Welcome back to Dry Powder.

Yes, Elon Musk will own Twitter (or owe $1 billion to walk away). The historic financing package, as I predicted last week, is a mix of Elon’s personal equity, senior debt, and margin loans from Wall Street—with millions of his Tesla shares as collateral. If things go south at Tesla, the world’s richest man could face a world-historical margin call. How the hell did Tesla’s board let this happen? This and more, in today’s email.

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Bill

Musk’s bid, after all, is financed by $25.5 billion of debt that Morgan Stanley and its Wall Street brethren are underwriting. Those banks, of course, will syndicate the loans to other banks and to other buyers, or will sell the various senior notes to investors, at a price. But to get $12.5 billion of the $25.5 billion, Musk secured a “margin loan,” meaning that he pledged his Tesla stock as collateral. Usually, such a loan is made at a 50 percent loan-to-value ratio. In order to get the banks to pony up a $12.5 billion margin loan, Elon probably had to pledge $25 billion of his Tesla stock to the banks. That means if the value of the Tesla stock falls by a certain amount, the banks can seize the collateral, in this case the Tesla stock, and sell it into the market at whatever price it will fetch to pay down the loan. Elon will have no say in the matter...