His ability to use his shares at Tesla to raise money, by selling or borrowing against them, has been complicated by their rapid downdraft in recent months.

Historically, Mr. Musk has been a cash-poor billionaire, depending upon so-called margin loans—borrowing backed up by his shares—for his personal expenses and business investments while holding on to his Tesla shares and benefiting from their rising value. 

But Tesla’s market value has fallen by about $700 billion this year, sinking his personal wealth along the way. The decline in Tesla’s valuation comes after years of growth that has allowed him to easily borrow money without having to cash out his shares. 

Shares in Tesla have fallen around 65% in 2022, dinged, in part, by the higher interest-rate environment. Another issue relates to the reason he may need cash: Twitter. Tesla investors have been concerned that Mr. Musk’s attention is divided following his October takeover of the social-media company. 

Late last year, just as Tesla’s stock price peaked, he began selling Tesla shares, totaling more than $39 billion including $3.5 billion last week. What his liquidity is like is unknown after what he said would be a more than $11 billion tax bill for 2021 and putting up roughly $25 billion in cash as part of buying Twitter. 

Mr. Musk’s current Tesla holdings, not including exercisable options, total 424 million shares worth about $52 billion at Friday’s closing price of $123.15 a share. 

Simply put, if he could tap all of those shares as collateral under Tesla’s rules, he would be allowed to borrow about $13 billion. That is only a bit more than he planned to borrow in April as part of the original Twitter deal using just 40% of his shares as collateral, underscoring how his borrowing power has shrunk with the collapse of the car company’s share price. He later scrapped those proposed margin loans to fund the deal amid investor concerns over the risk.

Mr. Musk and Tesla didn’t respond to a request for comment. 

Tesla shares aren’t his only asset or only avenue to raise money. He also holds shares in Space Exploration and Technologies Corp., or SpaceX, and has ownership in startups such as the Boring Co. His level of personal indebtedness isn’t clear. 

Mr. Musk is facing questions about whether Tesla, where he is also chief executive, is ready for a recession as he separately tries to stem losses at Twitter, cutting thousands of workers from his newly acquired social-media platform. Late Tuesday, he said drastic spending cuts at Twitter were required as the company was on track to bleed billions of dollars. His team had been seeking additional investment dollars for Twitter. 

“We have an emergency fire drill on our hands,” Mr. Musk said during a public talk on Twitter Spaces. After taking those drastic efforts, he said, Twitter could break even next year. 

While Twitter has rarely been profitable in the past decade, its finances were made more challenging by the debt Mr. Musk took on to fund his acquisition and by a decline in spending by advertisers worried about the erratic changes occurring under his leadership. Analysts estimate the debt expenses alone have added more than $1 billion in cost annually to a company that last year generated $5 billion in sales, mostly from ads. 

Mr. Musk has been here before—mired in debt and burning cash as the global economy teeters—and emerged successfully.

Those successes and investor enthusiasm for his ventures made him rank as the world’s richest person for a time. The drop in Tesla’s value this year sent Mr. Musk’s ranking as the world’s richest man to No. 2 behind

Bernard Arnault,

the chairman and chief executive of luxury conglomerate LVMH Moët Hennessy Louis Vuitton. Mr. Musk’s fortune fell to an estimated $140 billion as of Thursday from a high of $340 billion a little more than a year ago, according to the Bloomberg Billionaires Index. 

If he needs cash, Mr. Musk could always sell more Tesla shares, as he did recently. But, in the past, Mr. Musk, Tesla’s largest individual shareholder, has been reluctant to sell. At Tesla, Mr. Musk lacks the kind of dual class of stock ownership that gives founders at

Meta Platforms Inc.

or

Alphabet Inc.

controlling power. Instead, Mr. Musk’s large stake in Tesla, in the past, has effectively given him veto power over shareholder proposals thanks to the company’s supermajority vote requirement. 

On Thursday, Mr. Musk said he sold some stock to make sure he had “powder dry…for a worst-case scenario” and said that he was done selling until probably 2025, though he’s made similar statements like that this year only to sell more. 

“I’m somewhat paranoid having gone through two really intense recessions,” Mr. Musk said. 

While he had used margin loans before, the idea of borrowing billions off the backs of Tesla shares to help Twitter carries risks. 

Tesla’s board of directors has limited his borrowing power to essentially 25 cents on every dollar of share value, according to regulatory filings. As the shares fall in value, he must comply with the 25% limit. The risk to Tesla shareholders, as the company describes in its regulatory filings, is that he may have to unload a lot of shares at once to generate cash. He has never disclosed at what price he would need to pony up more collateral.

In recent days, Mr. Musk has swatted down the idea of margin loans altogether. In a tweet, Mr. Musk cautioned that such a move was unwise in this market. “When there are macroeconomic risks, it is generally wise to avoid using margin loans on any company, as stocks may move in ways that are decoupled from their long-term potential,” he wrote on Dec. 8. 

As of the most recent public filing, Mr. Musk had pledged as collateral more than half of his Tesla holdings, excluding options he could exercise.

Pledging doesn’t necessarily indicate that actual borrowing against those shares has occurred, the filing said. 

Write to Tim Higgins at tim.higgins@wsj.com