https://mobile.twitter.com/unusual_whales/status/14462517624...
So he takes out a $1 billion loan, and he offers $1 billion in stock as a security, and then also buys a futures contract (or a put option) on his $1 billion of stock to lock in the current price, so if the stock goes down in value over the life of the loan, the lender doesn't lose their security? And then when the loan falls due, he refinances – get a new loan using the same mechanism, and use it to repay the existing one? And he doesn't owe capital gains tax on the stock he uses as security, because he doesn't actually sell it?
I suppose though, you can't just go on refinancing forever. One day he will die, and then it will have to come out of his estate, and I guess his estate may pay the capital gains tax then? So it is really delaying paying tax, rather than getting out of it forever?
Unless, I suppose, he leaves the stock to a trust in his will, and transfers the loan to the trust too, and then the trust can continue this process long after he is gone? And maybe, if it is a charitable trust, even use some charitable tax exemption to get out of paying the tax permanently?
If it's hedged you actually don't have any upside so you will always be 'underwater' on the loan assuming >0 interest rate.
If interest rates were higher, it probably wouldn't make sense to do this endless loan trick[1]. Say you get charged 5% on this loan or you could pay 30% cap gains. It would only take 5 years for the interest payments to outstrip the upfront hit on the tax.
1. This is very simplistic though, as likely the $1bn would be invested in some way that would kick off some return, probably enough to cover the interest.
This is the best part. The cost basis for assets is stepped up on death to the price of the asset on the day that the decedent .. became the decedent. That becomes the cost basis for any capital gains tax the heir would owe if they sold the asset.
All this adds up to zero capital gains taxes being paid ever on the entire amount.
That being said, the estate tax would kick in for everything over 11m, so he'd have to use other tricks to work around that limitation.
The simplest reason for moving is avoiding billions of dollars in California state income taxes.
Who knows. But the biggest fundamental problem for California here honestly is geography: Boca Chica is the best single land based potential BEO spaceport in the continental US, simple as that. That's why SpaceX is there. As close to the equator as they can get, with a lot of water in front of most of the launch paths they want, and no urban buildup there. For the small percentage of polar orbits they'll want to do there will remain Vandenberg, or eventually converted oil rigs for sea launch, but the vast majority of SpaceX's cadence for the foreseeable future will be Starship going to more standard orbits where the bulk of Starlink will exist or eventually beyond Earth's orbit for trips to Mars.
Sure taxes and all the typical rigamarole that typically comes up in these discussions might have weighed a little one way or another, and in the vast majority of CEO/HQ moves weigh quite a bit. But to the extent that SpaceX is the biggest guiding unified dream of Elon Musk, and given the constraints of logistics, economics and the physics of orbital launch, it basically had to be there. Which means he has to be there. Which means it's a lot easier even for someone with a private jet if the HQ of his other big enterprise is around 300mi away nearly due north in the same TZ vs ~1650mi west.
If for some reason the jobs situation and housing was just perfectly impossible in Texas maybe he would have sucked it up but even then I doubt it given his (and Tesla's) resources. At the end of the day like everyone else he can't buy more than 24 hours in a day. He can buy more efficient use of them.
https://www.houstonchronicle.com/business/article/Elon-Musk-...
They have big expansion plans and most of that is outside of California. So, I'd say this is a good move for them. They no longer need the Bay Area investors. That was always the main reason for being there. It was critical to them just a few years ago when they were struggling to survive. But they turned a corner and are now very profitable so they can cut loose from that safely.
Tesla is now a multinational and while California is still an important market for it, they have bigger markets that they are thinking about now where they are starting to operate huge factories as well. Fremont went from being the largest Tesla factory to being one of the older and smaller ones in a few years.
You might want to tell Tesla that. They just added a ton of office space in Palo Alto: https://www.mercurynews.com/2021/10/08/tesla-agrees-to-big-o...