Elon Musk’s feud with Tesla shorts is not business, it’s just personal.
After lashing out at some vast, anti-Tesla conspiracy (technically, he has a point, Tesla is the most shorted US stock for good reason) in the aftermath of last week’s earnings bizarre conference debacle Musk first warned shorts that “oh and uh short burn of the century comin soon. Flamethrowers should arrive just in time“, then followed it up just hours later with another taunt on the coming short squeeze which “Looks like sooner than expected. The sheer magnitude of short carnage will be unreal. If you’re short, I suggest tiptoeing quietly to the exit”…
Looks like sooner than expected. The sheer magnitude of short carnage will be unreal. If you’re short, I suggest tiptoeing quietly to the exit … https://t.co/A0Q90pSLKA
— Elon Musk (@elonmusk) May 5, 2018
… on Monday afternoon, Musk decided to triple down, and has putting money where his trash-talking mouth is, revealing that on Monday he bought about $9.85 million worth of Tesla shares on Monday…
… his biggest purchase since March 2017.
Musk’s aggressive purchases which were surely leaked by the buying desk probably explains the wide intraday divergence between Tesla’s equity and its bonds: because while Musk was buying TSLA stock, he forgot to “dip his toe” in the company’s increasingly more distressed bonds.
For Musk, who is already Tesla’s largest shareholder with a stake approaching 20%, the Monday purchase was merely theatrical, and meant to strike fear among the shorts. The only question is whether it was funded with yet more margin loans from Morgan Stanley, as some humorously asked.
The long anticipated $tsla squeeze was Musk buying his own stock with margin loan? Almighty then.
— George Choumarov (@gchoumarov) May 7, 2018
Incidentally, this is not a joke: Elon Musk has personally borrowed $624 million in loans from various investment banks – first mostly Goldman, then mostly Morgan Stanley – as of a year ago to buy Tesla stock. And as we calculated last week, if one factors in his Boring investment as well as various other “sundry expenses”, the next public disclosure will likely have Musk at around $800MM in personal borrowings from banks…
… which as discussed last week, when applying to new collateral requirements instituted by Tesla’s Board, would require some $3.2B worth of stock. And with 13.775M Tesla shares pledged…
… that implies that at a share price below $232.30 (assuming a current balance of $800 million), Musk would face either a margin call or the need to post additional shares as collateral. (For context, in April, the stock dipped as low as the $244s). For more details please read “Will Elon Musk Be the Next CEO to Face A Margin Call Death-Spiral?”
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