12 ms·

Elon Musk Supports His Business Empire with Unusual Financial Moves

100 points by phodo 10y ago

iopuy 10y ago
Paywall free version?
- vanattab 10y ago
  http://lmgtfy.com/?q=Elon+Musk+Supports+His+Business+Empire+with+Unusual+Financial+Moves http://lmgtfy.com/?q=Elon+Musk+Supports+His+Business+Empire+...
  - c22 10y ago
    Or just click "web"
    - iambrandonn 10y ago
      Where?
      - hawkice 10y ago
        Directly to the left of the comments link, which is under the headline at the top.
        bravo22 10y ago
        Thank you!
      - ProAm 10y ago
        I don't see it as well.
      - DanBC 10y ago
        Explained here: https://news.ycombinator.com/item?id=10223645 https://news.ycombinator.com/item?id=10223645 > Second, when you're logged in, stories on /newest and on /item pages have 'past' and 'web' links. Click on 'past' to search HN for previous stories with that title. This helps with finding duplicates. Click on 'web' go to a Google search for the story title. This helps with finding better sources and catching spam.
        joshdickson 10y ago
        PSA time: The new way to get around the WSJ paywall is to add /amp before /article... which will show you the complete Accelerated Mobile Page (which, frankly, looks way better anyway)
- moreouters 10y ago
  This question makes sense to me. I believe this question, after considering the challenges of monetizing media while maintaining journalistic quality and integrity, is worth considering seriously and deeply.
  - badloginagain 10y ago
    Considered and promptly rejected. Not worth my money, probably wouldn't pay even if it was worth it.
  - erikb 10y ago
    Money value changes though. In the internet text is so cheap that its unreasonable to ask for money for it. That's just how it is. I personally, don't like rain clouds, but I have to accept that water makes me wet. Get over it.
abhi3 10y ago
I admire how Musk is so certain about his decisions and is willing to risk all.
vvanders 10y ago
Man, comments on that article are certainly ugly. I wonder why subsidies for Solar/EVs are viewed so negatively while ones for farming/oil/etc are almost ignored.
- hyperbovine 10y ago
  Because WSJ.
- dboreham 10y ago
  Because someone with large quantities of money wants it that way. The comments are probably astroturf.
  - zardo 10y ago
    I don't think many people realize how prevelant this is. PR firms try to move public opinion by making their clients interests seem like popular opinion. Every year of delay in renewables supplanting fossil fuels means hundreds of billions of dollars to the fossil fuels industry.
  - malchow 10y ago
    The world is not "Tomorrow Never Dies."
- abtinf 10y ago
  Farm subsidies are widely condemned, but their existence is explained through public choice theory. Perhaps you would explain to which oil subsidies you are referring?
  - abhi3 10y ago
    While the west has removed subsidies on oil mostly (but don't tax it either), developing countries over the world have spend a considerable portion of their budget subsidizing the oil industry. Renewable energy subsidies are not even 1% of them aggregate.
mathattack 10y ago
I understand when he puts his money where his mouth is, but is it ok for him to fund one company with another when they're in different businesses and he's not the only shareholder? I don't know all the details, but it seems a little strange.
- abhi3 10y ago
  He didn't fund company X using company Y's money. He funded company X by taking a personal loan by pledging his own shares in company Y.
  - maxerickson 10y ago
    The article is quite clear about SpaceX buying bonds from SolarCity. edit: (It does also mention the large personal loans)
    - abhi3 10y ago
      The article lists out several unusual practices. Buying bonds was just one of them. The bond purchase would have been approved by the board which would have considered if it was a good investment, those details we do not have. Maybe they were tax exempt, highly rated, secured and carried higher interest?
      - nissimk 10y ago
        The bonds are great for investors because most of the the terms in there are designed to screw over the customer. These bonds are securitizations of SolarCity leased solar panel rooftop systems. The salesmane I met with in NY told me that was the only way I could get SolarCity panels installed at my home is if I signed the solar lease agreement (which would then be securitized into these bonds). The lease says that if you default on the lease, by missing a single payment, SolarCity has the right to take back the panels, but you are still liable for the remainder of the lease payments even though you no longer have the panels.
wsloth514 10y ago
This title makes me think he was going a casino and gambling with the companies' money. Then he is using those winnings to create more companies.
IMTDb 10y ago
Is there an ELI5 version of this somewhere ? I understand some part of it but as a non-native english reader and not-so-financial guy it makes it hard to grasp it all.
- aerovistae 10y ago
  ELI5: Musk borrows money from banks for his companies. He uses his own stock in these companies as a collateral, which means that they bank can claim the stock from him if he fails to repay them in the long run. It also means that if the stock starts dropping in value, the banks can take it from him and sell it as a precautionary move, since if it dropped too much they would have nothing. If the banks were to do this, in theory this would hurt the companies. Right there is where my understanding drops off. Can someone else finish the narrative? Why would the banks selling off the stock collateral hurt Tesla ? How is it any different from me selling my stocks and someone else buying them? How does Tesla lose anything there?
