Here are some speculation as to alternative mechanisms to help Elon raise the cash without exercising his options or selling his stock (and thus mitigating the tax hit he might take in such a sale):
I revisited the June 12, 2012 form 10-Q from Tesla to revisit Elon's option package and ownership interest at the time. Based on what I found, it seemed as if Elon had a total ownership potential of 29% in Tesla. 20% is through options and 9% is through direct investment. (Anyone out there care to double check this for me?)
The direct ownership at today's market cap would be valued at about $810,000,000. What if Elon decided to pledge $465,000,000 of that direct ownership interest as collateral and worked with Goldman Sachs (who in the past has loaned him funds based on his ownership in Tesla, also detailed in the 10-Q). In turn, GS would give him a low interest loan and he would provide cash to Tesla to completely pay off the DOE loan and get a huge monkey off his and Tesla's back. From a tax standpoint, it might make sense for him to do a loan rather than an outright sale. Long-Term capital gains rates are around 23% now with the Medicare surcharge. Given today's interest rate environment, he might be able to get a loan rate in the 4% or so range.
By my calculations, over the past few months, Elon's stake in Tesla (assuming he has 29% of the company) has gone from about $1,160,000 to $2,610,000. Also his stake in Solar City has increased tremendously as well. He could be feeling quite flush with cash right now and based on his longer-term aspirations, paying of the DOE loan would be a way to continue moving Tesla forward. It would no longer have the interest and principle payments due to the DOE. Also I think in terms of market cap and hurting the shorts, it would push the stock higher, especially if Elon could engineer it so he doesn't have to sell shares on the open market or have to do a private placement to raise the cash. This is a WAG, but I estimate that Elon's personal net worth due to his ownership in Tesla, Solar City and SpaceX to be in the neighborhood now north of $5b. At that lofty net worth figure, $465,000,000 would not be a big stretch for him to come up with.
If he found it difficult to get a $465m private loan, he could do some combination of private placement sale and a personal loan to pay off some or all of the DOE loan.
Also forgive my ignorance here, but I'm not even sure if it's legal for an individual shareholder in publicly traded company (even if it is one of the primary owners) to simply give the company money to pay off a loan without an exchange of equity or debt.
There is speculation that he could exercise his options to give the company the cash that way, but it doesn't seem like the math would work out to pay off the DOE loan in that kind of transaction. Plus, to retain the greatest ownership interest it seems as if using his direct ownership shares (whether they be pledged as collateral or transferred in a private placement) would be the most efficient way for him to keep his maximum ownership interest. Ex. If he has options priced at $31 a share, his net cash out (Before taxes) from them at $80 would be $49 a share. But his direct ownerships shares would net out (before taxes) $80. Thus he would not need to sell or pledge as many direct ownership shares to generate the same amount of cash.
I revisited the June 12, 2012 form 10-Q from Tesla to revisit Elon's option package and ownership interest at the time. Based on what I found, it seemed as if Elon had a total ownership potential of 29% in Tesla. 20% is through options and 9% is through direct investment. (Anyone out there care to double check this for me?)
The direct ownership at today's market cap would be valued at about $810,000,000. What if Elon decided to pledge $465,000,000 of that direct ownership interest as collateral and worked with Goldman Sachs (who in the past has loaned him funds based on his ownership in Tesla, also detailed in the 10-Q). In turn, GS would give him a low interest loan and he would provide cash to Tesla to completely pay off the DOE loan and get a huge monkey off his and Tesla's back. From a tax standpoint, it might make sense for him to do a loan rather than an outright sale. Long-Term capital gains rates are around 23% now with the Medicare surcharge. Given today's interest rate environment, he might be able to get a loan rate in the 4% or so range.
By my calculations, over the past few months, Elon's stake in Tesla (assuming he has 29% of the company) has gone from about $1,160,000 to $2,610,000. Also his stake in Solar City has increased tremendously as well. He could be feeling quite flush with cash right now and based on his longer-term aspirations, paying of the DOE loan would be a way to continue moving Tesla forward. It would no longer have the interest and principle payments due to the DOE. Also I think in terms of market cap and hurting the shorts, it would push the stock higher, especially if Elon could engineer it so he doesn't have to sell shares on the open market or have to do a private placement to raise the cash. This is a WAG, but I estimate that Elon's personal net worth due to his ownership in Tesla, Solar City and SpaceX to be in the neighborhood now north of $5b. At that lofty net worth figure, $465,000,000 would not be a big stretch for him to come up with.
If he found it difficult to get a $465m private loan, he could do some combination of private placement sale and a personal loan to pay off some or all of the DOE loan.
Also forgive my ignorance here, but I'm not even sure if it's legal for an individual shareholder in publicly traded company (even if it is one of the primary owners) to simply give the company money to pay off a loan without an exchange of equity or debt.
There is speculation that he could exercise his options to give the company the cash that way, but it doesn't seem like the math would work out to pay off the DOE loan in that kind of transaction. Plus, to retain the greatest ownership interest it seems as if using his direct ownership shares (whether they be pledged as collateral or transferred in a private placement) would be the most efficient way for him to keep his maximum ownership interest. Ex. If he has options priced at $31 a share, his net cash out (Before taxes) from them at $80 would be $49 a share. But his direct ownerships shares would net out (before taxes) $80. Thus he would not need to sell or pledge as many direct ownership shares to generate the same amount of cash.
Last edited:
