This a beautiful story. Bankers get shafted lending money to apex capitalist.
🤌
No one has ever explained how bankers are losing. They say they’ve lost money. Yet the only details are Musk has to make payments and put up Tesla stock as collateral. That a no lose for the banks. They don’t care if Tesla stock crashes, they are making money from selling it.
If Tesla’s stock crashes, then the value the banks could get from selling it is much lower.
If Twitter and Tesla go bankrupt, the banks will have loaned out billions to own something worthless.
At least I would assume that’s how it works.
The bankruptcy scenario is correct but the first part isn’t: you don’t have X shares as collateral that you can liquidate. Instead, you have collateral to cover sum Y.
As long as the collateral contract covers enough stock positions the bank won’t lose.
That said all of this is assuming standard contracts. If y bank wrote “0% interest and instead 50% of the revenue growth of Twitter” then this would be an easy way to lose money.
Haven’t heard of a stupid banker yet, though, so what would the chances be?
It’s because when banks make loans, they sell of the debt, but nobody has wanted to buy the debt for Musk’s loans. My understanding of this is essentially, if someone takes out a loan of $100 million, the bank will sell that debt to an investor for $101 million, and the investor will make back $102 million once the loan is paid off due to interest. But no investors are confident enough that Musk will pay back his loan so no one is ponying up the dough to buy it.
That’s easy, just give him a AAA credit rating and call it a bond, some pension fund will buy it.
