Elon Musk warns against margin debt because of market volatility

Tesla chief executive put up billions of own money when he bought Twitter for $44 billion this year

Tesla's stock price has lost nearly half of its value since Elon Musk’s purchase of Twitter went through in October. AP

Billionaire Elon Musk is warning against something he himself has done — borrowing against the value of securities one owns — because of the risk of “mass panic” in the stock market.

“I would really advise people not to have margin debt in a volatile stock market and you know, from a cash standpoint, keep powder dry,” Mr Musk said in the All-In podcast released on Friday.

“You can get some pretty extreme things happening in a down market.”

The Tesla chief executive put up billions of his own money when he purchased Twitter for $44 billion earlier this year and saddled the company with $13 billion of debt.

Bloomberg News has reported that Mr Musk’s bankers are considering replacing some of the high-interest debt he layered on Twitter with new margin loans backed by Tesla stock that he’d be personally responsible for re-paying.

He’s also disposed of nearly $40 billion of Tesla’s shares, a move that contributed to driving the stock to a two-year low.

Jared Kushner and Elon Musk watch the Fifa World Cup final match between Argentina and France. Getty Images

Mr Musk attends model and businesswoman Heidi Klum's 2022 Halloween party at Moxy Lower East Side, in New York City Getty

Mr Musk on stage next to Optimus the humanoid robot in Palo Alto, California, in September 2022 AFP

Mr Musk speaks at the Tesla Giga Texas manufacturing 'Cyber Rodeo' grand opening party, in Austin, Texas, in 2022 AFP

Mr Musk shakes hands with Brazil's then president Jair Bolsonaro, at the event Conecta Amazonia in Porto Feliz, Sao Paulo state, in 2022 AFP

Mr Musk and his mother, Maye Musk, arrive for the 2022 Met Gala at the Metropolitan Museum of Art in New York, in 2022 AFP

Mr Musk attends the start of the production at Tesla's Gigafactory in Gruenheide, in 2022 AFP

Mikey Day as a lawyer, Cecily Strong as a judge, and host Mr Musk as Wario during the 'Wario' sketch on NBC's 'Saturday Night Live', in 2021 Getty

Mr Musk and son X Æ A-12 onstage at 'Time' Person of the Year in New York, in 2021 AFP

Mr Musk dancing onstage during a delivery event for Tesla's China-made Model 3 cars in Shanghai, in 2021 Reuters

Mr Musk with Armin Laschet, at the time CDU party federal chairman and prime minister of Germany's North Rhine-Westphalia, at the Tesla Gigafactory in Gruenheide, in 2021 Getty

Mr Musk at the construction site of the Tesla Gigafactory in Gruenheide, near Berlin, Germany, in 2020 EPA

Mr Musk leaves a New York court in 2019, after a hearing in a lawsuit brought against him by the US Securities and Exchange Commission Getty

A prototype of SpaceX's Starship spacecraft in Boca Chica, Texas, in 2019 Reuters

Mr Musk and then partner Grimes at The Metropolitan Museum of Art in New York City, in 2018 AFP

From left, Mr Musk, Corning chief executive Wendell Weeks, then US president Donald Trump and Johnson & Johnson chief executive Alex Gorsky at the White House, in 2017 AFP

Mr Musk presents his plan to colonise Mars at the International Astronautics Congress in Guadalajara, Mexico, in 2016 EPA

Mr Musk with then Japanese prime minister Shinzo Abe after a test drive of the Tesla Model S P85D in Palo Alto, California, in 2015 Reuters

Mr Musk with then wife Talulah Riley at the 2011 British Academy Film Awards in London Getty

Mr Musk after Tesla's initial public offering at the Nasdaq market in New York, in 2010 Reuters

Then US president Barack Obama with Mr Musk on a tour of Cape Canaveral Air Force Station at Cape Canaveral, Florida, in 2010 Reuters

Mr Musk in the Tesla Roadster electric car at the North American International Auto Show in Detroit, in 2009 Reuters

Mr Musk with music producer Quincy Jones at the Tesla Roadster launch party in 2008 AFP

Mr Musk answers questions about the new Tesla Model S all-electric car, at its unveiling in Hawthorne, California, in 2009 AFP

Elon Musk in Los Angeles in 2008. Getty

Tesla and SpaceX founder Elon Musk in 2004 Getty

Following the latest sales, Mr Musk again said this week he will stop selling shares, adding that the pause could last for two years or so.

The warning, at least the second made by Mr Musk this month, is ironic given the billionaire has previously pledged his Tesla shares.

As of December 2020, Mr Musk had 92 million Tesla shares pledged as collateral, according to an SEC filing in April 2022.

During the podcast, Mr Musk also reiterated his belief that the US economy is overdue for a recession and that the slowdown could be similar to the scale seen in 2009.

“My best guess is that we have stormy times for a year to a year and a half, and then, dawn breaks roughly in Q2 2024, that’s my best guess,” Mr Musk said. “Booms don’t last for ever, but neither do recessions.”