7:48 am, April 27, 2022
Elon Musk’s $44bn (£35bn) deal to buy Twitter has thrown the spotlight on the finances of the world’s richest man and just how he has amassed his multibillion-pound fortune.
The Tesla owner has personally pledged to pump in $21bn (£17bn) of cash to help finance the deal, making it a takeover like no other.
It has sparked questions over how he will cover the mammoth equity portion of the deal, and how he has ended up as the richest person on the planet with a personal fortune estimated at around $270bn (£213bn).
The one trillion dollar electric car company Tesla, of which he holds a 17 per cent shareholding, that accounts for the biggest chunk of Musk’s wealth.
And it is this jewel in his crown that has provided the bulk of the financing for the Twitter acquisition.
He has pledged some of his Tesla shares to back a $12.5bn (£9.9bn) so-called margin loan, while revealing that he has also secured $13bn (£10.3bn) in bank financing.
There are few details, however, on how he will stump up the personally guaranteed equity chunk of the funding for the deal, especially given that much of his fortune is tied up in assets.
Speculation is mounting over whether he will cash out on some of his assets, and potentially sell off the majority of his unpledged Tesla shares, or if he would rather look to bring on board other investors than risk destabilising the car maker’s stock.
Russ Mould, investment director at AJ Bell, warned that either way, ‘Mr Musk is taking a good deal of risk by using Tesla shares as collateral’.
‘If the electric car maker’s shares were to unexpectedly crater that could create a lot of discomfort, even if his 2018 pay deal allows him to exercise options priced at just $70 a pop and he is, on paper, the world’s wealthiest person.’
Where did Elon Musk get his money from?
The 50-year-old was born into a wealthy family in Pretoria, South Africa, with his engineer father, Errol, having once part-owned a Zambian emerald mine.
Aside from his not-so-humble beginnings, the tech pioneer showed an early aptitude with computers and designed his own video game at just 12 years old, before going on to secure his massive wealth through a raft of successful ventures.
This sets him apart from his billionaire counterparts, who struck lucky with one big success story – such as Jeff Bezos with Amazon and Mark Zuckerburg with Facebook.
Together with his brother Kimbal, Musk launched his first entrepreneurial foray by co-founding an online business directory called Zip2 in the mid-1990s.
The brothers went on to sell Zip2 to computer maker Compaq for $307m (£242m) in 1999, netting Musk a whopping $22m(£17m) and marking the first of a slew of lucrative business ideas.
He swiftly reinvested his Zip2 cash into an online banking startup called X.com, which merged with payments firm Confinity in 2000 to form a business that would later become PayPal.
Despite a chequered tenure at the group, which ended with him being fired as chief executive, Musk made a $180m (£142m) fortune when PayPal was later sold to eBay.
Flush with cash, Musk founded aerospace company SpaceX in 2002 with the bizarre intention of colonising Mars using affordable rockets, followed just a year later with a six million dollar (£4.7m) investment in the then fledgling car company Tesla.
At the time, Tesla was just a vision of electric sports cars. Despite a bumpy start to life, including near bankruptcy amid the financial crisis of 2008, it has since emerged as a behemoth in the electric car sector with a stock market value of more than one trillion US dollars (£789bn).
SpaceX has also snowballed into a leader in private space exploration, with a value estimated at more than $100bn (£79bn), where Musk currently holds a 48 per cent stake.