  - icefo 10y ago
    Just speculating from what you said because I don't have a WSJ subscibtion but it could be that if the banks sell Musk's stock he can't call the shots anymore and bad decisions happen. That and if people hear that the banks are selling stock they could think: omg must sell now before loosing everything because they must have reasons to sell it That's my 2 cents not an economist in any way
  - ksdale 10y ago
    It hurts the other shareholders a lot more than it hurts the companies. The stock price would drop precipitously if a huge block of shares was sold like that. The main way I see it hurting the companies is that stock price is a proxy for the value of the companies that can affect their ability to borrow or raise more capital through selling stock.
  - dxbydt 10y ago
    Sigh! tbh the wsj comments on this particular issue are mostly accurate, though the other issues are debatable. 1. Tsla is quite volatile. 2. If it drops significantly by some Y%, Musk's shares which are used as collateral would be called. 3. When that margin call gets triggered he'd be forced to sell X shares to meet it. 4. X is very large. 5. Since X is large, you have a ton of tsla on the market with no demand. Price will drop like a rock, by some Z%. 6. Say I and you hold Tsla shares. Obviously we are OK with a price drop of Y%, because we know the damn thing us volatile, yet we chose to buy into it because we believe in its upside. 7. But just because we are OK with Y% drop due to some macro event doesn't mean we are OK with this Z% additional drop due to the way Musk structured his personal investments. In other words, ordinary investors could end up losing a ton of money (y + z) for no fault of their own, than if they had just lost y% which they had signed up for. Depending on what numbers you attach to y and z, you can make the case this is unfair or very unfair. For his part, Musk claims the probability of the above is low, though definitely nonzero in today's uncertain market conditions.
hkmurakami 10y ago
> He has had a string of triumphs lately... Tesla shares are up 77% since Feb. 10. Seems a bit disingenuous to cite a stock price recovery without mentioning its preceding collapse. (they do have a more balanced chart later on in the article)
- itp 10y ago
  Not only is there a chart, but the article also includes the sentence "Tesla fell 40% from the end of December to February, but has since erased those declines."
dmode 10y ago
WSJ has a target on Elon Musk's back. Every week they post something negative about him or his companies. I have a couple of conservative friends who have an irrational hatred for Elon. They rail how everything Elon Musk does is a "scam". The WSJ comments are a reflection of that mindset. More broadly, I wonder why WSJ and some conservatives set a target on Elon. There are literally a gazillion subsidies, tax credits, offshore accounting going around. For example, Hollywood shoots their movies wherever they get tax credits. Texas has attracted large back office operations using tax credits. Data center locations are chosen based upon which state government throws in the most benefits. It seems odd that they would spent so much energy on Musk, whose subsidies are probably a rounding error. It makes me wonder if there are bigger things at stake. Are the WSJ overlords really scared that he is making material changes to energy and transportation that could hurt them ?
- sremani 10y ago
  LATimes, is also a bit skeptical of Elon Musk.
  - niels_olson 10y ago
    LA Times is pretty conservative too. I have friends and family in LA who are, fairly liberal, and they pay for the New York Times rather than get local bias.
    - tosseraccount 10y ago
      https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_United_States_presidential_election,_201 https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_...
      - throwaway40483 10y ago
        Here' the correct link: https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_United_States_presidential_election,_2012 https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_...
11thEarlOfMar 10y ago
In general, a responsible CEO should utilize any legally defensible opportunities to operate the company profitably. By subsidizing Tesla, the Federal Government is effectively investing in it. Tesla then utilizes tax concessions from Nevada to reduce the cost of building and operating the gigafactory. So in a sense, Tesla is spending the money invested by the Federal Government wisely. If voters are not happy about the subsidy strategies of the government in general, they should be aiming their ire at their political representatives, not the companies that benefit from the subsidies.
sesutton 10y ago
>The financial transactions have raised questions on Capitol Hill, where some lawmakers are concerned that money from federal contracts with SpaceX could be used to help SolarCity. Do these people not understand that money is fungible? It's like pouring two glasses of water into a pitcher and then trying to separate them again.

