Can Elon Musk Make the Math Work on Owning Twitter? It’s Dicey.

But most of his wealth is tied up in shares of his electric vehicle company, Tesla, and its stock has plunged about 40 percent this year. At one point, Mr. Musk tried backing away from buying Twitter, and he may opt not to funnel more money into what would be at least his fifth company.

Putting more money into a leveraged, slow-growth company like Twitter is also not the same as investing in a rapidly growing venture-backed start-up like his rocket-making company, SpaceX. The risks are greater at Twitter because the banks doing the lending care only about getting paid their interest on the day it is owed. Unlike, say, a real estate company, Twitter does not have a large amount of assets to offer lenders as collateral to keep them at bay.

Still, billionaires have sought to prop up beleaguered deals before. The hedge fund manager Eddie Lampert sought to rethink the retail industry and spent billions of his own fortune keeping Sears alive after its failed merger with Kmart in the 2000s. Sears filed for bankruptcy in 2018.

And Mr. Musk has gone into businesses before that naysayers had said were doomed and proved them wrong, like manufacturing electric cars. Twitter has suffered years of mismanagement and may benefit from fixing its business out of the glare of the public markets. Mr. Musk could bring new product ideas and hire engineering experts who might not have wanted to work for Twitter before.

Mr. Musk is “a phenomenal capital allocator, and I think he’ll make a lot of money in Twitter,” said Chamath Palihapitiya, a venture capitalist who was an early Facebook executive. “It doesn’t fit my risk profile. But I think he’s going to be very successful.”

Others caution against the ebullience that initially drove investors to Mr. Musk’s deal, warning that the lure of tech visionaries can fade with market fortunes, especially as global economic fears have mushroomed in recent months.

“At the height of a market boom, those appeals work more easily than they do in times like we are presently entering,” said Robert Bruner, a professor at the Darden School of Business at the University of Virginia and author of the book “Deals From Hell.”

Article source: https://www.nytimes.com/2022/10/30/technology/elon-musk-twitter-debt.html