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The message over the past week has been pretty clear -- the rules change without notice and will be changed based on what pisses elon off. That make Twitter now

by AJ007 4y ago

The message over the past week has been pretty clear -- the rules change without notice and will be changed based on what pisses elon off. That make Twitter now a niche message board. All of the elaborate justifications and explanations for buying Twitter and what was going on wrong over there while it was public have been thrown out the window, no matter what your point of view was. The fact that this most recent one targeted nearly the entire user base across nearly every interest group is probably Twitter's equivalent event of what happened to Digg and Myspace. There may be nothing he can do now to reverse a network collapse. This should be a good thing, if the user base is able to migrant to open platforms. If they head back to Facebook and Instagram, then its a loss. Elon might be getting margin called on Tesla right now, which could wipe him out financially. That would go a long way to explaining the poor decision making.

cesarb 4y ago
> Twitter's equivalent event of what happened to Digg and Myspace. A closer equivalent might be what happened to Freenode.
stanleydrew 4y ago
> Elon might be getting margin called on Tesla right now, which could wipe him out financially. I don't think this is how margin calls work. Presuming your broker is properly managing risk, then a margin call is explicitly designed to not wipe you out financially. You have to put up more capital or sell positions in order to maintain a certain amount of equity in your account, and that required amount is never zero (again, if your broker/lender is managing risk properly). Of course it is a stressful situation, and he may need to sell assets at "unfavorable" prices which would effectively lock-in some reduced paper wealth. But I don't think a margin call is going to wipe him out.
- Eji1700 4y ago
  Depends on your definition of wiped out. In order to get the loans for this he wound up putting up a ton of Tesla stock. He won’t be poor, but he could possibly lose control of Tesla and likely by extension things like space x. He’ll likely never be poor but he’ll lose his relevance
  - stanleydrew 4y ago
    Fair. I guess I pedantically object to using the term "margin called" as a verb that implies it causes financial ruin. The margin call helps to avoid ruin. But you're right, if he had to sell so much TSLA to meet margin requirements that he lost control, that would be bad.
    - ceejayoz 4y ago
      > The margin call helps to avoid ruin. For the bank, yes. For the investor, not necessarily. https://www.investopedia.com/articles/investing/121515/how-short-sellers-account-went-negative-106k.asp https://www.investopedia.com/articles/investing/121515/how-s...
      - stanleydrew 4y ago
        This appears to be an example of a failed margin call. The broker should have closed out the customer's position sooner, to maintain margin requirements. It's interesting to think about the reasons that didn't happen in this case. But to be clear, the broker is very exposed in this situation. It reads like the customer is planning to cover the loss, but if a loss is big enough there's a strong incentive to declare bankruptcy and leave the broker with bad debt. Needless to say the broker doesn't want to be in the position of worrying about whether they will be on the hook for customers' losses. Which is why margin requirements exist.
- ketzo 4y ago
  Elon has personal loans made using Tesla stock as collateral. If he is asked to post more collateral on those loans, and the only way he can meet those calls is to sell even more huge amounts of Tesla stock (which is a significant “if”), then he’s going to drive the price of TSLA down non-trivially. (This, by the way, already happened once earlier this week.) Which could spur more margin calls on other loans, as his collateral (more Tesla stock) has devalued. It could spiral in a very nasty way, depending on how his personal finances and loans are structured, and how harshly the market views his fire-sale of TSLA.
- paulpauper 4y ago
  A margin call protects the broker/bank. The customer still loses everything.
- viknesh 4y ago
  Margin calls are designed to stop the broker from losing money, not the customer.
  - stanleydrew 4y ago
    The broker only loses money if the customer loses money though. So their interests are aligned. The broker doesn't want a customer to get wiped out, which is exactly the point of margin requirements.
deleted 4y ago
[deleted]

by AJ007 4y ago

cesarb 4y ago

> Twitter's equivalent event of what happened to Digg and Myspace. A closer equivalent might be what happened to Freenode.

stanleydrew 4y ago

> Elon might be getting margin called on Tesla right now, which could wipe him out financially. I don't think this is how margin calls work. Presuming your broker is properly managing risk, then a margin call is explicitly designed to not wipe you out financially. You have to put up more capital or sell positions in order to maintain a certain amount of equity in your account, and that required amount is never zero (again, if your broker/lender is managing risk properly). Of course it is a stressful situation, and he may need to sell assets at "unfavorable" prices which would effectively lock-in some reduced paper wealth. But I don't think a margin call is going to wipe him out.

Eji1700 4y ago
Depends on your definition of wiped out. In order to get the loans for this he wound up putting up a ton of Tesla stock. He won’t be poor, but he could possibly lose control of Tesla and likely by extension things like space x. He’ll likely never be poor but he’ll lose his relevance
- stanleydrew 4y ago
  Fair. I guess I pedantically object to using the term "margin called" as a verb that implies it causes financial ruin. The margin call helps to avoid ruin. But you're right, if he had to sell so much TSLA to meet margin requirements that he lost control, that would be bad.
  - ceejayoz 4y ago
    > The margin call helps to avoid ruin. For the bank, yes. For the investor, not necessarily. https://www.investopedia.com/articles/investing/121515/how-short-sellers-account-went-negative-106k.asp https://www.investopedia.com/articles/investing/121515/how-s...
    - stanleydrew 4y ago
      This appears to be an example of a failed margin call. The broker should have closed out the customer's position sooner, to maintain margin requirements. It's interesting to think about the reasons that didn't happen in this case. But to be clear, the broker is very exposed in this situation. It reads like the customer is planning to cover the loss, but if a loss is big enough there's a strong incentive to declare bankruptcy and leave the broker with bad debt. Needless to say the broker doesn't want to be in the position of worrying about whether they will be on the hook for customers' losses. Which is why margin requirements exist.
ketzo 4y ago
Elon has personal loans made using Tesla stock as collateral. If he is asked to post more collateral on those loans, and the only way he can meet those calls is to sell even more huge amounts of Tesla stock (which is a significant “if”), then he’s going to drive the price of TSLA down non-trivially. (This, by the way, already happened once earlier this week.) Which could spur more margin calls on other loans, as his collateral (more Tesla stock) has devalued. It could spiral in a very nasty way, depending on how his personal finances and loans are structured, and how harshly the market views his fire-sale of TSLA.
paulpauper 4y ago
A margin call protects the broker/bank. The customer still loses everything.
viknesh 4y ago
Margin calls are designed to stop the broker from losing money, not the customer.
- stanleydrew 4y ago
  The broker only loses money if the customer loses money though. So their interests are aligned. The broker doesn't want a customer to get wiped out, which is exactly the point of margin requirements.

deleted 4y ago

[deleted]