TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

Elon's cash flow/liquidity

Discussion in 'TSLA Investor Discussions' started by pairtrader, Jan 16, 2015.

  1. pairtrader

    pairtrader Member

    Joined:
    Jan 26, 2014
    Messages:
    204
    Location:
    Vancouver
    #1 pairtrader, Jan 16, 2015
    Last edited: Jan 16, 2015
    To some, this may seem like an odd question, so my apologies in advance, but every time I hear about Elon donating/spending many millions of dollars, I can't help but wonder where he's getting the cash.

    It's been widely reported that Elon sank everything he had into his companies during the 08/09 financial crisis. He also reportedly borrowed the $100M to participate in the $92 TSLA share offering some time ago. Obviously he is worth billions on paper, but he has said that he will be the last person to sell shares of Tesla. I would assume that he did sell some shares at the IPO, which I will look into as it is public info, but that cash should be long gone. Has he sold some of his stake in SpaceX or SolarCity? Is he pulling a substantial salary from these that I'm not aware of (small salary at Tesla)? Where would he get the cash for a $17M house, $16M divorce (part cash), a quick mil for the Tesla museum (land) and now a $10M donation to the Future of Life Institute, without receiving dividends from his investments?

    The easy answer would be that he has an enormous line of credit backed by his assets, but what kind of cash flow does he generate to service it? I may just be completely missing something.

    I'm considering purchasing some TSLA shares if the slide continues and sentiment becomes sufficiently negative, but I do think Elon's personal finances matter when he is inextricably linked to his companies for the foreseeable future.
     
  2. Ingenieur

    Ingenieur Member

    Joined:
    Aug 31, 2013
    Messages:
    189
    Location:
    Deutschland
    He doesnt really need to sell to get money, for example he may make a zero delta option transaction for some of his holdings(basicly eliminating any volatility out their value, then borrowing against its value) So he still owns it but has no up- or downside risk (close to zero) and or some kind collar.
    Lots of way to get money without selling.

    Not sure about disclosure laws in US
     
  3. dha

    dha Member

    Joined:
    Jul 18, 2013
    Messages:
    475
    Location:
    Los Angeles
    As of May 2013, it seems that Elon had a margin loan of totalling $275 million from Goldman: Elon Musk Borrows $150 Million To Buy Tesla - Business Insider

    As you mentioned, a good chunk of that went toward purchasing more shares in that secondary offering, but I wouldn't be surprised if he's borrowing against his holdings to pay for his family's living expenses and other endeavors such as the museum.
     
  4. Cosmacelf

    Cosmacelf Active Member

    Joined:
    Mar 6, 2013
    Messages:
    3,399
    Location:
    San Diego
    Yes, most likely he is simply borrowing money and using Tesla stock as collateral. It isn't something I personally would do, since Goldman will end up owning Elon's shares should something really bad happen to the stock price, but Elon has never been a person to shirk away from risks. High risk, high reward.

    And Btw, this does open up the possibility of forced sales of Tesla stock should the stock price tank. Goldman will sell Elon's Tesla stock should the price get anywhere near the loan value...

    It is also possible he is using SpaceX as collateral instead and/or a mixture of both.
     
  5. uselesslogin

    uselesslogin Enthusiast

    Joined:
    Jun 13, 2013
    Messages:
    1,299
    Location:
    Omaha, NE
    He has SpaceX which claims to be "profitable and cash-flow positive." Maybe he gets a salary there but who knows it is private.
    Company | SpaceX

    That being said, he has already demonstrated he will spend his last penny on businesses that have little chance of success. So, who knows, he might need to sell shares to keep his struggling Hyperloop company alive in the future.
     
  6. SteveG3

    SteveG3 Active Member

    Joined:
    Sep 21, 2012
    Messages:
    1,671
    Location:
    US
    while I don't know the mechanism of Elon's loan, think about this in round numbers just for context. if Elon borrowed $300 million using only Tesla stock as collateral, and he owns about 25% of Tesla, there would have to be a drop to about $10 a share (roughly $1.3 billion market cap) before Elon's holdings in Tesla would start to fall near the value of what he's borrowed. If TSLA is at $10, I think we have bigger concerns than a possible margin call for Elon.
     
  7. clmason

    clmason Member

    Joined:
    Sep 29, 2011
    Messages:
    401
    Location:
    San Diego
    I have wondered if brother Kimbal is Elon's insurance policy. Kimbal is placed on all his company boards and he owns a large number of shares that he sells regularly. While i'm sure Elon's credit runs very deep, having a bro with millions who can liquidate is a nice setup.
     
  8. Cal1

    Cal1 Member

    Joined:
    Sep 22, 2013
    Messages:
    176
    Location:
    Battle Ground WA
    So for non financial types, how do you run a company on negative cash flow? Never understood where the $ comes from to pay employees, suppliers, etc. Tesla doesn't print $ and it's my impression that they are not bringing enough to service debt/obligations.
     
  9. Cosmacelf

    Cosmacelf Active Member

    Joined:
    Mar 6, 2013
    Messages:
    3,399
    Location:
    San Diego
    Who said Tesla was negative cash flow? They are negative GAAP, but that includes non cash expenses like depreciation and stock compensation.
     
  10. RobStark

    RobStark Active Member

    Joined:
    Jul 2, 2013
    Messages:
    2,909
    Location:
    Los Angeles
    They also put in significant amounts of monies into reserves to account for the buyback guarantee.


    Elon has said Tesla will be strongly cash flow positive by Q3 2015.
     
  11. KD5MDK

    KD5MDK Member

    Joined:
    Oct 8, 2012
    Messages:
    41
    Location:
    Longhorn Country
    They use the money in the bank they got from their investors, or commercial loans they obtained from banks.
     

Share This Page