Tesla Puts Stricter Cap On Musk’s Borrowing With Pledged Shares

(Bloomberg) -- Tesla Inc.'s board amended its policy around pledging shares, capping the total loan amount that Elon Musk can collateralize with his stake at the lesser of $3.5 billion or 25% of the value of the stock.

In a proxy statement filed Thursday, the electric-car maker described a policy that deviates from previous filings and singles out Musk, Tesla's chief executive officer.

The maximum loan amount secured by pledged shares can't exceed “with respect to our CEO, the lesser of $3.5 billion or 25% of the total value of the pledged stock,” the filing said. In the previous proxy statement, such a dollar amount wasn't included.

The new policy also lowers the maximum that directors and officers — other than Musk — can borrow against pledged shares to 15% of their value, from 25% previously. 

“In order to mitigate the risk of forced sales of pledged shares, the Board has a policy that limits pledging of Tesla stock by our directors and executive officers,” the company said in the filing.

Read more: Musk Warns Against Margin Debt on Market ‘Mass Panic' Risk

Musk holds about 411 million Tesla shares, with 238.4 million pledged to secure personal loans, according to Thursday's filing.

At Tesla's closing price of $185.06 on Thursday, those pledged shares are worth about $44 billion, which under the prior policy could have in theory secured as much as $11 billion in debt.

The proxy statement notes that the pledged share count “does not indicate the extent to which there may be actual borrowings against such shares as of such date, which may be substantially less than the value of the shares pledged.”

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