5 ms·

Because the people who wrote those letters don't trust you to pay up if stonks go down by 100x your net worth. They trust Elon, though, because he has more net

Because the people who wrote those letters don't trust you to pay up if stonks go down by 100x your net worth. They trust Elon, though, because he has more net worth. I'm taking a broad definition of "trust" that includes "we can sue you and recover the money."

gavinray 5y ago
Ah, so it's a reputation/wealth-based thing. That makes sense. By that logic though -- if you're a billionaire, could you try to buy every profitable company on borrowed money? Eventually you'd make the money back and since you don't have to pay anything out of pocket, you effectively have $INFINITY dollars to bargain with.
- shkkmo 5y ago
  Each new loan would have increased scrutiny due to the other loans you carry.
- leetcodesucks 5y ago
  Trump and Gordon Gekko did this
- pydry 5y ago
  You could try but it'd probably work out for you about as well as when the hunt brothers tried to buy up all the silver on earth.
- nabla9 5y ago
  It's not reputation based. Musk as requested secured enough loans to pay with cash. His ownership in SpaceX/Tesla is the collateral (as well as his Twitter shares if he buys them). He has no "infinity" of anything. It's called leverage and it probably maxes out around 60-70% of everything he owns.
  - naveen99 5y ago
    seems crazy to take that much leverage when you are worth $200B. the shorts must be salivating at a chance to force a margin call on him, just for fun. Would have been better to just do a tesla twitter merger for free.
- newaccount2021 5y ago
- rsstack 5y ago
  When he requests debt from the banks he needs to show that his current owned assets are worth more than his current debt _and_ the new requested debt. They wouldn't loan the hypothetical billionaire infinity dollars, unless the billionaire has infinity dollars in assets that aren't offset by previous debt.
- s1artibartfast 5y ago
  Banks don't like loaning multiple times with the same collateral
- bombcar 5y ago
  The "make the money back" part is what prevents it. Musk has 100 billion of TSLA say. He mortgages it to buy TWTR. Now he has 100 billion of TSLA, -40 billion loan against it, and 40 billion of TWTR. He could mortgage TWTR and buy something else, but it would have to be smaller, because the banks won't loan 100% of the value of the thing. Or he'd have to make another $40 billion and pay off the first loan to mortgage it again. Think of it as trying to use mortgage properties in monopoly to continue buying other properties.
  - KptMarchewa 5y ago
    >He could mortgage TWTR and buy something else, but it would have to be smaller, because the banks won't loan 100% of the value of the thing. Unless you're on robinhood: https://www.bnnbloomberg.ca/robinhood-traders-discover-glitch-that-gives-them-infinite-leverage-1.1343289 https://www.bnnbloomberg.ca/robinhood-traders-discover-glitc...
    - bombcar 5y ago
      Robinhood is the exception that proves all the rules. Maybe we'll see a wallstreetbets post "Musk couldn't take TWTR private but I did via robin hood bug"
a4isms 5y ago
80s Junk Bond King (and convicted felon*) Michael Milkin tells this story. He was once talking to an ambitions entrepreneur about funding a buyout with junk, and the entrepreneur asked, "This is a lot of money. How do you know I'll replay it?" Milkin says he replied, "Because if you miss even a single payment, I'll call your debt and take not just the company, but every single asset you own." ——— * That would be presidentially pardoned convicted felon Michael Milkin. The rules for "righting injustice through pardons" are very different for the rich than the comfortably well off, much less those living paycheque to paycheque.
- kmonsen 5y ago
  Pardoned by Trump. We should name and shame each one until this stops.
  - itsoktocry 5y ago
    >We should name and shame each one until this stops. Why should it stop? Do you not believe in redemption? Milken has done (and continues to do) a lot of great charity work with his fortune. Besides, if you look at what Milken was actually convicted of, it's pretty tame, especially by today's standards. And he spent two years in prison for it. What more do you want?
    - a4isms 5y ago
      I actually like what you're saying, but there is a problem here that is larger than whether it is just that Mr. Milken deserves a pardon. The problem is that justice unequally applied is injustice. So if we are saying, "Everyone convicted of a felony who serves their time and who then rehabilitates themselves should be pardoned," I'm all for it. And in my jurisdiction (Canada), people can apply for Federal pardons, and many receive them. There is a standard way to do it, a standard procedure to follow, and in theory, everyone is treated equally by the system. The injustice comes in if there is a special fast-track for a pardon one gets by hob-nobbing with your fellow wealthy oligarchs, one of whom is elected President and gives you a personal pardon. That's a bad look that suggests that all felons are equal, but some felons are more equal than others. Likewise, I am extremely leery of talking about "doing great charity work." Reputation laundering is my preferred term, and again this is not something available to all citizens. Nobody gives a crap if some felon donates $1,000 to a soup kitchen, but donate $1,000,000 and you get called a "philanthropist." I'm all for charity and doing good works, but I'm not for giving philanthropists anything special in terms of justice that people who can't afford to be philanthropists get. IMO, the answer is not to burn Milken's pardon, it's to pardon more convicted felons who do their time and then turn their backs on whatever criminal acts they used to commit.

