Elon Musk borrowed $1 billion from his privately held space company SpaceX in October, about the same time as he was buying the social media site Twitter, which is now called X.
Musk repaid the loan with interest in November, and it’s not clear exactly why he took the loan, The Wall Street Journal reported late Tuesday, citing documents it had reviewed.
Tesla
(ticker: TSLA), SpaceX, and X didn’t immediately respond to requests for comment on Wednesday.
Musk has long had arrangements to borrow money against the collateral of shares in the company he owns–the most valuable being the electric-car company
Tesla,
which is also the basis of most of the billionaire’s wealth.
Executives with large positions in company stock don’t always like to sell. They lose a position in the stock and the sales generate a taxable event. It can be beneficial to borrow against shares. The unusual thing about the loan from SpaceX, which is privately held, is that it came straight from the company.
Loans to corporate insiders need to be disclosed to investors, explains accounting expert Robert Willens. Typically, related-party transactions are disclosed in annual reports. SpaceX, however, is privately held and doesn’t file an annual report with the Securities and Exchange Commission. Outsiders just can’t be sure how or what was communicated to SpaceX investors.
In October, Musk paid $44 billion for X, taking it private after months of legal wrangling in which he tried to drop his bid. He put up about $25 billion in cash for the deal. The offer he made for the company included a $1 billion break-up fee if the deal fell through.
While it didn’t affect Tesla directly, the ups and downs of the Twitter saga affected Tesla’s share price as investors wondered if he would sell stock to raise funds, or if Twitter was distracting Musk from his role at Tesla.
Tesla stock was down 2% in midday trading Wednesday, while the
S&P 500
and
Nasdaq Composite
were off 0.9% and 1.2%, respectively.
The loan probably isn’t the reason. Tesla stock tends to be a little more volatile than the Nasdaq. And Deutsche Bank analyst Emmanuel Rosner wrote Wednesday after meeting with Tesla management in Munich that third-quarter profit margins might be a little worse than expected.
Musk isn’t the sole owner of SpaceX. He owns 42% and had almost 79% of its voting power as of March, the Journal reported. The upshot of that is that if he wants to take out a loan from the company, he can.
Separately, the Journal reported last week that Tesla was being investigated over the use of company funds on a secret plan to build a glass structure described internally as a house for Musk. He tweeted Sept. 1 that there is no house being built. Building a house for the boss is fine for a company to do, so long as it is reported and treated like management compensation and approved by shareholders.
Perhaps the SpaceX loan merely illustrates that although Musk is the world’s richest man, much of his wealth is tied up in shares. Even he may have to juggle assets to come up with cash when big bills come due.
It is also a reminder that Musk is a figure who will loom large for the foreseeable future for investors in Tesla and SpaceX.
Write to Brian Swint at [email protected]
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