3 ms·

Generally Musk's finances aren't built around direct sales of his stock or transfer of capital from one business to another; it's all about borrowing using his

Generally Musk's finances aren't built around direct sales of his stock or transfer of capital from one business to another; it's all about borrowing using his ownership stakes in his companies as collateral [1]. Increased valuations give him a much larger ability to draw on third-party loans to dump into whatever business he likes: the risk being if his investments don't pay off, he risks losing control of SpaceX. [1] https://www.economist.com/news/business/21709061-entrepreneurs-finances-are-jaw-dropping-inventive-and-combustible-his-space https://www.economist.com/news/business/21709061-entrepreneu...

adventured 9y ago
The parent was talking about SpaceX directly using the raised cash to assist Tesla, which is what I was replying to. That's not what you're talking about.
- azernik 9y ago
  That was exactly my point; that SpaceX directly transferring cash from one company to another is indeed unlikely, but that the higher valuation of SpaceX is a bigger help for Musk's finances in general. (EDIT: I was agreeing with you on the details, but also pointing out that there are effects here beyond the money directly raise that could help Tesla.)
- richardknop 9y ago
  Well not directly but by buying bonds. There is already precedent with SpaceX buying SolarCity bonds so it's not totally unlikely given Tesla's financial woes.
thomaskcr 9y ago
Musk borrows against his Tesla shares to fund his investments into SpaceX and SpaceX owns Tesla bonds. The two are pretty significantly linked financially. If Tesla has issues with paying back bonds, it would probably impact SpaceX. Additionally - I don't know where price-wise Musk gets margin called on his Tesla stock, but I do think him borrowing against it is a significant risk for Tesla. In my personal opinion, Tesla's biggest asset is Musk's fan base - I think it would really significantly impact Tesla if Musk got margin called and couldn't (or doesn't) cover and lost his status as the largest shareholder of Tesla. I think he would lose more interest in the company and you risk his fans no longer seeing Tesla as "his" company. I don't think I'm alone in this opinion either, Musk has borrowed enough against his shares to warrant getting margin called mention as a risk in the 10-K. (Not to say its wrong for him to borrow against them, I'm sure I would do the same - I just think doing it to fund a private company he is heavily involved in (and distracts him from his public company) links them financially in a way I would personally not be comfortable with if I were an investor in Tesla).
- rory096 9y ago
  Tesla paid back (almost all of) SolarCity's solar bonds in 2017. Only Musk personally (and his cousins) still hold that debt. [0] https://electrek.co/2017/04/14/tesla-solar-bonds-elon-musk-spacex/amp/ https://electrek.co/2017/04/14/tesla-solar-bonds-elon-musk-s...
  - thomaskcr 9y ago
    That's definitely not true -- They have a $230m Solarcity bond due Nov 2018 and then another $566m inherited Solarcity bond due Nov 2019. What was paid back were "Solar bonds", which were not SolarCity bonds. I can see why you would think that though - the PR around that only mentioned what they were paying early, not what was being inherited. (I think by design, but I have a cynical view of Tesla's relationship with the truth so that's only an opinion).
    - rory096 9y ago
      As far as I know, solar bonds are the only type of SolarCity bond that SpaceX owned. [0] http://fortune.com/2015/08/07/this-is-why-elon-musks-spacex-has-been-buying-up-solarcitys-bonds/ http://fortune.com/2015/08/07/this-is-why-elon-musks-spacex-...
      - deleted 9y ago
        [deleted]

adventured 9y ago

The parent was talking about SpaceX directly using the raised cash to assist Tesla, which is what I was replying to. That's not what you're talking about.

azernik 9y ago
That was exactly my point; that SpaceX directly transferring cash from one company to another is indeed unlikely, but that the higher valuation of SpaceX is a bigger help for Musk's finances in general. (EDIT: I was agreeing with you on the details, but also pointing out that there are effects here beyond the money directly raise that could help Tesla.)
richardknop 9y ago
Well not directly but by buying bonds. There is already precedent with SpaceX buying SolarCity bonds so it's not totally unlikely given Tesla's financial woes.

thomaskcr 9y ago

Musk borrows against his Tesla shares to fund his investments into SpaceX and SpaceX owns Tesla bonds. The two are pretty significantly linked financially. If Tesla has issues with paying back bonds, it would probably impact SpaceX. Additionally - I don't know where price-wise Musk gets margin called on his Tesla stock, but I do think him borrowing against it is a significant risk for Tesla. In my personal opinion, Tesla's biggest asset is Musk's fan base - I think it would really significantly impact Tesla if Musk got margin called and couldn't (or doesn't) cover and lost his status as the largest shareholder of Tesla. I think he would lose more interest in the company and you risk his fans no longer seeing Tesla as "his" company. I don't think I'm alone in this opinion either, Musk has borrowed enough against his shares to warrant getting margin called mention as a risk in the 10-K. (Not to say its wrong for him to borrow against them, I'm sure I would do the same - I just think doing it to fund a private company he is heavily involved in (and distracts him from his public company) links them financially in a way I would personally not be comfortable with if I were an investor in Tesla).

rory096 9y ago
Tesla paid back (almost all of) SolarCity's solar bonds in 2017. Only Musk personally (and his cousins) still hold that debt. [0] https://electrek.co/2017/04/14/tesla-solar-bonds-elon-musk-spacex/amp/ https://electrek.co/2017/04/14/tesla-solar-bonds-elon-musk-s...
- thomaskcr 9y ago
  That's definitely not true -- They have a $230m Solarcity bond due Nov 2018 and then another $566m inherited Solarcity bond due Nov 2019. What was paid back were "Solar bonds", which were not SolarCity bonds. I can see why you would think that though - the PR around that only mentioned what they were paying early, not what was being inherited. (I think by design, but I have a cynical view of Tesla's relationship with the truth so that's only an opinion).
  - rory096 9y ago
    As far as I know, solar bonds are the only type of SolarCity bond that SpaceX owned. [0] http://fortune.com/2015/08/07/this-is-why-elon-musks-spacex-has-been-buying-up-solarcitys-bonds/ http://fortune.com/2015/08/07/this-is-why-elon-musks-spacex-...
    - deleted 9y ago
      [deleted]