gavinray 5y ago

Ah, so it's a reputation/wealth-based thing. That makes sense. By that logic though -- if you're a billionaire, could you try to buy every profitable company on borrowed money? Eventually you'd make the money back and since you don't have to pay anything out of pocket, you effectively have $INFINITY dollars to bargain with.

shkkmo 5y ago
Each new loan would have increased scrutiny due to the other loans you carry.
leetcodesucks 5y ago
Trump and Gordon Gekko did this
pydry 5y ago
You could try but it'd probably work out for you about as well as when the hunt brothers tried to buy up all the silver on earth.
nabla9 5y ago
It's not reputation based. Musk as requested secured enough loans to pay with cash. His ownership in SpaceX/Tesla is the collateral (as well as his Twitter shares if he buys them). He has no "infinity" of anything. It's called leverage and it probably maxes out around 60-70% of everything he owns.
- naveen99 5y ago
  seems crazy to take that much leverage when you are worth $200B. the shorts must be salivating at a chance to force a margin call on him, just for fun. Would have been better to just do a tesla twitter merger for free.
newaccount2021 5y ago
rsstack 5y ago
When he requests debt from the banks he needs to show that his current owned assets are worth more than his current debt _and_ the new requested debt. They wouldn't loan the hypothetical billionaire infinity dollars, unless the billionaire has infinity dollars in assets that aren't offset by previous debt.
s1artibartfast 5y ago
Banks don't like loaning multiple times with the same collateral
bombcar 5y ago
The "make the money back" part is what prevents it. Musk has 100 billion of TSLA say. He mortgages it to buy TWTR. Now he has 100 billion of TSLA, -40 billion loan against it, and 40 billion of TWTR. He could mortgage TWTR and buy something else, but it would have to be smaller, because the banks won't loan 100% of the value of the thing. Or he'd have to make another $40 billion and pay off the first loan to mortgage it again. Think of it as trying to use mortgage properties in monopoly to continue buying other properties.
- KptMarchewa 5y ago
  >He could mortgage TWTR and buy something else, but it would have to be smaller, because the banks won't loan 100% of the value of the thing. Unless you're on robinhood: https://www.bnnbloomberg.ca/robinhood-traders-discover-glitch-that-gives-them-infinite-leverage-1.1343289 https://www.bnnbloomberg.ca/robinhood-traders-discover-glitc...
  - bombcar 5y ago
    Robinhood is the exception that proves all the rules. Maybe we'll see a wallstreetbets post "Musk couldn't take TWTR private but I did via robin hood bug"

a4isms 5y ago

80s Junk Bond King (and convicted felon*) Michael Milkin tells this story. He was once talking to an ambitions entrepreneur about funding a buyout with junk, and the entrepreneur asked, "This is a lot of money. How do you know I'll replay it?" Milkin says he replied, "Because if you miss even a single payment, I'll call your debt and take not just the company, but every single asset you own." ——— * That would be presidentially pardoned convicted felon Michael Milkin. The rules for "righting injustice through pardons" are very different for the rich than the comfortably well off, much less those living paycheque to paycheque.

kmonsen 5y ago
Pardoned by Trump. We should name and shame each one until this stops.
- itsoktocry 5y ago
  >We should name and shame each one until this stops. Why should it stop? Do you not believe in redemption? Milken has done (and continues to do) a lot of great charity work with his fortune. Besides, if you look at what Milken was actually convicted of, it's pretty tame, especially by today's standards. And he spent two years in prison for it. What more do you want?
  - a4isms 5y ago
    I actually like what you're saying, but there is a problem here that is larger than whether it is just that Mr. Milken deserves a pardon. The problem is that justice unequally applied is injustice. So if we are saying, "Everyone convicted of a felony who serves their time and who then rehabilitates themselves should be pardoned," I'm all for it. And in my jurisdiction (Canada), people can apply for Federal pardons, and many receive them. There is a standard way to do it, a standard procedure to follow, and in theory, everyone is treated equally by the system. The injustice comes in if there is a special fast-track for a pardon one gets by hob-nobbing with your fellow wealthy oligarchs, one of whom is elected President and gives you a personal pardon. That's a bad look that suggests that all felons are equal, but some felons are more equal than others. Likewise, I am extremely leery of talking about "doing great charity work." Reputation laundering is my preferred term, and again this is not something available to all citizens. Nobody gives a crap if some felon donates $1,000 to a soup kitchen, but donate $1,000,000 and you get called a "philanthropist." I'm all for charity and doing good works, but I'm not for giving philanthropists anything special in terms of justice that people who can't afford to be philanthropists get. IMO, the answer is not to burn Milken's pardon, it's to pardon more convicted felons who do their time and then turn their backs on whatever criminal acts they used to commit.