Shulou(Shulou.com)11/24 Report--

Beijing time on January 11 afternoon news, it is reported that Elon Musk (Elon Musk) has never been short of titles, he even tailored for himself "Chief Twit" and Tesla "Technoking" such exclusive names. However, there is one important title that he once had, which I am afraid will never have a chance with him in this life, that is, "the richest man in the world". As for the gap between him and the "richest man in the world" in the future, I am afraid no one can tell.

Musk is the first billionaire in history to lose $200 billion in personal wealth. He was also extremely active on Twitter last year, talking about everything from politics to vaccines to borrowing to complete his $44 billion acquisition of Twitter.

To understand Musk's rollercoaster wealth legend requires brain-burning thinking, which inevitably involves a lot of grand narratives: for centuries, people took it for granted that wealth was equated with talent. coupled with the flood of money during the epidemic, it has created a large number of seemingly visionary business leaders and investors-even if it is just a flash in the pan.

However, if we come back to the more realistic question, let's start with Musk's salary. First, bonuses in 2009 and 2012 increased his stake in Tesla, then an unprecedented salary package in 2018, coupled with the margin loans he used, laid the foundation for the most explosive wealth creation legend in history.

Musk's compensation report in 2018 set an all-time record for executive pay, and even drew sharp criticism from many shareholder consulting firms. But surprisingly, in the shareholder vote, the proposal was passed overwhelmingly. At the time, those goals seemed too ambitious to reach. One goal, for example, is to increase the electric car company's market capitalization to $650 billion-almost on a par with the market capitalization of tech giants such as Amazon, Alphabet and Microsoft.

However, such an expensive and bold plan fits Musk's style. For Tesla, it is nothing more than to enable him to focus on the electric car company for a long time.

But unexpectedly, Tesla's share price really skyrocketed, thanks in large part to Musk's "performance" ability. By the end of 2020, it had even gained a coveted place in the S & P 500. The 304 million Tesla stock options with an exercise price of $23.34, the previously unreachable key to wealth, seemed to be readily available in an instant.

The bonus is divided into 12 parts, each corresponding to different financial performance and market capitalization targets. So far, only one option has not been exercised-an absolute success by this standard. However, this arrangement is not flawless.

"the 2018 salary package is clearly not enough for Musk to focus on Tesla." "I want to know more about his role in Tesla," said Kristin Hull, founder of Nia Impact Capital, a social impact fund in Oakland, California. "what is the actual role of Tesla CEO? it's still too vague."

The sky-high compensation package sparked a shareholder lawsuit in Delaware. The plaintiff thought that the salary was too high and did not achieve the expected incentive effect, so it should be returned to Tesla.

During the trial in mid-November last year, Musk, 51, stayed up late to take a private jet to appear on the witness stand. It was just a few weeks after he completed his leveraged buyout of Twitter. The presiding judge in the case, Kathaleen St. J. McCormick, is also responsible for coordinating a months-long legal dispute between Musk and Twitter over the acquisition. Mr Musk was so calm in court that he portrayed himself as a workaholic forced to serve as CEO and claimed to have played no role on pay.

Although McCormick has not yet pronounced the verdict, the market has made its own decision.

Torn Wealth the stock has fallen 39 per cent since December 1 as Tesla faces fierce competition and delivery after the price cut has not yet met expectations. Over the same period, the technology-heavy Nasdaq 100 index fell only 1/5 of Tesla's. Musk, who has been raising money for himself through margin loans for many years, has naturally lost his position as the richest man in the world. Musk's net worth is now about $129.4 billion, down more than $210 billion from his peak, according to the Bloomberg Billionaires Index.

Fidelity, an investor in Twitter, has cut Twitter's valuation to less than half of Musk's purchase price because of a sharp drop in advertising revenue and soaring loan costs. This means that Mr Musk's 79 per cent stake in Twitter is now worth just $11.6 billion-he has sold Tesla shares several times before and raised more than $22bn to buy the company.

Stephen Diamond (Stephen Diamond), a law professor at Santa Clara University, lectured on securities law and provided corporate governance advice to institutional investors. Mr Musk was offered a Tesla stock option on the condition that he spare no effort to push up the valuation, he said. But to their surprise, the eccentric CEO cashed out $40 billion in stock and used most of it to buy another company at a high price.

"the board made millions, and he made billions." "but there is always a risk that he could take advantage of this and put the company on the sidelines in the short term," Diamond said to Musk. "

Currently, the cornerstone of Mr Musk's wealth is his 42 per cent stake in SpaceX. When he founded the rocket company in 2002, Tesla had not yet founded it. The privately held company's valuation has also climbed, with a valuation of $137 billion in its latest $750 million round of financing.

