Hacker News Reader

Comment by redox99 | Hacker News Reader

I don't understand the relation with TSLA.

There's a margin on TSLA stock at $112 or $115; Like some other commentator said as well - he collateralled TSLA stock to take a loan to buy Twitter.

his margin call level is not public right?

> his margin call level is not public right?

But you do know “things” have a way to find path to get in public :-). Also, as stated in the following article, Tesla filed with SEC how much of stock was used and you can use the timing to find the stock price during the period of acquisition.

https://www.newsweek.com/elon-musk-facing-margin-call-tesla-...

What happens if you collateral a stock for loan and the stock somehow becomes worthless?

Same thing that happens if you put up any kind of collateral that later becomes worthless: the lender doesn't get their money. That's the risk of collateral.

This is why mortgage lenders require you to maintain insurance on your property: if the house burns down or something, the lender still wants that money. If a house gets destroyed in a way that's not covered by insurance (say, by an earthquake in California, where most people don't have earthquake insurance), then the lender loses their money. (The former homeowner probably stops payments and gets their credit ruined.)

I’m not an expert in this but as far as I can tell there will never be a margin call. There’s only a margin call if he defaulted on his loans. All the banks will do is ask to restructure the loan to compensate for the loss in the collateral.

Further, it’s just $6bn which musk can easily cover.

> The funding included $7 billion of senior secured bank loans; $6 billion in subordinated debt; $6.25 billion in bank loans to Musk personally, secured by $62.5 billion of his Tesla stock; $20 billion in cash equity from Musk, to be provided by sales of Tesla stock and other assets; and $7.1 billion in equity from 19 independent investors.

https://en.wikipedia.org/wiki/Acquisition_of_Twitter_by_Elon...

Musk leveraged TSLA stock to buy Twitter.

Elon sold 19B in stock, took a loan for 6.25B, and the rest was other investors.

The 6.25B loan, assuming he still has it, is really not an issue considering his net worth. He can add more collateral or sell a bit. In fact TSLA stock is higher now than when he bought Twitter.

"Net Worth" can be misleading.

Wikipedia say Musk has repeatedly described himself as "cash poor" -- most of his worth are not in cash.

How much of his net worth are in $TSLA?

Reply on news.ycombinator.com