Elon Musk warns of margin debt over the risk of a ‘mass panic’ in the market

SpaceX CEO Elon Musk at the 2022 Met Gala.

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

Billionaire Elon Musk has warned against something he has done himself – borrowing against the value of his own securities – because of the risk of a “panic” in stock markets.

“I would really advise people not to have margin debt in a volatile stock market, and you know, from a cash standpoint, keep the powder dry,” Musk said in the Everything in it Podcast released on Friday. “Some pretty extreme things can happen in a declining market.”

The Tesla CEO raised billions of his own money when he bought Twitter for $44 billion earlier this year, leaving the company $13 billion in debt.

READ | Twitter users vote for Elon Musk’s resignation as CEO

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

He also sold nearly $40 billion worth of Tesla stock, a move that helped propel the stock to a two-year low. Following the recent selling, Musk said again this week that he would stop selling shares, adding that the hiatus could last about two years.

READ | OPINION | Elon Musk has a “super bad feeling”. Should everyone?

The warning, at least Musk’s second this month, is tongue-in-cheek as the billionaire has previously pawned his Tesla shares. Musk had pledged 92 million Tesla shares as collateral as of December 2020, according to an April 2022 SEC filing.

During the podcast, Musk also reiterated his belief that a recession is overdue for the economy and that the slowdown could resemble the magnitude of 2009.

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

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