You do realize that 420 is the police code for Marijuana, right?
Its a joke. The only alternative is that Elon Musk is manipulating the price of his shares by tweeting private and sensitive information and therefore needs to be fined by the SEC and possibly jailed for stock manipulation.
Therefore, its a joke. Because as stupid as Mr. Musk has been this past year, I am sure he's well aware of the illegality of stock manipulation on American markets.
Since when is Twitter a public disclosure as per the law then?
Normally, announcements for stock buybacks, taking a stock private, etc. etc. need to be filed with the SEC months in advanced and announced to the general community.
As the CEO of Tesla, his Twitter account can act as a legal announcement platform for the company, just as the Tesla site can. The SEC issued that guidance five years ago.
The requirement to comply with Regulation FD is that investors should be able to have some reasonable confidence that the source in question - the twitter account - is a legitimate source for the company. The two Twitter accounts that would clearly apply to would be @tesla and @elonmusk.
If this isn't a joke, then that means Mr. Musk announced the news before the T1 halt. Expect an SEC investigation soon. I'd definitely expect his actions to be illegal, although I'm not a lawyer.
Its probably going to be a slap on the wrist / a relatively small fine, but there's a proper dance to releasing information on the stock market to ensure everything is fair.
> The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.
Keep in mind that this position was built via the secondary market and not from Tesla itself. And that the position size would be about 3 Billion, a large but pretty ordinary size for a fund of their size.
They also put in $400 million into magic leap, ar large bet on Uber and about $50 Billion into the Softbank vision fund that is throwing money around.
I think this puts them about the 8th largest shareholder of Tesla.
As an aside, with Musk's recent tweet I think he's going to get a pretty stern talking to by the SEC about discomfiture and Reg FD.
Even if its true,
1) You've now used that bullet in your gun against the short sellers
2) Did it in a very dubious way, via twitter rather than RegFD disclosure.
3) will now have to answer questions about this "private takeover", ie where is the money coming from? how long is it committed for?
For what? An SEC headache a momentary pop that was immediately erased?
The tweet caused a momentary pop in the stock price which was erased about 2 minutes after it popped. The market can be exceedingly good and correcting itself.
By 12:48 just before the tweet it had risen to $359.88. Immediately after the tweet it hit its intraday high of $371.15 and then quickly fell back to $362.
It’s been trending upwards since and now sits around $367.
Considering it was below $300 a week ago, it’s been a pretty good week for Elon.
> “The tweet caused a momentary pop in the stock price which was erased about 2 minutes after it popped. The market can be exceedingly good and correcting itself.”
interesting, i look at that same 2 minutes and think “a little market distortion”, because in that time, some institutional investor(s) probably took advantage of some individual traders using their algorithmically-enhanced speed and information asymmetry (not taking sides here, as both should know the game they’re in).
an “exceedingly good” correction wouldn’t have been a blip at all, because the correction would have been happening simultaneous to the distortion.
Twitter isn't some esoteric social media platform and Elon has made extensive use of it which has moved the stock. I don't see where disclosures taking place being relevant in 2018 but admit there's not a lot of precedent behind this.
I don’t see anything in the linked SEC page about needing to halt trading before making the post?
> Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time.
Sounds like Twitter is the perfect mechanism to achieve this in a fair manner.
> The report of investigation explains that although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer — without advance notice to investors that the site may be used for this purpose — is unlikely to qualify as an acceptable method of disclosure under the securities laws
So the question is did Elon/Tesla ever put investors on notice that material statements could be made through his Twitter account?
Since it seems like he’s done this regularly in the past. There was even an institution investor that joked about Elon’s “Return on Tweet” and many articles written about Musk’s Twitter habit. I couldn’t say if a long past history of breaking news on Twitter is enough to have put investors on notice that material statements could come through that channel.
>> Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time.
> Sounds like Twitter is the perfect mechanism to achieve this in a fair manner.
What about investors that were blocked by Elon on Twitter?
This is a fair point, if you are blocked then you don't have fair access to information. Though I have a suspicion that people who Elon blocks have multiple Twitter accounts.
"Investors in Tesla should know to regularly check Musk's twitter with an incognito browser" doesn't seem like a defense the SEC will actually appreciate. Knowledge of incognito browser function is not a requirement to purchase stock.
It would be much weirder (crazy?) for Saudis to invest in oil. They have lots of fresh income when oil goes well, so the fund should be designed to do well if oil does not go well.
Saudi Arabia might have enough oil to last until demands drops..... It is also some of the cheapest oil to extract, so sometime before they might start lowering prices to push everyone else out of the market. Keep in mind their production is restrained now to keep prices high.
> Who would have predicted 30 years ago that a Saudi sovereign fund would invest in an electric car company ?
Pretty much everyone; the fact that Saudi Arabia and Kuwait has been for years investing large amounts of oil-derived funds in both a wide array of other fields, including alternative energy, was one of the things that created the difference in economic interests between them and Iraq that was among the sources of the disputes which saw their anti-Iran alliance breaking up and Iraq invading Kuwait and threatening Saudi Arabia in 1990.
According to various analysts, Saudi Arabia is sitting on an ocean of oil that they can't possibly find a buyer for until renewables take over completely.
The Saudi fund just made public that they own just under 5%, which is when you have to publicly declare to the SEC your holdings. This usually happens when there is an attempt at a hostile takeover. What Elon did was brilliant and he just countered it by tweeting this out. He is willing to take it private at the $420 price, probably way higher than the Saudi's were planning on. So now it'll be a race to see who can obtain >50% of the shares. Elon has a massive head start with how much he owns already, but the Saudi's fund is ridiculously huge right now ($250B) and I'm sure they have the ability to pull in another few hundred billion on demand. Kind of scary. Elon will need to find a stupid amount of capital and fast to do this.
It's very smart on Saudi Fund's part... They would own the worlds largest solar, battery, and EV producer. They could cover a desert in panels and sell the cars and batteries across Europe/Asia, while providing the power as well. They would once again have the largest control of the world's energy.
Unlike EV, currently there are plenty of other options for solar panels. Also, there are plenty of other deserts outside of Saudi Arabia. I think it is a smart move by the Saudi fund but I don't think owning Tesla alone is enough to maintain them as the leader in the energy market in the decades to come.
What do you mean 'way higher than the Saudi's were planning on'? I'm confused about the logistics of taking a company private, or how the Saudis would be negatively affected by Musk tweeting out that he effectively wants the stock to go up in price.
The stock was work $360 before his tweet and almost $390 afterwards (before the market decided it was a boutade); if Musk can prove he has the cash, the price will naturally gravitate towards $420. That basically means he's daring the Saudis to pay 15% more (about $10bn more), in order to take over from him, than they had presumably planned to do.
There's a decent chance of a bidding war driving the share price far higher than that.
This is strategic for the Saudis. And there are other strategic investors and sovereign wealth funds who will not want to see Tesla taken private for 10% above today's closing price.
Tesla's market cap is only 6% of Apple's, and Apple isn't geopolitically strategic.
Norway, China and Abu Dhabi all have SWFs larger than Saudi Arabia [1], and the energy implications of letting Tesla go would be strategic for each of them.
I don't know much about how this works. Am I right in saying this is like the episode in Yu-Gi-Oh where Seto takes 51% of his fathers company so that he then owns the company? That's the only example I can think of to illustrate what I interpret this as.
> They could cover a desert in panels and sell the cars and batteries across Europe/Asia, while providing the power as well. They would once again have the largest control of the world's energy.
Doesn't seem like you can reasonably charge a car in europe/asia from solar panels in the middle east. You'll be dealing with some pretty nasty transmission losses.
> Doesn't seem like you can reasonably charge a car in europe/asia from solar panels in the middle east. You'll be dealing with some pretty nasty transmission losses.
First of all, the oil reserves in Saudi-Arabia aren't going to last forever - but they will need massive amounts of energy to maintain their cities, especially for drinking water. Desalination is ridiculously expensive, and water access will be the war driver in the entire Middle East once climate change really hits. Cover the desert with solar plants, the coasts with desalination plants (and don't care about the brine) => control who gets the electricity and/or the water, control the region. Saudi-Arabia is actually already going pretty far in their fight for regional supremacy, that would fit perfectly.
As for transmitting the energy to Europe/Asia, well... there's technology in the works to synthesize gas (both gasoline and, well, gas) using electricity, which can be fed into the existing gas pipeline infrastructure and thus sold to the wide world.
