Elon Musk warns against margin debt amid risk of ‘mass market panic’

SpaceX CEO Elon Musk at the 2022 Met Gala.

  • Elon Musk issued a warning about borrowing against the value of the securities we own due to the risk of “mass panic” in the stock market.
  • The Tesla CEO pumped in billions of his own money when he bought Twitter for $44 billion earlier this year and saddled the company with $13 billion in debt.
  • Musk’s bankers are considering replacing some of the high-interest debt he put on Twitter with new margin loans backed by Tesla stock.
  • For more financial news, go to News24 company front page.

Billionaire Elon Musk warns of something he has done himself – borrowing against the value of the securities one owns – because of the risk of “mass panic” in the stock market.

“I would really advise people not to have margin debt in a volatile stock market and you know, from a cash standpoint, keep your dust dry,” Musk told the All in podcast published Friday. “You can make some pretty extreme things happen in a bear market.”

The Tesla CEO invested billions of his own money when he bought Twitter for $44 billion earlier this year and saddled the company with $13 billion in debt.

READ | Twitter users vote for Elon Musk to step down as CEO

Bloomberg News has reported that Musk’s bankers are considering replacing some of the high-interest debt he put on Twitter with new margin loans backed by Tesla stock that he would be personally responsible for paying back.

It also disposed of nearly $40 billion of Tesla stock, a move that helped push the stock to a two-year low. After the latest sales, Musk said again this week that he will stop selling shares, adding that the hiatus could last about two years.

READ | OPINION | Elon Musk has a ‘super bad feeling’. Should everyone do it?

The warning, at least Musk’s second this month, is ironic given that the billionaire has already pledged his Tesla shares. As of December 2020, Musk had 92 million Tesla shares pledged as collateral, according to an April 2022 SEC filing.

During the podcast, Musk also reiterated his belief that the economy is due for a recession and that the slowdown could be similar in scale to that seen in 2009.

“My best guess is that we have storm weather for a year to a year and a half, and then dawn in about the second quarter of 2024, that’s my best guess,” Musk said. “Booms don’t last forever, but neither do recessions.”

Leave a Reply

Your email address will not be published. Required fields are marked *