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The CEO has shown willingness to fund Tesla Motors and SpaceX with almost all his personal funds. If I remember correctly, he is worth more than Tesla's debt, a

by bfwi 8y ago

The CEO has shown willingness to fund Tesla Motors and SpaceX with almost all his personal funds. If I remember correctly, he is worth more than Tesla's debt, and unless he is somehow unable to liquidate enough assets to cover that debt, it won't be the end of Tesla.

JumpCrisscross 8y ago
> he is worth more than Tesla's debt Most of Elon's net worth is in illiquid SpaceX stock and Tesla shares.
- bfwi 8y ago
  Why is the Tesla stock illiquid? It's publicly traded. I'm sure he could sell SpaceX stock on the secondary market quite easily. SpaceX has never lacked in interest from investors.
  - JumpCrisscross 8y ago
    > Why is the Tesla stock illiquid? It's publicly traded. Pardon me, imprecise phrasing. SpaceX stock is illiquid. Tesla stock is liquid, but if Tesla is having financial difficulties its stock will go down. If Elon can sell Tesla shares, Tesla can sell Tesla shares. > I'm sure he could sell SpaceX stock on the secondary market quite easily Not "quite easily". One, he's a super material insider. That makes the process more complicated for everyone involved. (It would be difficult to avoid giving everyone else the right to participate on the same terms.) Two, he's a super material insider. The fact that he's selling will scare away many buyers. Three, he's a super material insider. His selling SpaceX stock to prop up Tesla screams that nobody is willing to finance Tesla in the open market. It would immediately lead to a rout.
    - bfwi 8y ago
      I'm not convinced that selling some of his SpaceX stock on the secondary market is difficult, or that selling some of his Tesla stocks would cause a rout, especially when the immediate consequence would be paying back the debt, thereby saving the company. But I hope some experts (e.g. stock analysts) would comment on this scenario, I think it's interesting.
      - JumpCrisscross 8y ago
        > I'm not convinced that selling some of his SpaceX stock on the secondary market is difficult Selling SpaceX stock is not difficult per se. The CEO selling his SpaceX stock for the purpose of purchasing shares in a public company, of which he is also the CEO, is. (Source: this is what I do for a living.) > selling some of his Tesla stocks would cause a rout Elon Musk selling his Tesla stock to buy new Tesla shares, thereby giving Tesla cash, wouldn't be a problem. (Though it's a roundabout way for Tesla to issue new shares.) Elon Musk selling his SpaceX stock to buy new Tesla shares would be. It shows Tesla was unable to raise capital in the stock markets.
      - stephengillie 8y ago
        A CEO selling off a large share of stock in the company (s)he's running is a de facto red flag. Often it's headline/breaking news.
  - mikestew 8y ago
    Why is the Tesla stock illiquid? It's publicly traded. It's not liquid as far as Musk is concerned. Ignore the aspect of "CEO dumps $COMPANY stock" for a moment. The kind of numbers Musk would need to dump would also affect the share price. 'cuz, you know, a bunch of supply just came online without corresponding demand.
amarka 8y ago
My understanding is that the majority of his personal net worth is from Tesla (+Solar City) and SpaceX. Would that limit his ability to personally fund Tesla?
- w1 8y ago
  Just did some rough math on this. He's reported to have 55% of SpaceX, recently valued at 27.5B [1], and ~19% of Tesla [2], most recently at ~44B, for a combined net worth of ~23B (before any debt). He therefore definitely couldn't personally buy out Tesla at current prices, and any significant investment of personal funds would require the sale of SpaceX shares. Also, much of his liquid pocket money has come from loans backed by his Tesla Stock. This could be a problem if Tesla stock price drops too much, as the stock he has pledge is required to be no less than a multiple of the money he has borrowed. [3] Disclosure: I am short Tesla. [1] https://www.cnbc.com/2018/04/13/equidate-spacex-27-billion-valuation-shows-unlimited-private-funding-available.html https://www.cnbc.com/2018/04/13/equidate-spacex-27-billion-v... [2] https://money.usnews.com/investing/stock-market-news/articles/2018-06-14/tesla-inc-tsla-stock https://money.usnews.com/investing/stock-market-news/article... [3] https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-heavily-leveraged-his-holdings-of-tesla-while-teslas-financial-leverage-has-jumped/#1d93716a7099 https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-...
  - bfwi 8y ago
    Thanks for the facts. You state that he can't buy out Tesla, which is true. But why does he need to buy out Tesla to cover their debt? On the contrary he would need to sell some of his Tesla (and perhaps SpaceX) stock and give the cash to Tesla to cover their debt.
    - w1 8y ago
      Those are really good questions. I don't know what form a transfer of cash from Elon to Tesla like that would take. Tesla issuing new shares for him to buy? Honestly, on paper there isn't any reason why Tesla can't just sell additional shares to the market in general, not necessarily just to Elon, in order to get enough money to cover their upcoming debt payments. Elon has publicly said he won't sell shares because Tesla won't need the money because it will be profitable[1], but some people are skeptical [2]. Maybe he just doesn't want to walk back his statement? Also as previously mentioned, he can't sell all of his Tesla stock without paying back some of his personal loans. [1] https://www.cnbc.com/2018/08/01/musk-says-tesla-wont-be-selling-stock.html https://www.cnbc.com/2018/08/01/musk-says-tesla-wont-be-sell... [2] https://www.businessinsider.com/teslas-upcoming-debt-payments-could-be-a-big-challenge-experts-2018-10?r=UK&IR=T https://www.businessinsider.com/teslas-upcoming-debt-payment...