Fair point. Do climate models have the fidelity to predict desertification? My intuition would be that the entire middle east will be devoid of water at 2 degrees hotter.
As always, the question is 'with how much certainty'? At low enough certainty I could predict what parts of the world will get dryer or wetter on the back of an envelope, but there are a lot of unknowables like human activity that would have to be included to make a quite reliable prediction.
According to the first link I found about large scale desalination, it can be done for a wholesale price of around $0.58/cubic meter.[1]
For comparison, my local water authority (in a part of the US that is not particularly dry) charges about $0.94/cubic meter.
Without knowing exactly what the difference is between wholesale and retail rates, I feel reasonably confident that desalination technology is currently sufficient to avoid civilization collapse and/or war.
I feel reasonably confident that desalination technology is currently sufficient to avoid civilization collapse and/or war.
Yes. But the experience up until now, is that desalinization is so much more expensive than other water sources, to the point that such plants often get mothballed when the other sources become available again.
> Without knowing exactly what the difference is between wholesale and retail rates, I feel reasonably confident that desalination technology is currently sufficient to avoid civilization collapse and/or war.
The problem is you're gonna need energy to operate these plants and you can't scale stuff up infinitely as the brine will kill off marine life and eventually, the water sources will become so salty that they can not be used for desalination any more: https://www.theguardian.com/global-development-professionals...
Which means, once Peak Salt hits, there will be problems. Oh, and desalinating water for drinking purposes is one thing - using it for agricultural demands is a whole different beast. Egypt, for example, already had problems in 2010, and the issue won't get smaller over the decades. http://edition.cnn.com/2010/WORLD/africa/11/09/egypt.water.s...
> First of all, the oil reserves in Saudi-Arabia aren't going to last forever - but they will need massive amounts of energy to maintain their cities, especially for drinking water. Desalination is ridiculously expensive, and water access will be the war driver in the entire Middle East once climate change really hits.
Somewhat OT, but... there has been enormous progress in energy efficient desalination, to the point that Israel has become a net exporter of water.
See DOI 10.1016/j.desal.2017.10.033 for more technical information on recent progress desalination.
"Saudi-Arabia is actually already going pretty far in their fight for regional supremacy, that would fit perfectly."
Doubt it. Too many cultural problems. Tribal, backward societies with people who don't like to work (companies prefer to hire foreigners. They are obligated to hire locals, locals stay often at home while getting paid). Based on the huge discrepancy of wealth, they don't seem to be very successful in the War against Yemen.
"Desalination is ridiculously expensive" - as long as you are near the ocean, it's pretty cheap. Hyflux[1] on a 25 year DBOO contract will sell you as much water as you want for less than $0.50 per 1000 liters. Combined with even a modicum of water conservation [2], you can get per-capita water use down to around a cost of $0.05/day at a 100 liters of use a day.
High Voltage Direct Current transmission lines typically lose about 3% per 1000km [1]. That's quite manageable. Building a line of that length through multiple countries would take a while, but the Saudis could pull it off. They certainly have the money
Woah, didn't realize long distance transmission was that efficient. Now I'm curious how crazy of an idea it would be to build a global solar electrical network to obviate the need for batteries (the sun is almost always shining somewhere).
On a smaller scale, putting solar panels in the Sahara Desert and run a big cable to Europe is frequently considered. Being in a desert removes most cloud cover, it's close to Europe, and the area required is miniscule even if you want to provide the entire area of Europe that way.
The only problems are that the day-night cycle still exists and storage is expensive, that it would be a massive capital investment, and that the governments of most countries in the Sahara aren't very stable.
In 2011, France and the US forced a regime-change that resulted in civil war and de-facto partition of the country. I would expect most of that investment has been destroyed by now, and the security situation is unlikely to be stable enough to restart this sort of grand plan for at least a decade.
In the meantime, Morocco (faithful French ally, an absolute monarchy with extremist-Islam undertones) started its own effort, which is now considered to be the largest solar-panel plant in the world: https://en.wikipedia.org/wiki/Ouarzazate_Solar_Power_Station
>It's very smart on Saudi Fund's part... They would own the worlds largest solar, battery, and EV producer. They could cover a desert in panels and sell the cars and batteries across Europe/Asia, while providing the power as well. They would once again have the largest control of the world's energy.