100 points by phodo 10y ago

iopuy 10y ago

Paywall free version?

vanattab 10y ago
http://lmgtfy.com/?q=Elon+Musk+Supports+His+Business+Empire+with+Unusual+Financial+Moves http://lmgtfy.com/?q=Elon+Musk+Supports+His+Business+Empire+...
- c22 10y ago
  Or just click "web"
  - iambrandonn 10y ago
    Where?
    - hawkice 10y ago
      Directly to the left of the comments link, which is under the headline at the top.
      - bravo22 10y ago
        Thank you!
    - ProAm 10y ago
      I don't see it as well.
    - DanBC 10y ago
      Explained here: https://news.ycombinator.com/item?id=10223645 https://news.ycombinator.com/item?id=10223645 > Second, when you're logged in, stories on /newest and on /item pages have 'past' and 'web' links. Click on 'past' to search HN for previous stories with that title. This helps with finding duplicates. Click on 'web' go to a Google search for the story title. This helps with finding better sources and catching spam.
      - joshdickson 10y ago
        PSA time: The new way to get around the WSJ paywall is to add /amp before /article... which will show you the complete Accelerated Mobile Page (which, frankly, looks way better anyway)
moreouters 10y ago
This question makes sense to me. I believe this question, after considering the challenges of monetizing media while maintaining journalistic quality and integrity, is worth considering seriously and deeply.
- badloginagain 10y ago
  Considered and promptly rejected. Not worth my money, probably wouldn't pay even if it was worth it.
- erikb 10y ago
  Money value changes though. In the internet text is so cheap that its unreasonable to ask for money for it. That's just how it is. I personally, don't like rain clouds, but I have to accept that water makes me wet. Get over it.

abhi3 10y ago

I admire how Musk is so certain about his decisions and is willing to risk all.

vvanders 10y ago

Man, comments on that article are certainly ugly. I wonder why subsidies for Solar/EVs are viewed so negatively while ones for farming/oil/etc are almost ignored.

hyperbovine 10y ago
Because WSJ.
dboreham 10y ago
Because someone with large quantities of money wants it that way. The comments are probably astroturf.
- zardo 10y ago
  I don't think many people realize how prevelant this is. PR firms try to move public opinion by making their clients interests seem like popular opinion. Every year of delay in renewables supplanting fossil fuels means hundreds of billions of dollars to the fossil fuels industry.
- malchow 10y ago
  The world is not "Tomorrow Never Dies."
abtinf 10y ago
Farm subsidies are widely condemned, but their existence is explained through public choice theory. Perhaps you would explain to which oil subsidies you are referring?
- abhi3 10y ago
  While the west has removed subsidies on oil mostly (but don't tax it either), developing countries over the world have spend a considerable portion of their budget subsidizing the oil industry. Renewable energy subsidies are not even 1% of them aggregate.

mathattack 10y ago

I understand when he puts his money where his mouth is, but is it ok for him to fund one company with another when they're in different businesses and he's not the only shareholder? I don't know all the details, but it seems a little strange.

abhi3 10y ago
He didn't fund company X using company Y's money. He funded company X by taking a personal loan by pledging his own shares in company Y.
- maxerickson 10y ago
  The article is quite clear about SpaceX buying bonds from SolarCity. edit: (It does also mention the large personal loans)
  - abhi3 10y ago
    The article lists out several unusual practices. Buying bonds was just one of them. The bond purchase would have been approved by the board which would have considered if it was a good investment, those details we do not have. Maybe they were tax exempt, highly rated, secured and carried higher interest?
    - nissimk 10y ago
      The bonds are great for investors because most of the the terms in there are designed to screw over the customer. These bonds are securitizations of SolarCity leased solar panel rooftop systems. The salesmane I met with in NY told me that was the only way I could get SolarCity panels installed at my home is if I signed the solar lease agreement (which would then be securitized into these bonds). The lease says that if you default on the lease, by missing a single payment, SolarCity has the right to take back the panels, but you are still liable for the remainder of the lease payments even though you no longer have the panels.

wsloth514 10y ago

This title makes me think he was going a casino and gambling with the companies' money. Then he is using those winnings to create more companies.

