Elon Musk 'Can't Afford To Buy Twitter' Despite His Massive Offer

Elon Musk can’t afford to buy Twitter despite his $43 billion bid, according to a New York University professor.

Yes, you read that right - the SpaceX and Tesla founder, who is the richest man in the world, doesn't have the funds available in order to secure such a deal.

Lecturer Scott Galloway, professor of marketing at NYU's Stern School of Business, has explained why Musk would be unable to complete his purchase.

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Galloway claims the tech billionaire would have to borrow against his Tesla shares, which could ‘tank’ stocks, and also predicted that the takeover would result in job losses, as the company would be privatised. 

Despite an estimated fortune of $259 billion, the Tesla and SpaceX CEO has just ‘$2.95 billion in cash’, as per Bloomberg Billionaires Index estimates.

Speaking on his Pivot podcast, Galloway told listeners that Musk has ‘no viable route to financing’ without loaning against his shares in Tesla, which could put the car company’s stocks at risk. 

Galloway listed the possible ways Musk could raise money to purchase Twitter, noting he’d be hard-pushed to secure a loan, raising the likelihood that Musk would resort to borrowing against his Tesla shares.

Galloway explained: “The first [buying option] is with debt, and he can't because his company has no EBITDA (earnings before interest, taxes, depreciation, and amortisation). 

“No firm is going to loan him more than a billion or a few billion dollars, so he has to come up with $40 billion in equity." 

Galloway also ruled out Musk’s borrowing money from rich pals, saying: “They would start asking questions he can't answer.”

"Really, the only viable source of financing here is for him to borrow against his shares in Tesla," Galloway went on.

To do so, Musk would be forced to borrow the $40billion he needs in equity value, which is the value of Tesla that’s available to shareholders. 

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Galloway said Musk would be looking at borrowing ‘$40 billion against between $200 billion and $300 billion in equity value’.

This would mean Musk may be forced to approach several different banks for lending, as, according toGalloway, ‘no single bank is going to be the bank that’s taken down by this guy’s mania’.

‘Huge’ margin profits required by said banks could then lead to a slashing of Tesla’s stocks. 

Galloway explained: "They [the banks] would put in huge margin requirements, meaning if Tesla stock got cut in half – which it easily could – then all of a sudden Elon Musk would get margin calls and be a forced seller of Tesla stock.”

He added: "You know whose stock goes down if this deal were to somehow go through and he would raise money against Tesla shares? Tesla's stock would tank."

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