this post was submitted on 24 Jul 2023
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He realized pretty fast that he offered WAY too much money for Twitter. Like, we're0 seeing maybe 5x what it was really worth at the time. But, because he did everything out in public like the narcissist he is, he knew there was no way he was getting out of the sale in court.
So he got as much of the cash from banks and other investors as possible. An amount of debt that could ruin someone with even his net worth. Now he's driving their investment into to the ground so the banks will end up writing off most of the debt rather than asking for repayment. So far, it seems to be working.
Maybe I'm financially illiterate, but I don't understand how that works. Like... if I take out a loan to buy a house and then deliberately burn down the house, that doesn't get me off the hook. If anything, I'll probably end up going to prison to boot. Why exactly would the banks just write off Musk's debt instead of going after him and his other assets in court?
Because laws are for poor people silly goose
Most of the money in the world economy is known as "Book Money." It exists only because an investor somewhere decided it did and invested based on that number. When a bank or investor stops thinking it's worth that much one of the things they can do is a Write Down. The money (which never really existed anyway) ceases to exist, the banks books (and possibly their rating as a lender) are affected, the investee should become considered a bad investment, and the money is deleted from the world. But there are no other real consequences unless the investor or investee destroys enough of their wealth that they become insolvent.
You bought your house with earned money. Real money. It can't just be erased in the same way because you played by the rules the whole time.
Wait, huh? So anyone can just print money by investing it? Or is it hypothetical money tied to the value of something?
Lenders are not as stupid as you think. 75% of Twitter's purchase price was paid by Musk himself or loans secured against his Tesla stock. None of that will be "written off".
The number I've seen it closer to 55% but, regardless, all the Tesla money was acquired exactly the same way and will be written off the same way too.
Tesla has positioned itself as a tech company instead of a car company, and if its investors decide one day that it's a car company it's value will drop 60 - 80% overnight. Of course the investors will never do that because 1) it will leave a lot of them in ruin and 2) the gigafactories for batteries are probably actually valued pretty accurately. But remember ever time Telsa talks about robots or super computers they're trying to make everyone forget that their valuation multiples should be closer to Ford than Apple.
Tesla owns a huge and successful charging network, and most EV makers in the US are switching to Tesla charging ports in order to take advantage of it. In the process, this will make the smaller charging networks (like EA) even more irrelevant.
If Ford happened to own all the gas stations in America, you'd have an idea of what Tesla is about to become. There's a good reason why Tesla stock is priced so high.
Ford used to own gas stations. They didn't totally leave the business until the 70's gas shortages, though they had been in decline since the 30s. History does tend to repeat itself, and there's nothing proprietary about electricity (there are adapters to go from one plug type to another). The US switch to using NACS has just started in the last couple months and will not be seen in most of the rest of the world, since Europe and much of Asia codified standards like CCS into law while Tesla was still trying to keep their tech private.
Smart money says Tesla will spin off the charging network (and solar stuff) into independent entities due to stagnate markets during the next recession and then devest entirely after their next major stock slump.
Ford never dominated the US market for gas stations like Tesla does for chargers. Even if Tesla never builds another charger outside the US, it can thrive by dominating the US market alone. And the experience of EA and others demonstrates that it's not so easy to set up a competing network.
Of course Tesla might spin off its charging business, but that won't worry investors. It just means that your Tesla share would turn into a share of TeslaCars plus a share if TeslaChargers.
I hope the cash he got from banks is backed by his stocks in Tesla. But what do I know, look what happened to Silicon Valley Bank. Banks aren't smarter in investing than the rest of us apparently.