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High on the Hog, Billionaire Elon Musk is Also Low on Cash

© AFP 2022 / Win McNamee/Getty ImagesElon Musk, founder and chief engineer of SpaceX speaks at the 2020 Satellite Conference and Exhibition March 9, 2020 in Washington, DC.
Elon Musk, founder and chief engineer of SpaceX speaks at the 2020 Satellite Conference and Exhibition March 9, 2020 in Washington, DC. - Sputnik International
The Tesla founder and chief executive needs close to $600 million to access stock options under his compensation programme and sell them at a higher price. He has started selling off his earthly possessions and put several high-end properties up for sale, but denies that it has anything to do with the potential stock purchase.

Elon Musk appears to be incredibly cash-strapped for a billionaire, as Tesla's filings show he is living off money he's borrowed from various banks.

The Tesla boss personally owned $548 million to Morgan Stanley, Goldman Sachs, and Bank of America as of this February, pledging his shares of the electric car manufacturer as a collateral. That is $41 million more than he owed to the three banks by last May.

Forbes currently estimates Musk's net worth at $36.8 billion on paper, but most of what he owns is invested in Tesla and SpaceX.

The share pledge risk

Filings show that he had used 54 percent of his Tesla shares, worth nearly $15 billion, to secure the loans at the end of last year.

If the price of Tesla stock falls below a certain level, the banks may demand that he repay the loans until he makes up the difference, and he could risk losing control over the company.

This doesn't appear to be the case now, as Tesla stocks have grown almost twofold since the beginning of the year despite the pressure on auto-makers in light of the COVID-19 pandemic.

The 48-year-old has stressed on several occasions in the past that he is short on cash including last year, when he was fighting a defamation lawsuit from a British diver whom he called a “paedo guy”. At the time, Musk testified that he was “financially illiquid” and had no cash to pay the $75,000 in damages demanded by the diver.

Going austere?

Musk announced in a 1 May tweet that he was selling “almost all” of his physical possessions and would “own no house”.

The entrepreneur has since reportedly put up three of his California homes for sale, seeking a total of $75 million for the properties. He has told The Wall Street Journal that he also plans to sell four other houses in the prestigious Los Angeles neighbourhood of Bel-Air and will likely move into a small rented house.

The big payday

Last week, he qualified for stock options worth about $730 million, after the company's market capitalisation stayed above $100 billion for the past six months - just days after he tweeted that the Tesla stock price was “too high”.

But to be able to sell the stock, he first needs to purchase it for around $592 million. It isn't clear whether he has the money, or whether he will resort to another loan to access the option.

Musk denied to The WSJ that he was selling his possessions because he needs the money. “I'm trying to make my life as simple as possible right now, so will only keep things that have sentimental value,” he said.

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