by bfwi 8y ago

JumpCrisscross 8y ago

> he is worth more than Tesla's debt Most of Elon's net worth is in illiquid SpaceX stock and Tesla shares.

bfwi 8y ago
Why is the Tesla stock illiquid? It's publicly traded. I'm sure he could sell SpaceX stock on the secondary market quite easily. SpaceX has never lacked in interest from investors.
- JumpCrisscross 8y ago
  > Why is the Tesla stock illiquid? It's publicly traded. Pardon me, imprecise phrasing. SpaceX stock is illiquid. Tesla stock is liquid, but if Tesla is having financial difficulties its stock will go down. If Elon can sell Tesla shares, Tesla can sell Tesla shares. > I'm sure he could sell SpaceX stock on the secondary market quite easily Not "quite easily". One, he's a super material insider. That makes the process more complicated for everyone involved. (It would be difficult to avoid giving everyone else the right to participate on the same terms.) Two, he's a super material insider. The fact that he's selling will scare away many buyers. Three, he's a super material insider. His selling SpaceX stock to prop up Tesla screams that nobody is willing to finance Tesla in the open market. It would immediately lead to a rout.
  - bfwi 8y ago
    I'm not convinced that selling some of his SpaceX stock on the secondary market is difficult, or that selling some of his Tesla stocks would cause a rout, especially when the immediate consequence would be paying back the debt, thereby saving the company. But I hope some experts (e.g. stock analysts) would comment on this scenario, I think it's interesting.
    - JumpCrisscross 8y ago
      > I'm not convinced that selling some of his SpaceX stock on the secondary market is difficult Selling SpaceX stock is not difficult per se. The CEO selling his SpaceX stock for the purpose of purchasing shares in a public company, of which he is also the CEO, is. (Source: this is what I do for a living.) > selling some of his Tesla stocks would cause a rout Elon Musk selling his Tesla stock to buy new Tesla shares, thereby giving Tesla cash, wouldn't be a problem. (Though it's a roundabout way for Tesla to issue new shares.) Elon Musk selling his SpaceX stock to buy new Tesla shares would be. It shows Tesla was unable to raise capital in the stock markets.
    - stephengillie 8y ago
      A CEO selling off a large share of stock in the company (s)he's running is a de facto red flag. Often it's headline/breaking news.
- mikestew 8y ago
  Why is the Tesla stock illiquid? It's publicly traded. It's not liquid as far as Musk is concerned. Ignore the aspect of "CEO dumps $COMPANY stock" for a moment. The kind of numbers Musk would need to dump would also affect the share price. 'cuz, you know, a bunch of supply just came online without corresponding demand.

amarka 8y ago

My understanding is that the majority of his personal net worth is from Tesla (+Solar City) and SpaceX. Would that limit his ability to personally fund Tesla?

w1 8y ago
Just did some rough math on this. He's reported to have 55% of SpaceX, recently valued at 27.5B [1], and ~19% of Tesla [2], most recently at ~44B, for a combined net worth of ~23B (before any debt). He therefore definitely couldn't personally buy out Tesla at current prices, and any significant investment of personal funds would require the sale of SpaceX shares. Also, much of his liquid pocket money has come from loans backed by his Tesla Stock. This could be a problem if Tesla stock price drops too much, as the stock he has pledge is required to be no less than a multiple of the money he has borrowed. [3] Disclosure: I am short Tesla. [1] https://www.cnbc.com/2018/04/13/equidate-spacex-27-billion-valuation-shows-unlimited-private-funding-available.html https://www.cnbc.com/2018/04/13/equidate-spacex-27-billion-v... [2] https://money.usnews.com/investing/stock-market-news/articles/2018-06-14/tesla-inc-tsla-stock https://money.usnews.com/investing/stock-market-news/article... [3] https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-heavily-leveraged-his-holdings-of-tesla-while-teslas-financial-leverage-has-jumped/#1d93716a7099 https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-...
- bfwi 8y ago
  Thanks for the facts. You state that he can't buy out Tesla, which is true. But why does he need to buy out Tesla to cover their debt? On the contrary he would need to sell some of his Tesla (and perhaps SpaceX) stock and give the cash to Tesla to cover their debt.
  - w1 8y ago
    Those are really good questions. I don't know what form a transfer of cash from Elon to Tesla like that would take. Tesla issuing new shares for him to buy? Honestly, on paper there isn't any reason why Tesla can't just sell additional shares to the market in general, not necessarily just to Elon, in order to get enough money to cover their upcoming debt payments. Elon has publicly said he won't sell shares because Tesla won't need the money because it will be profitable[1], but some people are skeptical [2]. Maybe he just doesn't want to walk back his statement? Also as previously mentioned, he can't sell all of his Tesla stock without paying back some of his personal loans. [1] https://www.cnbc.com/2018/08/01/musk-says-tesla-wont-be-selling-stock.html https://www.cnbc.com/2018/08/01/musk-says-tesla-wont-be-sell... [2] https://www.businessinsider.com/teslas-upcoming-debt-payments-could-be-a-big-challenge-experts-2018-10?r=UK&IR=T https://www.businessinsider.com/teslas-upcoming-debt-payment...