Elon Musk
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The Tesla chief was overtaken for the third time in two days by Bernard Arnault of French luxury conglomerate LVMH.
Note: When U.S. markets closed at 4:00 p.m ET, Musk still ranked as the world’s second richest person, with an estimated net worth of $185 billion—$1.2 billion less than Arnault’s $186.2 billion at the time.
Tesla shares opened trading Thursday down around 1%, following a Bloomberg report Wednesday evening that CEO Elon Musk may replace some of Twitter’s debt with a personal margin loan backed by shares of his electric vehicle maker. That sent Tesla stock down, enough to drop Musk below Bernard Arnault of French luxury conglomerate LVMH on Forbes’ ranking of the world’s wealthiest people for the third time in two days.
“The Tesla margin loan for Twitter remains an albatross over the Tesla story,” said Wedbush analyst Dan Ives.
Arnault was worth an estimated $185.1 billion as of 9:30 a.m ET Thursday, with Musk trailing him by $1 billion, worth an estimated $184.1 billion. The Frenchman–whose LVMH owns brands such as Louis Vuitton, Bulgari and Tiffany & Co.–-previously passed Musk on two occasions Wednesday, but by the time U.S. markets closed at 4 p.m. ET, Musk had regained the lead, with an estimated net worth of $185.4 billion–$700 million more than Arnault’s $184.7 billion at the time.
The potential margin loan is the latest development in the drama surrounding Musk’s $44 billion Twitter takeover, which has weighed heavily on Tesla’s stock since Musk first announced the deal on April 14, before attempting to back out. Tesla shares are down more than 50% this year, with almost all of the drop having occurred since mid-April. The company has also faced supply chain issues, particularly due to China’s zero-Covid policy.
Musk’s initial financing for the takeover included a $6.3 billion personal margin loan, in addition to the $13 billion of debt he ultimately saddled Twitter with, keeping it off his own personal balance sheet. Musk ended up scrapping the personal margin loan, instead financing the rest of the acquisition with his own cash and $8 billion of equity commitments from other investors.
That was likely a relief to Tesla investors, who worried that Musk could face margin calls on his margin loan, forcing him to sell even more shares. He has already sold $19.3 billion (pre-tax) worth of the company’s stock from mid-April to early November, presumably to help finance the acquisition.
But Musk may have renewed interest in a margin loan if the estimated $1 billion of annual interest expense on the $13 billion of debt used to finance the acquisition proves too much for an already struggling Twitter to cover. With tech stocks having crashed since Mid-April, the company is likely now worth far less than the $44 billion Musk agreed to pay. Meanwhile, users and advertisers have reacted negatively to many of the changes to the platform implemented by Musk. Chief among them: charging $8 per month for account verification and relaxing content moderation.
Musk could easily repeat his performance from Wednesday and end the day as the world’s richest man. But this latest development doesn’t look good for him–or Tesla’s investors.
As Wedbush’s Ives puts it: “The nightmare continues for Tesla holders.”