Is Elon Musk’s proposed $44 Billion leveraged take over of Twitter at $54.20/share, a 38% premium over its market price last month, a warning sign of a market top? Why is the richest American using mostly borrowed money to take TWTR private? Why is a major American bank lending such large sums of money to one person, Elon Musk so he can control a “public” town square?
Of course these gigantic billion dollar loans from a major wall street bank, and other Hedge Funds and the Shadow banking industry, might create a major financial problem if the “value” of Musk’s collateral were to decline, in the coming months.
Shouldn’t the SEC and the Banking regulators being looking at the risk profile of this deal? What if TSLA stock went below $800/share; below $700/share; or even $600/share? One giant margin call, I would guess.
Its funny how interest in a stock disappears quickly as it goes down in price. Everyone loves a stock with positive momentum, but once it starts to decline fund managers can’t wait to rid themselves of “that turkey.”
Yes, it may be true that Musk is a business “genius.” But, one only needs to read the story of the rise and fall of Long Term Capital Management, to learn that even an investment team loaded with MIT rocket scientists and two noble prize winners, can lead to financial failure.
As Warren Buffett once said, “No one knows who is swimming naked, until the tide starts going out.”
May 11th, 2022