Elon Musk owes $507 million to banks helping Tesla raise capital
- Wall Street ends volatile week sharply higher
- AT&T (T) in Talks to Merge Media Assets with Discovery (DISCA) - WSJ
- Disney (DIS) Dips As Streaming Business Shows Signs of Slowing Down, Analysts 'Very Bullish' on LT Opportunity
- Airbnb (ABNB) Bookings Up 52% to Help Sales Beat, Seen as a 'Blow Out Quarter' as More Upside is Left
- DoorDash (DASH) Reports Bigger Loss and a Sales Beat, Shares Soars on Strong Guidance and Two Upgrades to 'Buy'
FILE PHOTO: Tesla CEO Elon Musk leaves Manhattan federal court after a hearing on his fraud settlement with the Securities and Exchange Commission (SEC) in New York City, U.S. April 4, 2019. REUTERS/Brendan McDermid
Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.
By Noel Randewich
SAN FRANCISCO (Reuters) - Tesla Inc Chief Executive Elon Musk personally owes $507 million to Wall Street banks involved in Tesla's stock and debt sale, backed by his stake in the electric car maker, a company filing showed on Thursday.
The lending was disclosed in Tesla's prospectus on Thursday to raise up to $2.3 billion with new shares and convertible debt, and it was $117 million less than the personal loans to Musk disclosed in Tesla's previous prospectus in 2017.
Still, Tesla said that if the price of its stock falls and the banks force Musk to sell some of his shares, that could create additional pressure on the stock.
Tesla jumped over 4% after Tesla disclosed capital raising plans, which soothed investors' recent concerns about the Palo Alto, California company and pulled its stock up from two-year lows.
Musk, who owns 20% of Tesla, has taken personal loans from Wall Street banks for years. A Tesla 2017 prospectus showed $624 million in loans to Musk.
The filing on Thursday showed Musk owed money to three banks working on the capital increase.
Goldman Sachs Group Inc has $213 million in loans outstanding to Musk, while he owes Morgan Stanley $209 million, and another $85 million to Bank of America Corp . Goldman was not mentioned as a personal lender to Musk in the 2017 filing.
Those loans are backed by Musk's shares in Tesla, currently worth a total of around $8 billion. If Tesla's stock declines, then Musk could be forced to sell some of those shares under terms of the loan, according to the Tesla filing.
Mark Williams, a professor of finance at Boston University, said that investment banks can run into conflicts of interest with their deals with companies, their founders and CEOs, testing their rules to keep different businesses separate.
"This is particularly true in the case of Tesla where you have an aggressive and vocal CEO who is prone to pushing the legal limits and gain terms that might run counter to Goldman’s conflict of interest policies," Williams said.
Goldman and Citigroup Inc, the top-line book runners in Thursday's capital raise, both have "sell" ratings on Tesla's stock, which is unusual but not exceptional on Wall Street.
At the end of 2018, Musk and his trust had 13.4 million Tesla shares pledged as collateral for personal debts, according to another filing. That is down from 13.8 million shares at the end of 2017.
Tesla, Morgan Stanley and Goldman Sachs declined to talk about the loans. Tesla has a policy that caps executives' borrowings at a quarter of the value of the shares pledged as collateral.
With Tesla repeatedly pushing back forecasts for turning a profit, its stock has dropped 27% year to date.
Musk plans to buy another $10 million worth of shares as part of the sale announced on Thursday.
(Reporting by Noel Randewich in San Francisco, additional reporting by Elizabeth Dilts, Kate Duguid and Lauren Tara LaCapra in New York; Editing by Lisa Shumaker)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Tesla (TSLA) option implied volatility decreases
- Musk's bitcoin turnaround pleases some Tesla investors
- UPDATE: Airbnb Inc. (ABNB) Metrics Impress But PT Cut to $180 at BofA Securities
Create E-mail Alert Related CategoriesReuters, Trader Talk
Related EntitiesGoldman Sachs, Citi, Morgan Stanley, Tesla, BofA/Merrill Lynch
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!