How to Use Tesla to Save Twitter

Musk has already funded Twitter by selling a chunk of his Tesla stock, as well as taking out a large loan. That strategy has left Twitter with little cash cushion to fund its recovery.

Twitter used $42 billion (from the sale) to buy back and cancel its shares. Of the $6 billion in cash reported at the end of June, $5.29 billion was used to repay bonds. Musk's leveraged buyout saddled Twitter with $13 billion in expensive new debt and about $1.29 billion in annual interest costs. While cash has dried up, Twitter has struggled with a spiral of losses.

In addition to paying severance packages to thousands of laid-off employees and hiring new ones, the cost of collateral damage Musk inflicted on Twitter is mounting. As a result, Twitter could burn through a lot of cash for a while as it tries to rebound.

Unfortunately, Musk has destroyed the bridge to potential partners who could help ease Twitter's liquidity pressures. Mr. Musk's bankers, for example, are unlikely to be interested in lending Twitter any more cash. They already face losses of more than $500m on the loan they arranged for Mr. Musk in April because of soaring interest rates and Twitter's deteriorating financial outlook under his leadership.

With Twitter's leveraged buyout debt valued at 50 to 60 cents on the dollar, investors who contributed cash to help Mr. Musk acquire Twitter may have seen the value of their equity wiped out. For Musk's other shareholders, this is very bad news. They have even admitted that they "clearly" paid too much in the first place. They have little recourse because Musk owns the most shares and has fired everyone qualified to challenge him.

Of course, Musk may sell more of his valuable stake in Tesla to keep funding Twitter. He did sell another $4 billion worth of stock recently, claiming to help save Twitter. That may be true, but the amount is also consistent with the hit his personal margin loans are likely to take. Tesla shares have plunged 49 percent since the company filed its latest proxy statement on March 31. That leaves Mr. Maas with fewer options to continue running Twitter, and given his track record, Mr. Musk will most likely turn to Tesla, his richest company.

This would repeat an old pattern for Mr. Musk, who has previously used his various companies to back new or neighboring businesses. In 2009, when Tesla was struggling, Musk borrowed $20 million from SpaceX to keep Tesla alive. SolarCity, a solar panel company founded by two of Musk's Cousins, is also heavily backed by Musk's company. In 2016, SolarCity was on the verge of bankruptcy, and Tesla even bought it out, taking on about $3 billion in debt.