Due to the possibility of a “mass panic” in the stock market, billionaire Elon Musk is warning against doing something he himself has done: borrowing against the value of securities he owns.
Musk said in the All-In podcast, “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.” In a down market, “you can have some pretty extreme things happen.”
When he bought Twitter Inc. for $44 billion earlier this year, the chief executive officer of Tesla Inc. put up billions of his own funds. And burdened the company with $13 billion in debt.
New margin loans backed by Tesla stock may replace some of the high-interest debt that Musk piled on Twitter. That he would be personally responsible for repaying.
Additionally, he sold nearly $40 billion worth of Tesla shares, which caused the stock to drop to a two-year low. After the most recent sales, Musk once more declared this week that he would stop selling shares, adding that the hiatus might last for about two years.
Ironically, Musk’s warning—at least his second this month—comes after he previously pledged his Tesla stock. According to an SEC filing from April 2022, Musk had 92 million Tesla shares pledged as collateral as of December 2020.
Musk stated, “My best guess is that we have turbulent times for a year to a year and a half. And then, roughly in Q2 2024, dawn breaks,” Neither booms nor recessions last forever.”