6 ms·
He can always borrow it, too. Tesla is a volatile stock, but if he's not borrowing a huge percentage of his stake, he should be able to use it as collateral.
by devoutsalsa 4y ago
He can always borrow it, too. Tesla is a volatile stock, but if he's not borrowing a huge percentage of his stake, he should be able to use it as collateral. Then he can sell later to pay it off when the timing is right.
- deckard1 4y agoMusk goes to the bank Musk: I can haz money? Bank: You said that Twitter isn't going to be a way to make money. That you "don't care about the economics at all". Your exact words. Musk: ... Bank: ... Musk: Give me money
- iepathos 4y agoBank: I see your net worth is far beyond what you're asking for and you won't have a problem making payments with your income. I didn't even know credit scores got as high as yours. Here you go.
- deleted 4y ago[deleted]
- mywittyname 4y agoMusk's net worth his highly volatile. Telsa is trading at pretty high 200 P/e, one bad quarter could crater the stock price. Space X is private, which carries its own issues. Add to that the risk to these assets if Musk dies. Or hell, even it Musk merely "spooks" investors with his flamboyance. This is a insanely risky vanity project.
- littlestymaar 4y agoNo matter how volatile his worth is, it's just around a tens of the said worth and there's no way it loses 90% of its value overnight, even if TSLA's valuation is arguably nonsensical.
- mywittyname 4y agoIt doesn't need to lose 90% of its value overnight, 30% is enough to trigger a call on margin loans. Within the past year, Telsa stock slide from a $1209/sh peak to $766/sh in the span of about five months.
- littlestymaar 4y agoAnd what? Can't he just add more securities as a collateral if it happens?
- HWR_14 4y agoIf he has it. At standard margin rates, he'd need to put up ~$140 billion in TSLA stock to cover his TWTR offer. How much can TSLA slide before he doesn't have that. Keep in mind, private companies (SpaceX, Twitter in this hypothetical) cannot be used for margin purposes.
- tekknik 4y agoWhy would he have tu up up almost 4x the loan amount? He just needs to cover the loan.
- HWR_14 4y agoWhen using stock as collateral for a loan, it's not uncommon to get a loan for 30% of the value of the stock. Certainly not 100%. In this case, MS has offered him a loan for 20% of the value of his stock.
- tekknik 4y agoYou can still sell the rest of the stock and cover a majority of the loan. I still fail to see why you need way more money than the loan amount to pay it off.
- jjav 4y ago> I didn't even know credit scores got as high as yours. A bit of an aside, but the richest person I know (as in buys multi-million dollar cars on a whim and has many many of those) says his credit score is pretty mediocre because he's never had a loan. I'd thought having gazillion dollars in the bank would give you a good credit score but guess not.
- no_wizard 4y agoI imagine once you have a verifiable net worth over a certain amount (at least 10 million in near cash assets + a hefty amount on hand) you are able to bypass certain things the rest of us simply can't. This is what I've heard second hand anyway
- tekknik 4y agoOnce you have a balance above a few hundred thousand your bank starts treating you differently. Sometimes you even get a different entrance to the bank, different tellers, so on.
- smoldesu 4y agoAs another side note, the richest person I know regularly maxes out his credit card so he can pay it all down and rake in the score bump. Every couple times he does this, they issue him an upgraded card with less limits: the cycle continues. Not a bad way to buy stuff if you have the means to pay it off.
- devoutsalsa 4y agoImagine the airline miles you’d get by purchasing Twitter on your credit card.
- k_sze 4y ago“Nobody’s gonna try to buy Twitter with a credit card, right?” “Nah.” “Alright, we don’t need BIGINT in the ‘balance’ column.”
- Sebb767 4y agoAs the saying goes: If I owe the bank one million dollars, I have a problem. If I owe the bank one billion dollars, the bank has a problem.
- metadat 4y agoWrong in this case. Here the bank can reclaim what is owed via other means.