I'm afraid I have to shatter this dream. There is a thing called Ohm's law, and it is not taught in business schools as I know... :)
Out of curiosity, I googled current HVDC lines, and was surprised at how rapidly it has started to replace HVAC for long-distance transmission. It now strikes me that getting a line from the peninsula to europe will be more of a political effort than a technical one, which is not the conclusion I was initially expecting.
That's an interesting take but I don't think it's Musk vs the Sauds. Musk realized he can't attract and retain tech talent with the shares in such a volatile state. I believe that's the underlying motivation here.
Solar panel efficiency is inversely proportional to temperature, plus all that sand + wind is going to be adding to maintenance costs. There's better places to put solar panels than in the desert.
I'm not sure about any of these plants in particular, but a lot don't use PV cells, instead using mirrors to heat and evaporate a liquid, driving a turbine.
I don't know whether it's accurate, but I've noticed people saying that these sorts of plants are kind of obsolete these days, because of the development of PV cells.
It's actually liquid sodium in newer designs, which retains heat well, is stored in an insulated tank, and can generate power using that heat even after the sun goes down. So no, I don't think they're obsolete.
https://www.scientificamerican.com/article/new-concentrating...
Want to know something else that is fun about the concentrated thermal projects?
If the sun is not available for long periods of time and the fluid cools down too much they have to dump energy into it to prevent it from solidify to point of overwhelming the pumps capacity!
Sounds like a good reason to keep that kind of generation in the desert, then. That's interesting, though. I suppose they could just divert some power generation to battery storage for those heaters though, just like nuclear reactors have backup generators for cooling.
Not necessarily obsolete, just uncompetitive. Many of the concentrated thermal systems can meet 30% efficiency but they usually are more of steel and plumbing projects than solar projects. On top of the high initial capital cost, they have higher maintenance as it is a system of high temperatures with moving parts.
All PV cells have a temperature coefficient that reduces their productivity in heat. some preform better than others. Thin-film is notable example.
Placing large PV farms in the desert is mainly about two things: High insolation value and cheap land that is easy to build on. Many of the desert regions have very few cloudy days each year offering more available sunlight hours improving the annual production of the system. Second, land in the desert regions are orders of magnitude cheaper to buy than other areas. This drives down overall project cost and improves the IRR. In addition to the land being cheap, it hold little economic value for much else. If it can be used for generating power, then local authorities are often favorable when reviewing these projects.
It is harder than you might think. Not all dirt adheres the same way. Dried bird dropping are significantly more resistant to abrasive cleaning than settled dust. On top of that the opacity is much more problematic for the cell as it creates a resistive hotspot.
I agree module cleaning is not a showstopper, but it does have its challenges.
-Birds fly everywhere; can't hide from them. It can be hard to diagnose some of the problems they create.
"Robotic" cleaning is really not as common as the headlines make it seem. A couple of big projects have used them to target settled dust that can be removed without water. For most projects, the robotic systems don't pencil out and people default to paying a small crew every couple of months to go out and wash them.
Why is Saudi Arabia Elon's enemy here? Perhaps it is the opposite, and the Saudis are the one's funding the whole going private operation in the first place?
Sure, or we can think of it in the same way we thought about their investment in Citigroup in 2007, their investment in Uber in 2016 or their investment in Snapchat this year.
They are masters of market timing... just not the good kind.
If you have data to suggest that their risk adjusted returns are abysmal then that would be very interesting. I don't see the point of picking 3 investments from a fund worth hundreds of billions and presenting it as data that they are underperforming.
Super coincidental that Elon announced he was thinking about taking the company private right after this happened.
My guess is that they had run the numbers on taking the company private before. Since the Saudis had approached Elon before and he denied their offer (for whatever reason) he probably was upset that they acquired a stake through secondary markets and tweeted their half-baked plan... (not a good course of action IMO)
How so? They've just got 5% of Tesla and he's talking about taking it private at +15%. It seems like instant profit to them just from the reaction to them buying it.
Or Softbank. The Bank of Japan is printing money like crazy to keep the Yen from deflating. Softbank seems to intent on getting out of Yen and into assets while the Yen still has the value it does right now.
Okay I know nothing about trading halts but reading this: https://en.wikipedia.org/wiki/Trading_halt it seems that Tesla is supposed to tell the exchange to halt trading 10 minutes prior to releasing news. Did Tesla initiate the trading halt here (late) or did the exchange?
