Elon Musk sells his real estate: naked or crazy?

The billionaire made it known that his partner, artist Grimes, does not find the abrupt change in a particularly fun ascetic lifestyle (“My friend @Grimezsz is mad at me”). Obviously, this could not stop him, even though he himself is “a little sad” about the loss of property. Musk justifies his decision to sell by saying that ownership is a burden. “I don’t need the money. I am dedicated to Mars and Earth.”

The “Wall Street Journal” suggests another explanation for the 48-year-old man’s earthly property exemption: the businessman is rich in paper, but still has little cash. Because Musk’s assets of approximately $ 39 billion consist primarily of his stake in Tesla and the space company SpaceX. Its around 20 percent of Tesla’s shares are the decisive lever to maintain control over the electronic car maker.

Against the rules

It wasn’t until Monday night that a dispute with the state of California escalated. He wants to restart the main plant immediately and will be on the production line himself, Musk wrote on Twitter on Monday. “If someone is arrested, I will ask that it be just me.”

Alameda County, where the Tesla plant in Fremont is located, continues to have exit restrictions to prevent the spread of the coronavirus. Tesla had filed a lawsuit against him over the weekend, and Musk had threatened to move the California automaker’s headquarters to Texas or Nevada, for example. California Governor Gavon Newsom had promised to resume production next week, shortly before Musk’s tweet.

Musk had downplayed the risk of coronavirus from the start and last week described the restrictions on going out in Alameda County as “fascist.” By far the majority of Tesla vehicles are being built in Fremont, while production at the new second plant in China is just beginning.

Life at the pump

Musk has stated in the past that he will never sell his shares. But because he doesn’t receive a CEO salary, he runs into liquidity shortages, according to the Wall Street Journal. In a court case last year, one of Musk’s lawyers described his term as “financially illiquid.” And when his younger brother tried to inflate it a few years ago, the Tesla boss rejected it, noting that he was not fluent himself. “I have to borrow money,” the newspaper quoted him from court records.

Musk apparently finances his expenses by mortgaging his company’s shares. According to the Wall Street Journal, it provided 54 percent of its Tesla shares as collateral for loans at the end of last year, 14 percentage points more than the previous year. At just three major banks, he was in chalk with more than $ 500 million. The credit model bears a risk: if stocks on the stock exchange fall below a certain level, the debtor is required to make additional contributions, and then the infamous “margin call” comes into play, which has already cost existence to some speculators. Because then the money has to come at once.

Such a confrontation still seems unlikely. Rather: Tesla stock is in demand like never before. In February, it hit a record $ 917 after tripling its value in a few months. The crown crisis caused a sharp decline, but as of Friday the price rose to $ 819 again. The California automaker is worth more on the stock market than rivals Volkswagen, Ford, General Motors and Fiat Chrysler combined.

If this upward trend continues for years to come, Musk would be free of his monetary concerns for the foreseeable future. Because instead of a salary, he negotiated the purchase of 20 million stock options, depending on the achievement of ambitious goals in terms of results and value of the stock market. If everything goes according to plan (share price would have to rise to over $ 3,600 if existing shares were available) Musk would probably be the richest person in the world in eight years, even before Amazon founder Jeff Bezos. You’ve just reached the first milestone: Since Tesla’s market capitalization has averaged over $ 100 billion in the past six months, you are now entitled to buy 1.69 million shares for $ 350 each. Your profit (on paper): about $ 700 million.

Price gains cannot be rationally explained

Musk’s supporters believe the bullish stock valuation is warranted. After all, the California company reported a quarterly profit for the third time in a row, and almost 90,000 vehicles were delivered. However, critics point out that the quarterly profit is mainly due to the sale of greenhouse gas emission rights and that Tesla continues to burn money in its operating business. Even Musk’s rush to action seems a little scary. “Tesla’s stock price is too high,” he tweeted in early May, one of a dozen tweets in 75 minutes. The stock market fell rapidly ten percent that day. Over the weekend, however, his fans’ confidence returned. Tesla’s stock price is “an emotional and not a financial construct,” says Bloomberg columnist Liam Denning.