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Will Elon Musk Be the Next CEO to Face A Margin Call Death-Spiral?


Submitted by Mark B. Spiegel of Stanphyl Capital Management

In the annals of CEO margin-call history, among the most infamous are Worldcom’s Bernie Ebbers, Chesapeake’s Aubrey McLendon and Steinhoff's Christo Wiese. Is Tesla CEO Elon Musk on the path to joining them?

Although it’s been known for years that Musk borrows hundreds of millions of dollars against his Tesla shares to support his expensive jet-setting lifestyle of spectacular homes, actresses and planes (not to mention child support), there was a new development buried in Thursday’s release of the annual Tesla proxy statement:

…directors and executive officers may pledge their Company stock…as collateral for loans and investments, provided that the maximum aggregate loan or investment amount collateralized by such pledged stock does not exceed twenty-five percent (25%) of the total value of the pledged stock.

Yes, Musk’s loans are now limited to 25% of the value of the pledged stock, a policy that seemingly did not exist when last year’s proxy was issued.

So how much money are we talking about here? The most recent figure we have for the value of Musk’s margin loans comes from the registration statement for Tesla’s March 2017 stock sale, in which on p. S-9 it notes that he (at that time) owed a total of $624.3 million to various financial institutions, with the largest amount ($344.4 million) owed to Morgan Stanley whose Tesla analyst Adam Jonas has—coincidently or not—lately been desperately conceiving of increasingly fantastical reasons to maintain a TSLA price target of $376 despite steadily slashing his estimates as one “justification” after another for that target evaporates into the realities of Tesla’s massive cash burn and technological backsliding.



https://www.zerohedge.com/news/2018-04-28/will-elon-musk-be-next-ceo-face-margin-call-death-spiral


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