It is very rare for Elon Musk to apologize.
Tesla CEO (TSLA) – Get a free reportSpaceX and Twitter rarely admit a mea culpa.
Admitting mistakes is not part of his repertoire. In a recent example, Musk retweeted an article from the Santa Monica Observer, which attributed a violent attack on Paul Pelosi, the husband of House Speaker Nancy Pelosi, to a conspiracy theory.
The Santa Monica Observer is known for running false information on multiple occasions, including a story about Hillary Clinton’s death and her body double being sent to debate Donald Trump during one of the 2016 presidential debates.
Musk deleted the tweet but never publicly apologized.
He is sure of his influence and his power. The richest man in the world and boss of a multitude of companies never backs down even when he has made a mistake.
It is often the opposite. Musk likes to counterattack. He has followed this strategy since he took control of Twitter, the public square of our time.
He strikes hard against those he considers his enemies or his adversaries: the Democrats, the partisans of awakened culture, the press, the giants of Silicon Valley. According to him, what these supposed enemies have in common is that they oppose freedom of expression, of which he describes himself as an “absolutist” defender.
He did not hesitate to mock the media coverage of his first actions as the boss of Twitter. Musk is looking for new sources of revenue to make the platform profitable as soon as possible.
The problem he has now is that he went into debt to the tune of $13 billion to finance the acquisition of the platform. It was a margin loan, where he pledged some of his Tesla shares.
The way a margin loan works is that once the value of the collateral decreases relative to the amount borrowed, the borrower must post additional collateral to make up the difference.
“Avoid using margin loans”
As it took six months to finalize the purchase of Twitter, it is not easy to determine when the loan was finalized between May, when negotiations for the acquisition of Twitter began, and October, when the acquisition was closed. finalized. During this period, Tesla shares traded above $200, reaching as high as $317.54 on May 4. What is certain is that, with the share price closing at $179.05 on December 9, the collateral shares lost approximately between 10% and 40%. of their value, possibly requiring Musk to post additional collateral to compensate for the decline in value.
According to Bloomberg News, his advisers are pressuring him to use his Tesla shares as collateral for new loans to replace Twitter’s debt. Musk’s bankers are considering replacing some of the high-interest debt he took on on Twitter with new margin loans backed by Tesla stock that he would be personally responsible for repaying. Discussions so far have centered on how to refinance $3 billion in unsecured debt on which Twitter is paying an interest rate of 11.75%.
It is in this context that the tech mogul has just made a rare confession and expressed his regrets. Musk has hinted that he should never have taken out a margin loan on his Tesla shares because, regardless of the group’s long-term potential, in an uncertain economic environment, the stock’s value is likely to fall short term.
“When macro risks exist, it’s generally wise to avoid using margin loans on a business,” the billionaire said on Twitter Dec. 8. “As stocks can move in ways decoupled from their long-term potential.”
The tweet suggests that even companies with strong fundamentals like Tesla aren’t immune in times of economic uncertainty, as is the case today. Investors tend to give in to fear and panic, which leads to a massive sell-off in stocks, regardless of how strong the company is.
Musk therefore seems to advise against taking out a margin loan during such times. In doing so, he seems to express his regret that he did it himself.
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