I am not familiar with this area but based on the glossary here https://www.nasdaqtrader.com/Trader.aspx?id=tradehaltcodes , it seems if the halt was done by the exchange it would have a T12 halt code. SteveGregory's comment cites Tesla trading was halted using a T1 halt code (defined as "Trading is halted pending the release of material news"), which I assume would be initiated by Tesla.
I get it, it's Musk, but this is still such an irresponsible way to announce news of this magnitude. From a WaPo article:
The sudden announcement gained immediate criticism from former regulators who suggested it may conflict with SEC rules for potentially market-moving statements.
Harvey Pitt, a former SEC chairman, told CNBC on Tuesday that Musk’s tweets “might consittute fraud if any of the facts he disclosed are not true” or if there was any indication that he had floated the proposal purely to boost the stock price
It's irresponsible from our point of view because we don't know much about this yet.
From his point of view, if he is serious about it, then it's not a false fact and it's not floated purely to boost the stock price, so why should he be afraid?
Because it’s the SEC. It’s the favorite tool to send rich people to jail. Of all the things rich Americans should be afraid of, the SEC probably ranks near the top, short of physical threats.
The information was disseminated to all parties at the same time and they weren't in a "dark" period. I know several people are upset given their bet but I don't see this being any different than some headline in an AP release. If anything, twitter is more immediate to the masses and there's no middleman.
>Because it’s the SEC. It’s the favorite tool to send rich people to jail. Of all the things rich Americans should be afraid of, the SEC probably ranks near the top, short of physical threats.
Living in America :)...
I'm very glad that a number of countries require nothing more of public companies than timely disclosed financials.
Americans, are you happy with your country very likely having the world's most complex securities laws?
The SEC can't send people to jail, they have to refer a case to law enforcement for jail to be a possibility. It's even in the TV show Billions, or you can read about Theranos.
RE: Elizabeth Holmes
"This is pretty standard practice with the SEC. The regulator explains on its website that, while it works with law enforcement agencies, it's investigations lead to civil or administrative actions. It routinely penalizes brokers and traders by banning them from working in the industry or accepting outside money. "
Small nitpick, he's the CEO, but not the founder. Tesla loves to forget telling this part of the story, but it was founded by Martin Eberhard and Marc Tarpenning in 2003. Elon invested the next year, but didn't become CEO until 2008.
my concern is, is this an indirect admission they cannot meet their bond/note requirements? While irresponsible I am not sure if much of a case will stick if he doesn't act on it personally or have it shown he tipped others off before the tweet.
my interest being I just ordered a III on Monday. Oh joy.
As far as I know, he isn't trading any of his stock, so any market movement he wouldn't personally benefit from. Unless someone can prove that he made statements at the behest of someone that did trade the stock, I can't see how this breaks any laws. As an aside, since the stock is essentially a Musk sentiment gauge rather than having anything to do with the actual fiscal performance of the company it must be fun algo trading his Twitter feed...
Which is kind of why he wants to go private. Because these rules are designed to prevent the behavior of corrupt CEOs, which he is not. Being public makes him richer, but ties his hands and prevents him from making certain decisions.
That sort of depends on your definition of "corrupt", and I'm not sure you can say that so definitively. Yes, Musk isn't running these companies to line his personal pockets. But he's been incredibly clear that his goal is to raise funds for his Mars colonization project, which creates a tension between that aim and his fiduciary duty to Tesla. (This is not to say he's guilty of anything, but that even intentions we see as pure don't exempt him from standard practices.)
>SEC rules for potentially market-moving statements. Harvey Pitt, a former SEC chairman, told CNBC on Tuesday that Musk’s tweets “might consittute fraud if any of the facts he disclosed are not true”
Have anybody given weight that even an SEC chairman can't give a yes or no answer on application of US securities law, but uses word "might"
The SEC chairman likely doesn't do the actual legal work in bringing cases to court. Would you expect Jeff Bezos to know how to navigate his warehouses and ship packages out?
I would imagine an act is not a crime till it is investigated by investigators or tried in court. Everything you hear now a days is "allegedly" because no one wants to be definitive and then get sued for libel in the chance they are wrong.
Perfect example. Nicholas Cruz
..just googling and picking an article.