- sangnoir 4y agoHaving to find "other means" to reclaim is exactly what makes it the banks problem. Do you think it's easy to get someone with access to billions of dollars (of your money) to do something they'd rather not? They can tie you up in the courts for years since they're basically equal powers: an $800 billion bank doesn't get better lawyers than a guy worth $1 billion. A bank vs someone with just a million dollars means the individual is at a major disadvantage as lawyer fees can easily exceed that amount in attritional lawfare.
- timmytimthetim 4y ago
- Sebb767 4y agoAlso, the reason the bank suddenly wants to reclaim that money might be that the wealth has vanished. If Tesla drops 99% for whatever reason, they will have a big problem getting their money back from stocks.
- sangnoir 4y agoThat's a great point: counterparty risk is a much bigger concern on a billion-dollar loan
- rasz 4y agoThe saying goes: "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem." and comes from 1976 "As I see it: the autobiography of J. Paul Getty". There were no billionaires back then. When you owe a bank 20 Billion while being worth 260 you are still in the first category.
- jack_pp 4y agoIt's about him defaulting on the loan which is not possible considering his shares in Tesla etc. not about him borrowing for investment purposes
- kurupt213 4y agoYou can default on a loan regardless of your net worth; you can even default on a secured loan. The default is what triggers the civil proceedings for a judgement and forced liquidation of assets
- colinmhayes 4y agoThere's a not totally unreasonable chance that tesla is 10x lower next year. That would mean his net worth is basically equivalent to the loan he would need. Seems pretty risky.
- mehrdada 4y agoWe don’t know the interest rate of that margin loan but you can be goddamn certain whoever underwrote the loan calculated that risk more precisely than HN crowd such that the rate justifies the default risk.
- accountofme 4y agoI have to disagree. It is about the risk of his counterparties. If their risk is deemed too high, they will start liquidating assets to get minimise their risk. Just look at what recently happened in the nickel markets on the London Metals Exchange when a Chinese Nickel Producer had a margin call against a $2bn short position. Tldr: the brokers liquidated their position due to the unnecessary risk of having a margin call over a weekend.
- conductr 4y agoBank: put that sweet sweet Tesla stock in this account and take what you want
- Apocryphon 4y agoInstead of the bank, what if he went to SoftBank. Imagine the possibilities of an Elon Musk-Masayoshi Son collaboration.
- gonzo 4y agoCould be like We Work, Greensill Capital, or Wirecard, or it could be like GoTo. Only one way to find out though.
- AlchemistCamp 4y agoIt could also be more like Alibaba and double or triple the 37B profit Softbank's Vision Fund made this year. I would not bet against Musk.
- darawk 4y agoIt's a secured loan. The bank doesn't care if it makes money or not.
- deleted 4y ago[deleted]
- CamperBob2 4y agoBank: "Do you want that in twenties, or fifties?"
- discodave 4y agoPretty sure that this filing shows he is $21 billion short on the borrowing front.
- Anon1096 4y agoThe other half of the money was borrowed against his stocks already. He probably can't get a favorable rate on the other half so 21 million is coming out of pocket.
- valleyjo 4y agoHe’s already borrowing 12.5B via a margin loan against his assets. Maybe that’s the most he can get away with.
- hackerfromthefu 4y agoInterested in a source for this?
- andreareina 4y agoIt's this para in TFA: > (ii) A separate debt commitment letter, dated April 20, 2022 (the “Margin Loan Commitment Letter”), from Morgan Stanley Senior Funding, Inc. and certain other financial institutions party thereto as commitment parties (collectively, the “Margin Loan Commitment Parties”) pursuant to which the Margin Loan Commitment Parties have committed to provide $12.5 billion in margin loans (the “Margin Loan Facility”), the proceeds of which will be distributed or otherwise made available to Purchaser; and The letter: https://www.sec.gov/Archives/edgar/data/1418091/000110465922048128/tm2213229d1_ex99-d.htm https://www.sec.gov/Archives/edgar/data/1418091/000110465922...