Elon Musk may be forced to sell shares previously pledged to secure certain personal loans, should Tesla stock continue to decline.
As pointed out by several online commentators, Musk is currently close to facing a margin call on the loans used to facilitate his 2022 purchase of Twitter.
Tesla shares were changing hands at $225.31 ahead of Wednesday’s market opening. The stock is down 41 percent since the start of the year, 47 percent since Trump’s inauguration, and 38 percent in the past month.
Newsweek has contacted Tesla via email for comment.
Why It Matters
The electric vehicle giant rode a postelection rally to hit an all-time high in mid-December. Since that time, however, Tesla has been battling weak global sales, increased competition in the EV space, as well as protests and boycotts sparked by the CEOs involvement in the Trump administration and Department of Government Efficiency (DOGE).
Should Musk be forced to sell some of his shares to cover his personal loans, this could cause Tesla’s stock to decline further, as the company has warned previously.
What To Know
A margin call occurs when a borrower no longer has enough equity to meet the broker’s minimum requirements. In Musk’s case, the price of Tesla stock used as collateral would fall below a certain price point, at which point he would be forced by the broker to either deposit more funds or liquidate assets—such as his holdings in Tesla or his other companies—to bring the account back to the required level.
Musk financed his $44 billion acquisition of Twitter, now X, utilizing a mix of personal bank loans, subordinated debt, personal cash and equity contributions from independent investors, according to reports at the time.
Saul Loeb/AFP via Getty Images
According to a 2024 Tesla filing with the Securities and Exchange Commission (SEC), Musk has pledged 238.4 million shares “as collateral to secure certain personal indebtedness.” At the time, Musk held a total of 715.0 million shares, meaning approximately one-third were being used as collateral for personal loans.
Musk currently owns around 411 million shares in Tesla, according to portfolio management service Whalewisdom, equating to a roughly 12.8 percent stake in the company.
It is currently unclear how many of Musk’s shares are currently collateralized, the loan-to-value ratio agreed by lenders, and how far Tesla stock would need to fall for him to face a margin call.
In late March 2024, the time of Tesla’s SEC filing, Tesla’s share price stood at around $180, per Yahoo Finance.
According to certain reports, Tesla’s stock would have to decline to $114 for Musk to face margin calls on these loans, equating to a 50 percent drop from its current price and below the minimum price targets currently set by analysts.
What People Are Saying
Attorney and legal commentator Tristan Snell, via X: “Elon Musk’s purchase of Twitter was financed by borrowing money. He used his Tesla stock as collateral. If Tesla stock keeps crashing, the banks/creditors could repossess Twitter.”
Independent journalist Will Lockett recently wrote that, should Musk face a margin call, “he would either need to be bailed out by a private investor or let the banks liquidate the assets” of his companies, including Tesla, SpaceX and X.
Tesla, in its 2022 annual SEC filing, said: “If Elon Musk were forced to sell shares of our common stock, either that he has pledged to secure certain personal loan obligations, or in satisfaction of other obligations, such sales could cause our stock price to decline.”
The company added: “We are not a party to these loans, which are partially secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk. If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further.”
What Happens Next?
Despite slowing sales and weak stock performance, many analysts remain bullish on Tesla. In a recent note referenced by Investing.com, Morgan Stanley analysts expressed confidence that the company is well positioned to capture a substantial share of the expanding market for autonomous vehicles and AI-driven robotics.
Analyst price targets for Tesla, compiled by Yahoo Finance, currently range between $120 and $550, with an average of $340.25.
