Tesla Inc Chief Executive Elon Musk personally owes $507 million (roughly Rs. 3,500 crores) to Wall Street banks Included in Tesla’s stock and debt sale, backed by His Own stake in the Electrical car maker, a company filing Revealed on Thursday.
The lending was revealed in Tesla’s prospectus on Thursday to raise around $2.3 billion (roughly Rs. 16,000 crores) with brand new shares and convertible debt, and it was $117 million less than the private loans into Musk disclosed in Tesla’s preceding prospectus in 2017.
Still, Tesla said that in case the price of its stock falls along with the banks induce Musk to market some of his shares, that may create additional pressure on the inventory.
Tesla jumped 4% after Tesla disclosed capital raising plans, which soothed investors’ recent worries regarding the Palo Alto, California firm and pulled its stock up from two-year lows.
Musk, who owns 20% of Tesla, has obtained private loans from Wall Street banks for ages.
The filing on Thursday showed Musk owed cash to three banks operating on the capital growth.
Goldman Sachs Group Inc has $213 million in loans outstanding to Musk, while he owes Morgan Stanley $209 million, and yet another $85 million into Bank of America. Goldman was not mentioned as a private lender to Musk in the 2017 filing.
These loans are backed by Musk’s shares in Tesla, now worth a total of about $8 billion. If Tesla’s stock declines, then Musk might be forced to sell a few of those shares under terms of the loan, as stated by 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 by businesses, their founders and CEOs, analyzing their principles to keep unique businesses independent.
“This is particularly true in the instance of Tesla where you have an aggressive and outspoken CEO who is prone to pushing the legal limits and gain terms which may run counter to Goldman’s conflict of interest policies,” Williams said.
Goldman and Citigroup, the top-line publication runners in Thursday’s capital increase, both have”sell” ratings on Tesla’s stock, which is unusual but not exceptional on Wall Street.
In the end of 2018, Musk and his trust had 13.4 million Tesla stocks pledged as collateral for personal debts, according to another filing. That’s down from 13.8 million shares at the end of 2017.
Tesla, Morgan Stanley and Goldman Sachs declined to talk about the loans. Tesla includes a policy that restricts executives’ borrowings in a quarter of the value of these shares pledged as collateral.
Together with Tesla repeatedly pushing back predictions for turning a profit, its stock has dropped 27% year to date.
Musk intends to buy another $10 million worth of shares as part of the sale declared on Thursday.