SpaceX investors raised The alarm that Company money was being used to support Musk's tunneling company

In 2018, SpaceX investors raised The alarm that Company money was being used to support Musk's tunneling company, The Boring Company. In exchange, SpaceX ended up with a 6% stake in the Boring Company. To this day, Musk's companies routinely do business with each other. And it's all in one big family, one that Musk completely controls.

So it's likely that Musk will try something similar with Twitter this time around. Musk has floated the idea of an all-purpose app called "X," which plans to combine social media, payments, news, and food ordering. He also created the "X Holdings" company (which has been used to buy Twitter), which he plans to use to house all of Mr. Musk's companies. So under the guise of synergies between Tesla and the "X" universal app, Musk could direct Tesla to invest in Twitter for potentially billions of dollars in cash and resources.

If that happens, Tesla investors may or may not know the extent to which the company will support Twitter. Because Tesla could create a "special purpose entity" (SPE) to invest in Twitter. After all, tracking Tesla's cash is already tricky. As of Sept. 30, about a third of Tesla's $20 billion in cash was held overseas.

While siphoning cash from Tesla to support Twitter is a controversial strategy, it won't have a major impact on Tesla's finances, at least in the short term. Currently, Tesla has very little debt and recently received an "investment grade" credit rating from Standard & Poors. Based on 2022 EBITDA (earnings before interest, tax, depreciation, and amortization) of $18.7 billion, Tesla's debt-to-EBITda ratio is just 0.4 times. The ratio is a measure of the extent to which cash earnings support a company's debt and is a key indicator of financial stability.

Even if Musk were to direct Tesla to borrow as much as $10 billion to $20 billion from Twitter, that would only raise those ratios to 0.9 to 1.4 times, respectively, still within the "investment grade" rating. Of course, things could get worse for Tesla in the future. But even if Tesla's EBITDA were to plunge by half, after adding as much as $20bn of debt, the leverage ratio would still be less than three times, near the upper limit of "investment grade" credit but still comfortably manageable.

But here's the problem: Tesla's future prospects have become less certain. That healthy cash cushion could shrink if business conditions worsen and Tesla's operations continue to struggle to maintain profits and cash flow, while Musk is willing to spend a lot of cash to save Twitter.