Tesla Inc Chief Executive Elon Musk personally owes $507 million (roughly Rs. 3,500 crores) into Wall Street banks Included in Tesla’s stock and debt sale, backed by His Own stake in the electric car maker, a company filing showed on Thursday.
The lending was revealed in Tesla’s prospectus on Thursday to increase around $2.3 billion (roughly Rs. 16,000 crores) with new shares and convertible debt, and it was $117 million less than the private loans to Musk disclosed in Tesla’s previous prospectus at 2017.
Still, Tesla said that in case the purchase price of its stock falls along with the banks force Musk to market a number of his shares, that may create additional pressure on the stock.
Tesla jumped 4% following Tesla disclosed funding strategies, which soothed investors’ recent worries about the Palo Alto, California company and pulled its inventory up from lows.
Musk, that owns 20% of Tesla, has taken private loans from Wall Street banks for years.
The filing on Thursday revealed Musk owed cash to three banks operating on the capital increase.
Goldman wasn’t cited as a private lender to Musk from the 2017 filing.
These loans are backed by Musk’s stocks in Tesla, currently worth a total of about $8 billion. If Tesla’s stock declines, then Musk might be forced to sell some of those shares with regards to the loan, as stated by the Tesla filing.
Mark Williams, a professor of finance at Boston University, said that investment banks can run into conflicts of interest with their deals by businesses, their founders and CEOs, analyzing their rules to stay different businesses independent.
“This is particularly true in the instance of Tesla in which you’ve got an aggressive and outspoken CEO who is prone to pushing the legal limits and gain terms which may run counter to Goldman’s conflict of interest policies,” Williams said.
Goldman and Citigroup, the top-line publication runners in Thursday’s funds increase, both have”sell” ratings on Tesla’s stock, which is uncommon but not outstanding on Wall Street.
In the end of 2018, Musk and his trust had 13.4 million Tesla shares pledged as security for private debts, based on another filing. That’s down from 13.8 million shares at the end of 2017.
Tesla includes a policy that caps executives’ borrowings in a quarter of their value of these shares pledged as security.
With Tesla repeatedly pushing back forecasts for turning a profit, its stock has fallen 27% year to date.
Musk intends to purchase another $10 million worth of shares as part of their sale declared on Thursday.