Elon Musk may be compelled to sell shares he previously pledged as collateral for personal loans if Tesla’s stock continues to decline.
Several online commentators have noted that Musk is nearing a margin call on the loans he used to finance his 2022 acquisition of Twitter.
Ahead of Wednesday’s market opening, Tesla shares were trading at $225.31. The stock has dropped 41% since the beginning of the year, 47% since Trump’s inauguration, and 38% over the past month.
Newsweek has reached out to Tesla for comment via email.
Why It Matters
Tesla surged to an all-time high in mid-December following a postelection rally. However, the company has since struggled with weak global sales, rising competition in the EV market, and backlash over CEO Elon Musk’s involvement with the Trump administration and the Department of Government Efficiency (DOGE), leading to protests and boycotts.
If Musk is forced to sell some of his pledged shares to cover his personal loans, it could drive Tesla’s stock even lower—an outcome the company has previously warned about.
What to Know
A margin call happens when a borrower’s equity falls below the broker’s minimum requirement. In Musk’s case, if Tesla’s stock price drops below a certain threshold, he would be required to either inject more funds or sell assets—such as his Tesla shares or stakes in other companies—to meet the margin requirement.
Musk’s $44 billion purchase of Twitter, now X, was funded through a combination of personal bank loans, subordinated debt, personal cash, and equity contributions from independent investors, according to reports at the time.
According to a 2024 Tesla filing with the Securities and Exchange Commission (SEC), Elon Musk has pledged 238.4 million shares as collateral to secure certain personal loans. At the time of the filing, Musk held a total of 715 million Tesla shares, meaning about one-third were being used as collateral.
Currently, Musk owns approximately 411 million Tesla shares, representing a 12.8% stake in the company, according to portfolio management service Whalewisdom.
It remains unclear how many of Musk’s shares are currently being used as collateral, the loan-to-value ratio agreed upon with lenders, or the exact price at which Tesla stock would trigger a margin call.
At the time of Tesla’s SEC filing in late March 2024, the company’s share price was around $180, according to Yahoo Finance. Some reports suggest that Tesla stock would need to drop to $114 for Musk to face margin calls—representing a 50% decline from its current price and falling below analysts’ lowest price targets.
What People Are Saying
Tristan Snell, Attorney & Legal Commentator (via X):
“Elon Musk’s purchase of Twitter was financed by borrowing money. He used his Tesla stock as collateral. If Tesla stock keeps crashing, the banks/creditors could repossess Twitter.”
Will Lockett, Independent Journalist:
If Musk faces a margin call, “he would either need to be bailed out by a private investor or let the banks liquidate the assets” of his companies, including Tesla, SpaceX, and X.
Tesla’s Warning on Musk’s Stock Sales
In its 2022 annual SEC filing, Tesla cautioned that if Elon Musk were forced to sell pledged shares to meet personal loan obligations, it could negatively impact the stock price.
“If Elon Musk were forced to sell shares of our common stock, either that he has pledged to secure certain personal loan obligations, or in satisfaction of other obligations, such sales could cause our stock price to decline,” the company stated.
Tesla further clarified: “We are not a party to these loans, which are partially secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk. If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further.”
What Happens Next?
Despite Tesla’s recent struggles with slowing sales and a declining stock price, many analysts remain optimistic about the company’s long-term potential.
Morgan Stanley analysts, in a recent note referenced by Investing.com, expressed confidence that Tesla is well-positioned to dominate the growing markets for autonomous vehicles and AI-driven robotics.
According to price targets compiled by Yahoo Finance, analysts currently estimate Tesla’s stock could range between $120 and $550, with an average target of $340.25.
