Whether they know it or not, New York State taxpayers are locked in a high-stakes business partnership with a billionaire whose high-tech empire has been “fueled by his voracious appetite for risk and unyielding confidence.”
That’s how today’s Wall Street Journal (subscription required) describes Elon Musk, chairman of SolarCity, whose planned “Gigafactory” in Buffalo is being financed with $750 million in state government funding, courtesy of Gov. Andrew Cuomo. Musk also is chief executive and main shareholder in SpaceX, which builds rockets, and Tesla Motors, which makes very expensive “premium” electric cars.
Today’s Journal account of the “unconventional” financing arrangements behind SolarCity, SpaceX and Tesla is a must-read for anyone concerned about the future of Cuomo’s ambitious “Buffalo Billion” development initiative—of which the one-million-square-foot SolarCity factory complex is the linchpin.
Among other things, the Journal story notes that Musk’s SpaceX company has been the biggest buyer of $214 million in “solar bonds” issued by SolarCity to finance its expansion. And:
In addition to the bond purchases, [Musk] has taken out $475 million in personal credit lines, buying shares of SolarCity and Tesla when they needed capital, securities filings show.
The credit lines are secured with about $2.51 billion of Mr. Musk’s shares in SolarCity and Tesla, based on their closing prices Wednesday.
Few top executives use their shares as collateral for personal loans because it can be risky to other shareholders and also raises concerns that the executive’s personal interests could conflict with the company’s interests.
If the stock price slides, that could trigger a margin call requiring the executive to sell the shares or put up more collateral to repay the loan.
In securities filings, Tesla has disclosed the possibility of margin calls related to Mr. Musk’s loans, which it said “may cause the price of our common stock to decline further.”
SolarCity’s stock price has fallen about 35 percent since the start of the year, the Journal reports.
Musk recently has been able to celebrate a series of PR successes including large pre-orders for Tesla’s forthcoming Model 3 and the return vertical landing of an unmanned SpaceX rocket used to send cargo to the international space station. Just this week, SpaceX announced a partnership with NASA to launch an unmanned mission to Mars, to which Musk has suggested he’d like to retire.
If not Mars, there’s always Buffalo.
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