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.
Bank: 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.
> 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.
The credit score system is really about incentivizing you to get, use, and keep credit cards, including retail credit cards, and loans, i.e. take on debt.
The fact that so many things require a high credit score is a forcing function for you to take on these debt instruments, and the credit score is a way for the system to optimize that it get its money.
The entire system is gamed against the consumers unwittingly or unwillingly forced to participate.
Your credit score is higher if you pay off your credit card in full every month. Although, yes, it does reward having multiple cards with a high limit.
As 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.
> regularly maxes out his credit card so he can pay it all down and rake in the score bump
Does it really?
I have a very high credit score but putting a large charge on one credit card (nowhere close to maxing it out though) dramatically drops my credit score for one month until I pay it off in full at the end of the month.
I pay my child's tuition in full for the year each August (school in California is way too expensive so it's a lot of money, but that's a different topic). I put it on the credit card to get some cash back. My credit score drops by about 150 points right away. Once I get the bill at the end of the cycle and pay it off, the credit score goes right back to where it was before. I don't get any bump though.
I 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
Once 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.
I can only get loans from my private bank because my credit score is bad. I only borrow on margin foe trading I don't really need other debt but it's embarrassing
"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.
Having 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.
Also, 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.
Musk'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.
No 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.
If 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.
You 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.
There'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.
We 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.
You 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
I 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.
The 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.
> (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
