I'm sure when evaluating the risk, they assumed Musk was a reasonable businessman. They probably never dreamed that he'd troll his prospective customers (Tesla), troll his advertisers (X), and conduct one of the worst layoffs in history (X - not saying layoffs may not have been necessary, but the way it was done was dystopian and mean-spirited).
Hopefully Musk got enough to last him a lifetime, because no one other than Russian Oligarchs are going to ever loan him money again. Then again, watch him try to sue the banks for not loaning him money!
> when evaluating the risk, they assumed Musk was a reasonable businessman
Not really. His crown jewels are Tesla and SpaceX. (Now, probably, also xAI.) The banks did this business to maintain access to those. Even hung, these deals are net positive for them collectively if it earns relationship capital.
> no one other than Russian Oligarchs are going to ever loan him money again
He’s the richest man in the world. Of course he can borrow money.
He's the richest man in the world on paper. If Tesla has a 3rd consecutive quarter of year-over-year declining sales, then, that will be interesting, especially if, like the previous two quarters where Tesla posted unit sales declines, the EV market continues to grow in units sold. Yes, everybody focuses on how the EV market is not growing as fast as predicted, but it is growing, and meanwhile, Tesla's sales are declining.
With regards to relationship capital, yes, that was the banks' intent at the time, believing Musk to be a reasonable businessman. Now that he's demonstrated he's not, that changes the risk evaluation. They're not going to throw good money after bad.
> If Tesla has a 3rd consecutive quarter of year-over-year declining sales, then, that will be interesting
Tesla could go up in flames and still leave Musk, despite his borrowing against his stock, with more wealth than many countries' GDP.
> that was the banks' intent at the time, believing Musk to be a reasonable businessman
Musk's reasonableness as a businessman doesn't matter. The tens of billions of dollars of potential business he represents is everything.
Based on present reality, not hypotheticals, this remains a good bet. It's why the M&A team is having comp cut but not the lending team [1]. The loans are good business even if the deal was not.
> Musk's reasonableness as a businessman doesn't matter. The tens of billions of dollars of potential business he represents is everything.
Aren't these two statements contradictory? Musk's potential business is merely a fantasy once people realize he's emotional and has a tendency to pop-off at inopportune times and that he can't deliver. Early Tesla and early SpaceX made Musk look like a genius. But his years late delivery of FSD, which isn't even FSD, and the fiasco that is Cybertruck have put Tesla on rocky ground. We've learned that SpaceX has a team in place to manage Musk's worst impulses. Even so, they're under increased scrutiny for violating environmental policies during their launches - but I'd argue they still have an overall positive image. What was Twitter is now a shit show and has revealed the worst of Musk's tendencies. His reputation has taken a huge hit, and since Tesla and X are cult-of-personality companies, they appear to be taking a hit right along with Musk. Would you want to throw more money after that? Maybe - but I'm going to challenge your analysis pretty hard to make sure it makes sense.
> Aren't these two statements contradictory? Musk's potential business is merely a fantasy once people realize he's emotional and has a tendency to pop-off at inopportune times and that he can't deliver
The measure that matters is Musk's going-forward ability to fundraise. You're noting good risk factors for why that could erode. But he hauled $6bn in May [1]. Everything you mention was known then. As of now, it hasn't hit him where it matters.
Again, Tesla could entirely vaporise and Twitter go bankrupt and the very same banks that Musk defaulted on would still have rational reason to continue to do business with him. That would be true even if having access to SpaceX and now xAI ceased to be a wealth-management gold mine. He's simply that wealthy.
Elon Musk is magical. Magically, he makes Tesla's PE ratio 10 times that of Toyota. It wasn't outrageous to think he could flip Twitter for more than he bought it. The problem with magic is the effects are unpredictable. You never know when it will stop working.
IIRC Jack Dorsey left a bit under a billion in Twitter. Larry Ellison invested about a billion. There's another couple of billion in co-investors money in the deal. 13 billion in lbo financing, and the rest is Elon's money
Hopefully Musk got enough to last him a lifetime, because no one other than Russian Oligarchs are going to ever loan him money again. Then again, watch him try to sue the banks for not loaning him money!