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Comment by mikewarot | Hacker News Reader

So my hunch that this could lead to him going broke isn't completely off base?

I figure he ends up having to pay $10E+10, and everyone knows it, so he gets short-squeezed in Tesla stock, then margin called on any loans against his stock... then POOF

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$10 bn out of $200+ bn won't make him go broke though. Don't see the logic in that, Mike.

He doesn't have $200,000,000,000 in cash.. he has stock, the value of which is exclusively depended on buyers exchanging their $ for it. There's nothing stopping any publicly traded stock from collapsing in value to the physical assets of the company minus any debts or liabilities.

According to this thing I found on the internet[1], if I read it correctly, Tesla is worth $31B if it were stripped and sold.

Most of Elon's wealth is Tesla stock... far more than the actual value of the company, by a factor of more than 5. If he has any debts against his stock, those could be his downfall.

[1] - https://www.marketwatch.com/investing/stock/tsla/financials/...

It could if your $200 billion valuation is based on the stock of over-valued companies which you used to over-leverage-borrow, and you need every free penny to continue paying back debt and keep that stock price high.

Elon owns 16% of Tesla and Tesla stock is the vast majority of his wealth. If the market cap of Tesla were to crash below $150 billion it would be in the territory where his penalty to Twitter could be multiple billions more than the value of his Tesla stock.

I personally don’t think Tesla is worth even $100 billion. However, the markets disagree, and it is difficult to imagine a scenario where Tesla loses 80% of its value.

…but it’s not totally inconceivable.

> he gets short-squeezed in Tesla stock

What?

Yeah that makes no sense. He has a lot of stock and wants to sell some.

A short squeeze means you have an obligation to buy shares and not enough are available, that drives the price up like crazy.

I used the wrong words, obviously.

If Tesla stock drops and his loans against Tesla stock go negative, he'll be forced to liquidate more shares to make up the difference to keep the loan afloat... this would then lower the value of the stocks even more, and the positive feedback loop could let all of the air out of his imagined wealth.

In other words - He has effectively sold shares at a price by borrowing against them... if the price falls, he'll have to do something to make up the difference... which is about the same thing as a short-squeeze for him.

It's the same mechanism as a short squeeze, just with the roles of stock and cash swapped. There is likely a specific word for that, but the comparison works.

Squeezed short sellers have an obligation to get a specific stock, but only have cash. There are not enough market participants willing to sell the stock, so the price rises astronomically to their disadvantage.

Elon has an obligation to get cash, but only has $TSLA stock. There are not enough market participants willing to buy the stock, so the price drops enormously to his disadvantage.

You can't short squeeze a seller. Sorry you just can't.

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