But crucially, Mr Musk may not be able to use his SpaceX, Boring Co or Neuralink as he did with Tesla, a listed company. He used margin loans to fund his highly valued companies, boosting his ranking on the rich list. He initially planned to use the same loan in his acquisition of Twitter, but adjusted his financing plan in May last year after market volatility caused Tesla's share price to fall.

Margin issue after Tesla's share price plummeted, there was an unavoidable question: when will the bank ask Musk to make a margin call?

There is no clear answer, and there is a problem with any estimate: it is difficult to know the details only through stock price fluctuations and securities filings. Mr Musk and Jared Burchard, general manager of his family's office, have not commented.

Tesla's 2022 agency documents show that by the end of March last year, Mr Musk had pledged about 52 per cent of his stake as debt security, but did not disclose the amount of loans he received through the pledged shares or specify the terms.

However, the margin loan agreement, which was originally part of the Twitter financing package, provides some clues.

Under the terms at the time, he could borrow $12.5 billion at a 20 per cent ratio of mortgage assets to value, and if that figure reached 35 per cent, he would need a margin call. At that time, he will either pledge more Tesla shares, or reduce the loan size, or both.

Assuming the same terms, based on Tesla's share price of $359.20 on March 31, Musk could borrow $19.2 billion on shares worth about $96 billion.

The "smart move" with Tesla's share price falling, it should have reached the 35 per cent trigger on October 14, when the stock closed at $205. To restore the 25 per cent ratio, Mr Musk would have to add $22 billion worth of Tesla shares or repay a $5.5 billion loan.

A few weeks later, Mr Musk sold $3.95 billion worth of shares-after saying twice in April and August that his sell-off was over. It is not clear whether he needs to raise more money for the acquisition of Twitter or whether it is due to a margin loan.

After he started selling the shares, Tesla's share price fell another 19% as of December 12, when he began selling another $3.6 billion of shares. Just a few days ago, Mr Musk tweeted that it was "wise" not to use margin debt on any company in the face of macroeconomic risks.

If the roughly $7.6 billion realised from the stock sales in November and December is not enough to completely eliminate margin debt risk, the calculations behind it will become very complicated.

In theory, Musk still has $11.7 billion in outstanding loans. If there are no other funds to repay the loan, the subsequent fall in the share price will force Mr Musk to continue to mortgage more Tesla shares.

If Mr Musk mortgages all of his remaining Tesla shares, he will have enough money to guarantee the debt-unless the share price falls below $79. Earlier this month, the stock fell to $101.81, down nearly 50 per cent in five weeks.

After that, options acquired by Mr Musk in 2018 may be difficult to serve as collateral for margin loans because the shares cannot be sold for five years after the exercise.

The way forward, of course, even after Tesla's share price plummets, Mr Musk may once again overtake Bernard Arnualt, the world's richest man, and fend off competition from Guartam Adani, the Indian energy giant.

The first is SpaceX. The company dominates the burgeoning space exploration market, much like Tesla at that time.

Just last week, Chamath Palihapitiya, known as the "king of SPAC", predicted that SpaceX's "Star chain" space Internet project would be launched in 2023, much earlier than expected. Part of the reason is that it would "create a respite" for Mr Musk.

This could provide Musk with another listed company that attracts all kinds of investors.

Musk has said that his grand plan for Twitter is to make it a springboard for all other apps. Judging from what he has said in the past, this is probably similar to China's super app Wechat. Ma Huateng, founder of Tencent, to which Wechat belongs, ranks 30th in the world with a personal wealth of US $40.9 billion.

But now it seems that this ambition is still a long way off. Musk still needs to find a new CEO for Twitter. In his words, the man had to be "stupid enough to take the job". When he bought Twitter, he even said bluntly at the first staff meeting that the company could go bankrupt.

In addition, Tesla's board of directors is also under great pressure to prove to the outside world whether they are fully prepared to lose Musk, an important CEO. An Icelandic shareholder proposed in May that investors vote on whether Tesla's board of directors should prepare a key risk report.

More importantly, some of Musk's most valued supporters are fed up with his antics. Billionaire Leo KoGuan, a major shareholder of Tesla, once said, "the board of directors is absent."

While Tesla acknowledges that Musk poses key risks, the company's growth is largely due to the low interest rate environment and the hindsight of electric cars by head car companies.

However, the relaxed competitive environment that Tesla has enjoyed over the past decade is now packed with traditional carmakers and new car-building forces such as Lucid and Rivian. It is worth noting that although Musk has always opposed price cuts and discounts, Tesla has recently adopted such promotions several times, especially in the increasingly competitive Chinese market in the electric car industry. Tesla will announce his financial results on January 25.

"will Musk really let this iconic American company self-destruct?" "it's incredible to look at his situation," said Diamond, a law professor. "the acquisition of Twitter caused him indigestion and had to suffer the consequences financially."

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