Elon Musk has outlined that margin loans should be avoided during economic uncertainty, following rumours that bankers were looking to back his unsecured debt with Tesla stock.
When there are macroeconomic risks, it is generally wise to avoid using margin loans on any company, as stocks may move in ways that are decoupled from their long-term potential
— Elon Musk (@elonmusk) December 9, 2022
Bloomberg reported on Wednesday that Musk’s advisors had been in talks with a consortium of banks over loans provided for his US$44bn takeover of Twitter, with suggestions being made that new margin loans backed by Tesla stock could be provided.
Musk borrowed approximately US$13bn from the consortium, which includes Barclays and Morgan Stanley (NYSE:MS), and faces paying interest as high as 11.75% on the unsecured US$3bn portion.
Ultimately the use of Tesla shares as collateral could provide more security for the banks, with Musk also able to benefit from lower interest rates.
Shares in the electric vehicle maker, however, have tanked this year as Musk has already sold billions of dollars worth to fund his takeover of Twitter, something that has infuriated Tesla backers.
Musk has also tweeted Twitter might go bankrupt with daily losses running at around US$4mln.