk temporarily changed his Twitter mini-description to simply #bitcoin. The announcement was a mark of confidence in cryptocurrency. Bitcoin prices then jumped past $42,000.

Tesla claimed that this investment in bitcoin was aimed at diversifying its sources of liquidity and gaining flexibility in order to be able to largely remunerate its shareholders. But a few months later, in May 2021, Tesla indicated that it no longer accepted bitcoin as a means of payment. It cited as a reason that it wanted to preserve the environment since minting of bitcoins consumes enormous amounts of electricity.

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Tesla's Investment Is in the Red

For several months, Tesla's bitcoin gamble paid off, especially when the price hit an all-time high of $69,044.77 on Nov. 10. But since then prices have plummeted and are currently hovering around $31,000. The bitcoin-price slump puts Tesla's initial investment in the red. Indeed, the Austin company seems to have lost money. According to Bitcoin Treasuries, Tesla's 43,200 bitcoins purchased for $1.5 billion are currently valued at $1.35 billion, down $150 million, or about 15%.

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https://www.thestreet.com/investing/cryptocurrency/tesla-loses-money-on-bitcoin-bet

The preferred equity may have a 20-year maturity and include a feature allowing interest to be paid in kind at a rate of 14%, the people said. That interest rate would be increased by 75 basis points in the seventh, eight and ninth year, they added. The financing may alternatively be structured with a 10% interest rate and warrants, one of the people said.

According to the report, the preferred equity may have a 20 year maturity, as well as a feature which would allow interest to be paid in kind at 14%. The rate would be raised by 75 basis points in the 7th, 8th and 9th year. Alternatively, the financing may be structured with a 10% interest rate plus warrants.

Tesla has lost $400 billion in market value since Musk’s interest in Twitter became public in early April, driving a wedge in his acquisition plans at a time when he has committed $21 billion of his wealth to finance the purchase. Musk had planned to buy Twitter with a combination of loans and equity commitments, leveraging into the deal much of his stake in the world’s most valuable automaker — from which he derives most of his wealth.

Link to tweet

Musk’s net worth, which makes him the world’s richest man, has fallen by around $50 billion in recent weeks, according to Forbes’ real-time wealth index. And Tesla stock has shed nearly 30 percent of its value in just the past month.,,,,

Musk has leveraged much of his Tesla stock as collateral for his loans, making the recent economic downturn a particular issue for his bid. Tesla has warned of the risks it faces because of the amount of Tesla stock Musk has put down as collateral. Tesla stocks were trading at under $730 on Thursday, well below the more than $1,100 mark from early April. A drop by several hundred more dollars could trigger requirements that would force Musk to sell some shares, analysts said.

At one point last year, he had put down more than half of his shares as collateral, according to financial filings. Because the Twitter bid would only add to that percentage, Musk has faced pressure to reduce his equity commitment, according to people with knowledge of the matter who spoke on the condition of anonymity to discuss sensitive matters.

Josh Marshall
@joshtpm
·
May 13, 2022
Hadn’t Tesla parked a few billion of reserve cash in crypto?
Dr. MadScientistPhD
@MadScientistPhD
cnbc.com
Tesla says it held nearly $2 billion worth of bitcoin at the end of 2021
By Dec. 31, the fair market value of its bitcoin holdings came in at $1.99 billion.
7:54 AM · May 13, 2022

Elon Musk took to Twitter early Friday to say that his takeover of the company was “temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”....

I suspect Musk’s jitters about buying Twitter are all about the money and has nothing to do with how many bots are zooming around the platform. He just doesn’t want to say that. If the richest guy in the world wanted to be more honest about what’s going on, he might have to acknowledge that his primary credit card — his shares in Tesla Inc. — doesn’t have the buying power it once did.

Musk said last month that he wanted to buy Twitter for $43 billion — when he only had about $3 billion in cash on hand. Most of the fortune of the world’s richest man, which added up to some $259 billion at the time, was tied up in his Tesla shares. Since then, Tesla’s shares have lost about 36% of their value, and Musk’s net worth has fallen to about $215 billion......

After all, Musk’s tweet about how many fake accounts there are on Twitter linked to a Reuters news article that is 11 days old. If this was a possible deal-breaker for him, he could have said so then. But the stock market wasn’t unwinding as rapidly at the time, either.

Musk has been able to use his Twitter bid to secure more attention for all of the things he doesn’t like about it. He tweeted yesterday that although he would prefer “a less divisive candidate” for president in 2024, he thinks that Twitter should end its ban on former President Donald Trump. In that context, “less divisive” appears to be a polite way of saying “someone who hadn’t torched the Constitution and tried staging a coup.” But Musk doesn’t appear to be bothered by those nuances – which, of course, makes him a questionable steward of Twitter’s future.

Known for his freewheeling and sometimes impulsive business style