Musk warns investors: Tesla’s stock price is highly volatile, don’t use margin loans to speculate in stocks
Tesla(261.77, 4.27, 1.66%) CEO Elon Musk warned investors on Saturday to be wary of margin loans because Tesla is a highly volatile stock. This warning came on the eve of Tesla’s release of its second-quarter delivery data, which sparked strong reactions and speculation among netizens.
Musk was responding to a tweet from Tesla blogger Whole Mars Catalog, who expressed interest in increasing his holdings of Tesla shares in the coming weeks and months.
Musk responded by saying: “Please advise people to be wary of margin loans. Tesla has always been a highly volatile stock, often with no apparent pattern or reason. We are confident in long-term value creation, but cannot control the manic-depressive nature of the stock market. ”
A “margin loan” is a loan obtained by an investor using an existing investment as collateral. This can be risky because if the value of the collateral (Tesla stock in this case) falls significantly, the investor will be required to provide additional funds or sell the stock to repay the loan.
Musk’s suggestion is a reminder that Tesla’s stock has historically exhibited high levels of volatility, meaning its price can swing wildly without clear reason or pattern. This volatility can make margin loans particularly risky.
It is worth mentioning that this is not the first time Musk has warned about the risks of margin loans. In an interview at the end of December last year, Musk said: “I really advise people not to hold margin debt in the current volatile stock market environment. In a downturn in the market, some very extreme things can happen.”
Ironically, though, Musk himself had previously pledged a significant amount of his Tesla shares to secure a margin loan for the Twitter acquisition.