Elon Musk takes over Twitter

This is why banks require collateral.

If the value of Tesla stock drops dramatically, Morgan Stanley can be made whole by a margin call. And that would be a problem for Elon Musk, because for all the talk of his $250 billion (or whatever it is) net worth, that wealth isn't very liquid. If he can't sell pieces of his businesses himself to meet a margin call, instead of owning Tesla stock that has lost value, but still makes him a fabulously wealthy man, he potentially can lose the entire value of the stock he pledged. He is way overleveraged to anything negative happening. It goes beyond the bubble gum and bullshit he has employed in the past to get bailed out when he has written checks he couldn't cash. And really, this is an entirely different beast because the last time he was bailed out, it was by the federal government at all of our expense, combined with the Federal Reserve keeping his ability to borrow billions of dollars going and going by mispricing the debt markets. Maybe his luck continues. But if it doens't, Morgan Stanley is not going to eat tens of billions of dollars without a margin call. Then? It really is his problem as much as theirs.

 

What exactly is he evil, heinous stuff that Elon Musk or Mark Zuckerberg have done?

I would point out that one major difference between Elon Musk and Mark Zuckerberg is that Zuckerberg built a business that has been relatively debt free, growing impressively on the back of operating profits without government subsidization or endless borrowing. When there were questions about the viability of the business, Zuckerberg was nimble enough to transition to a mobile strategy that has kept the business very profitable, even if it no longer is growing the way a lot of people would like. Facebook earned $117 billion last year. Tesla earned less than $6 billion dollars last year, almost $1.5 billion of that from the sales of emissions credits, not from the sale of cars. And the company itself still has between $5 and $6 billion in long-term debt.

 

Not just more than it earned, but significantly more than it earned. And this is a guy who is relatively cash poor, so he can't reach into his couch cushions that easily to meet those interest payments -- unless something about how liquid he is, changes. He already had been funding his lifestyle with loans against the value of his Tesla stock, although he did a massive pump and dump (using Twitter) recently and sold a lot of his stock, so maybe it's not quite as dire for him as it would have been previously.

It all will work out fine if Tesla manages to stay a company that trades at 200+ times earnings. But htat requires distorted markets, which is completely in the hands of Jay Powell and a committee of monetary mandarins. They'd love to keep Elon Musk flush, because that is their purpose, but runaway inflation (which they caused) has thrown a crimp into things and now Musk is at the whim of them either letting inflation keeping running away without it bringing about an armed revolution, or consequently htem somehow being able to magically tame that inflation without popping the credit-induced bubble he has benefitted from.

 

That's hyperbole.

You can question if Tesla (and SpaceX) is worth the valuation it currentlygets. But comparing him to Donald Trump is absurd and the notion that he's worth $250+ billion today because of a dad he doesn't talk to isn't right.

Musk is a serial entrepren3ur. He made millions from selling zip2, which his dad had nothing to do with (it was funded by angel investors). And that led to him starting X.com, which became PayPal. Even though Musk himself was running the company into the ground before they replaced him with Peter Theil, who put the focus on PayPal, Musk became fabulously wealthy when eBay bought PayPal.

Donald Trump has never actually created anything that anyone wanted to buy from him for anywhere near that kind of money.