IMTDb 10y ago

Is there an ELI5 version of this somewhere ? I understand some part of it but as a non-native english reader and not-so-financial guy it makes it hard to grasp it all.

aerovistae 10y ago
ELI5: Musk borrows money from banks for his companies. He uses his own stock in these companies as a collateral, which means that they bank can claim the stock from him if he fails to repay them in the long run. It also means that if the stock starts dropping in value, the banks can take it from him and sell it as a precautionary move, since if it dropped too much they would have nothing. If the banks were to do this, in theory this would hurt the companies. Right there is where my understanding drops off. Can someone else finish the narrative? Why would the banks selling off the stock collateral hurt Tesla ? How is it any different from me selling my stocks and someone else buying them? How does Tesla lose anything there?
- icefo 10y ago
  Just speculating from what you said because I don't have a WSJ subscibtion but it could be that if the banks sell Musk's stock he can't call the shots anymore and bad decisions happen. That and if people hear that the banks are selling stock they could think: omg must sell now before loosing everything because they must have reasons to sell it That's my 2 cents not an economist in any way
- ksdale 10y ago
  It hurts the other shareholders a lot more than it hurts the companies. The stock price would drop precipitously if a huge block of shares was sold like that. The main way I see it hurting the companies is that stock price is a proxy for the value of the companies that can affect their ability to borrow or raise more capital through selling stock.
- dxbydt 10y ago
  Sigh! tbh the wsj comments on this particular issue are mostly accurate, though the other issues are debatable. 1. Tsla is quite volatile. 2. If it drops significantly by some Y%, Musk's shares which are used as collateral would be called. 3. When that margin call gets triggered he'd be forced to sell X shares to meet it. 4. X is very large. 5. Since X is large, you have a ton of tsla on the market with no demand. Price will drop like a rock, by some Z%. 6. Say I and you hold Tsla shares. Obviously we are OK with a price drop of Y%, because we know the damn thing us volatile, yet we chose to buy into it because we believe in its upside. 7. But just because we are OK with Y% drop due to some macro event doesn't mean we are OK with this Z% additional drop due to the way Musk structured his personal investments. In other words, ordinary investors could end up losing a ton of money (y + z) for no fault of their own, than if they had just lost y% which they had signed up for. Depending on what numbers you attach to y and z, you can make the case this is unfair or very unfair. For his part, Musk claims the probability of the above is low, though definitely nonzero in today's uncertain market conditions.

hkmurakami 10y ago

> He has had a string of triumphs lately... Tesla shares are up 77% since Feb. 10. Seems a bit disingenuous to cite a stock price recovery without mentioning its preceding collapse. (they do have a more balanced chart later on in the article)

itp 10y ago
Not only is there a chart, but the article also includes the sentence "Tesla fell 40% from the end of December to February, but has since erased those declines."

dmode 10y ago

WSJ has a target on Elon Musk's back. Every week they post something negative about him or his companies. I have a couple of conservative friends who have an irrational hatred for Elon. They rail how everything Elon Musk does is a "scam". The WSJ comments are a reflection of that mindset. More broadly, I wonder why WSJ and some conservatives set a target on Elon. There are literally a gazillion subsidies, tax credits, offshore accounting going around. For example, Hollywood shoots their movies wherever they get tax credits. Texas has attracted large back office operations using tax credits. Data center locations are chosen based upon which state government throws in the most benefits. It seems odd that they would spent so much energy on Musk, whose subsidies are probably a rounding error. It makes me wonder if there are bigger things at stake. Are the WSJ overlords really scared that he is making material changes to energy and transportation that could hurt them ?

sremani 10y ago
LATimes, is also a bit skeptical of Elon Musk.
- niels_olson 10y ago
  LA Times is pretty conservative too. I have friends and family in LA who are, fairly liberal, and they pay for the New York Times rather than get local bias.
  - tosseraccount 10y ago
    https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_United_States_presidential_election,_201 https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_...
    - throwaway40483 10y ago
      Here' the correct link: https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_United_States_presidential_election,_2012 https://en.wikipedia.org/wiki/Newspaper_endorsements_in_the_...

11thEarlOfMar 10y ago

In general, a responsible CEO should utilize any legally defensible opportunities to operate the company profitably. By subsidizing Tesla, the Federal Government is effectively investing in it. Tesla then utilizes tax concessions from Nevada to reduce the cost of building and operating the gigafactory. So in a sense, Tesla is spending the money invested by the Federal Government wisely. If voters are not happy about the subsidy strategies of the government in general, they should be aiming their ire at their political representatives, not the companies that benefit from the subsidies.

sesutton 10y ago

>The financial transactions have raised questions on Capitol Hill, where some lawmakers are concerned that money from federal contracts with SpaceX could be used to help SolarCity. Do these people not understand that money is fungible? It's like pouring two glasses of water into a pitcher and then trying to separate them again.