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Tesla: Elon Musk Borrowing Update – Tesla, Inc. (NASDAQ: TSLA)



Last April I published an article detailing how Eles Musk, CEO of Tesla (TSLA), significantly increased his personal influence. While holding well over 30 million shares in the company, many of these shares have been pledged as collateral for personal loans. Last Friday, the company released an annual deposit that allows us to further investigate the situation.

Let me briefly review the other important news released late last week. After the market closed on Friday, Tesla issued an 8K submission that four of its directors will not stand for re-election if their term ends in the next few years. There has been a lot of criticism regarding the board and its relationship with Musk, so maybe a bit of big sales will change.

That brings me to the power of attorney also published on Friday. See page 72 of the document for a list of key holdings and their positions. Musk holds the largest stake in the company (21.7% of the shares). The following note is attached to its position:

Contains ("I") 33,824,680 shares held by the Elon Musk Revocable Trust of July 22, 2003; and ("II") 4,748,110 shares that may be issued to Mr. Musk upon exercise of options exercisable within 60 days of 31 December 2018. Including 13,394,056 shares pledged as collateral to cover a specific personal debt.

Unfortunately, we only get this data once a year and it's been delayed by more than four and a half months since the end of the year. However, by tracking these elements, we can get an idea of ​​how things have changed over time. In the following table I have described in detail the history of Musk's positions, followed by the presentation of the most important elements in diagram form over this period.



* Based on the year-end price. Data comes from Tesla proxy applications.





If you just look at the number of security pledged stocks, you might be pleased to see the number drop from around 2017 by the end of 2018 by around 380,000 shares, nearly 2.8%. However, Tesla shares rebounded more than US $ 21 over the course of 2018, an increase of nearly 6.9%. This means that the market value of the pledged shares rose by nearly $ 170 million, an increase of nearly 4%. As the last chart above shows, the market value of committed shares is now over $ 4.45 billion, the highest level at the year-end.

Unfortunately, like all Tesla shareholders, Mr. Musk's share price has fallen nearly $ 60 a year, nearly 18%, as the graph below shows. Assuming that the market value of the borrowed shares has remained the same, this would mean that the amount pledged as collateral should rise to more than 16.31 million based on Thursday's closing price. That would be an increase of almost 22%, almost 3 million additional shares that would have to be pledged and of course everything else would be the same.



(Source: Yahoo Finance)

Regardless of your opinion on Tesla, the heavily indebted character of musk is a great risk factor to consider in detail in the 10-K deposit , Musk's increasing borrowing to fund its other ventures could lead to a sizeable margin on a sharp decline in Tesla shares, forcing Musk to sell millions of shares, leading to a downward spiral. I'll be back in the next few days to get an overview of Tesla's earnings report, which could have a big impact on what Tesla's stock does for the remainder of this year.

Disclosure: I / we have no positions in the above stocks and no plans to create positions within the next 72 hours. I wrote this article myself, and it expresses my own opinion. I can not get any compensation for it (except from Seeking Alpha). I have no business relationship with a company whose shares are mentioned in this article.

Additional information: Additional information from the author: Investors are always reminded that investors should always make their own due diligence before investing directly or indirectly in this article. Investors should also consider consulting with a broker or financial adviser before making investment decisions. Any material in this article should be considered as general information rather than a formal investment recommendation.


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