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THIS. Elon is the largest Tesla stockholder, but he has taken out huge loans against that stock. If the stock price of TSLA falls below about $230/share (there

THIS. Elon is the largest Tesla stockholder, but he has taken out huge loans against that stock. If the stock price of TSLA falls below about $230/share (there is some confusion about the exact price, but it's widely believed to be somewhere around there) his stock could all be sold to cover the loan, which would suddenly dump the stock price even further, or he could be forced to post more of his stock as collateral for the loan. Either way, it's not good for him OR for the company. Elon has used those loans to finance a rather extravagant lifestyle. He own FIVE mansions in Bel Air, all right next to or near each other. He owns a $70,000,000 private jet, a top-of-the-line Gulstream G650 ER, and flies everywhere with it, burning immense amounts of fuel sometimes just commuting within Los Angeles (between Hawthorne and Van Nuys airports, for example). Because his unusual compensation arrangement at Tesla is contingent on the company's increasing market value or maybe someday turning a profit (which has never ever happened), these loans against his Tesla stock are his main bread-and-butter. In other words, Tesla's fate as a company and its stock price are intimately tied to Elon's personal financial solvency. That's gotta create some conflicts of interest between his various jobs as CEO, head of the Board of Directors, and a person who doesn't want to be personally financially wiped out.

vkou 8y ago
What should we believe? This, or Elon claiming that shorts are evil, and are done by bad people who hate the climate?
onetimemanytime 8y ago
Wow! I Googled and there it is: *"At the end of 2016, Musk had 11,420,723 shares pledged as collateral. At the end of 2015, it was "4,000,000 shares of which are pledged as collateral to secure certain personal indebtedness owed to Morgan Stanley."" https://www.inc.com/erik-sherman/1-reason-why-elon-musk-might-want-to-take-tesla-private-its-personal.html https://www.inc.com/erik-sherman/1-reason-why-elon-musk-migh... His lifestyle isn't the big problem, IMO. He's not Johnny Depp, he's way richer. That money most be going somewhere else...
- yread 8y ago
  Does that mean his debt increased by 7M shares? At ~250 a piece? Almost 2B$? Is that what he actually owes or is it more like a line-of-credit up to 2B$ He's burning money faster than Tesla!
  - deleted 8y ago
    [deleted]
  - toast0 8y ago
    There's a current tax dodge where high net worth people get pledged asset loans and spend that, because loan proceeds aren't taxable, but selling stock is. Selling stock in a company you're the CEO of also can be bad PR, but pledging it might be less bad. OTOH, selling stock to redeem a pledge could be scrutinized for insider trading, and such a large amount could move the stock, so if I were loaning the money, I would require some large multiple of the loan in pledges -- enough so that I would expect not to have to call the pledge, because I know it will be a disaster if I do.
- Hypx 8y ago
  https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-heavily-leveraged-his-holdings-of-tesla-while-teslas-financial-leverage-has-jumped/#122f71027099 https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-... It's close to 13.775M, and growing. The worrying sign is that the company is losing tons of money at the same time. As the author of that article writes: > So, Musk has steadily increased his personal leverage to a company that has been steadily increasing its financial leverage. That's a double whammy. It's too much financial engineering. In following other companies I have experienced situations in which a CEO faced margin calls as his company's share price dropped. It is not pretty, and obviously adds incremental selling pressure to an existing decline. It just seems inevitable that the colliding forces of an overleveraged CEO running into an overleveraged company will create some kind of financial implosion.
deleted 8y ago
[deleted]
bvi 8y ago
> Elon has used those loans to finance a rather extravagant lifestyle. How does this actually work? His stock is just his collateral for those loans, which can be transferred if he defaults on payments?
__s 8y ago
Owning mansions is an investment in real estate. Vehicles are the assets that aren't a store of value
vsl 8y ago
> turning a profit (which has never ever happened) "Never ever" as in two profitable quarters? https://www.cnbc.com/2018/06/29/tesla-still-isnt-profitable-8-years-after-ipo-but-it-hasnt-been-alone.html https://www.cnbc.com/2018/06/29/tesla-still-isnt-profitable-...

vkou 8y ago

What should we believe? This, or Elon claiming that shorts are evil, and are done by bad people who hate the climate?

onetimemanytime 8y ago

Wow! I Googled and there it is: *"At the end of 2016, Musk had 11,420,723 shares pledged as collateral. At the end of 2015, it was "4,000,000 shares of which are pledged as collateral to secure certain personal indebtedness owed to Morgan Stanley."" https://www.inc.com/erik-sherman/1-reason-why-elon-musk-might-want-to-take-tesla-private-its-personal.html https://www.inc.com/erik-sherman/1-reason-why-elon-musk-migh... His lifestyle isn't the big problem, IMO. He's not Johnny Depp, he's way richer. That money most be going somewhere else...

yread 8y ago
Does that mean his debt increased by 7M shares? At ~250 a piece? Almost 2B$? Is that what he actually owes or is it more like a line-of-credit up to 2B$ He's burning money faster than Tesla!
- deleted 8y ago
  [deleted]
- toast0 8y ago
  There's a current tax dodge where high net worth people get pledged asset loans and spend that, because loan proceeds aren't taxable, but selling stock is. Selling stock in a company you're the CEO of also can be bad PR, but pledging it might be less bad. OTOH, selling stock to redeem a pledge could be scrutinized for insider trading, and such a large amount could move the stock, so if I were loaning the money, I would require some large multiple of the loan in pledges -- enough so that I would expect not to have to call the pledge, because I know it will be a disaster if I do.
Hypx 8y ago
https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-heavily-leveraged-his-holdings-of-tesla-while-teslas-financial-leverage-has-jumped/#122f71027099 https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-... It's close to 13.775M, and growing. The worrying sign is that the company is losing tons of money at the same time. As the author of that article writes: > So, Musk has steadily increased his personal leverage to a company that has been steadily increasing its financial leverage. That's a double whammy. It's too much financial engineering. In following other companies I have experienced situations in which a CEO faced margin calls as his company's share price dropped. It is not pretty, and obviously adds incremental selling pressure to an existing decline. It just seems inevitable that the colliding forces of an overleveraged CEO running into an overleveraged company will create some kind of financial implosion.

deleted 8y ago

[deleted]

bvi 8y ago

> Elon has used those loans to finance a rather extravagant lifestyle. How does this actually work? His stock is just his collateral for those loans, which can be transferred if he defaults on payments?

__s 8y ago

Owning mansions is an investment in real estate. Vehicles are the assets that aren't a store of value

vsl 8y ago

> turning a profit (which has never ever happened) "Never ever" as in two profitable quarters? https://www.cnbc.com/2018/06/29/tesla-still-isnt-profitable-8-years-after-ipo-but-it-hasnt-been-alone.html https://www.cnbc.com/2018/06/29/tesla-still-isnt-profitable-...