"Cruz is accused of gunning down students and teachers in various classrooms at the school in Parkland on February 14, in one of the deadliest mass shootings in modern US history."
Why is he accused? We all know he did it. Why not say "Cruz gunned down..."? This is after he confessed to it, after security footage was reviewed.
No, because I'm familiar enough with law in general to know that not doing so without a complete picture of the facts is almost always an oversimplification.
All this tells me is that Pitt is being appropriately careful.
There's probably still too many people won't think he's an underachiever until they see all three boosters of a FH landing while their landing spot is being circled by autonomously driven Teslas.
This feels like a false argument to me. I don't think most people are saying he's an underachiever, just opposing the idea that everything he does is good.
Come back when you led a team to build an orbital rocket with a reusable first stage while simultaneously leading a team to build a luxury electric vehicle with self-drive capability... and largely succeeded in both with a few hiccups.
Nothing but a very comfortable safety net. I mean come on, his parents were part of the group of people who fled South Africa after the end of Apartheid... not exactly rags to riches.
He's done a lot, but "started with nothing" is seriously disingenuous. Additionally: you don't have to "start from nothing" for your achievements to be worthy.
I salute Musk for all his achievements. No question he has changed our world in more ways than one. But as the CEO of a public company he has a responsibility towards his shareholders many of whom continue to stand by him through thick and thin he has to be careful with what he says and the medium he chooses to say things that could effect his company. None of this would apply if he is not a CEO of a public company.
Putting up for one thing doesn't mean you're automatically capable of putting up for all things. I'm not diminishing his existing achievements. He's put up very well in specific cases.
Case in point: Musk calling a professional diver a pedophile for having a informed opinion based on his personal experience and expertise.
The kids were rescued, Musk had nothing additional to put up, and would have been better following the path of shut up. He was already getting a ton of praise for quick action, and got upset that not everyone universally appreciated it.
Musk should not have gotten into a twitter war. The other guy started it (check the full context) but still... where I come from we have a saying: "Never wrestle with a pig. You both get dirty and the pig likes it." When you war with a troll you usually end up looking worse than the troll.
That being said I care more about Musk's real accomplishments than a few minutes of Twitter asshattery.
All: please don't do the superhero-vs-supervillain thing all over again. It's repetitive in the extreme, which makes it unsubstantive, which makes it off topic here.
"...Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity’s SpaceX investment."
Does anyone know more about how this is organized? My understanding (which could well be wrong) is that organizations with over 500 owners must do normal quarterly filings in the same way a publicly traded company would. Yet in previous years I've searched and come up empty handed on SpaceX.
I think the model is the fund is one investor in Tesla, many people are investors in the fund. So Tesla doesn't have materially different reporting requirements.
How does this skirt the accredited investor requirement in Sarbanes-Oxley? Seems like a very obvious way to avoid it, and hence something that would not be allowed.
Honestly, I'm starting to think this is less about avoiding the public markets and more about getting out of the crushing debt (8.65 in liabilities comming due before the end of March 2019)that they have coming due in March of 2019.
The billion of debt coming due is convertible above a price of $360 and if he can keep the price propped up will almost certainly force all bond holders to convert into equity holders.
I mean, think about this rationally, if it wasn't for the public markets Tesla would already be bankrupt. Going private means giving up this access to capital as well as having to come up with 9 Billion to fund debt commind due.
With stock you have something to bargain with when selling debt. Without it you've lost a huge weapon.
Same for paying your employee's. No more tesla stock that appreciates each quarter that you can sell as soon as it comes to you.
Also just did some digging on Tesla bonds and CDS...
At current levels, they imply a about a 30% chance of a Tesla default in the next five years. It costs around $1.3 million to insure $10 million of bonds against default.
And if Tesla went private and he funded it with debt he's looking at a rate somewhere around the low teens from what Bloomberg is reporting which means borrowing $58 Billion to finance this would cost aroudn $7.1 Billion a year in interest payments at 12.5%.
And keep in mind he's paying that to cut off public markets access for raising money, one of his best sources of cheap capital in the past 5 years.
> Readers should also note that, unlike the 2018 and the 2021 convertibles, where the principal is always repayable in cash, the 2019 convertibles may be redeemed wholly in shares (at Tesla's option and if the requisite conversion ratio has been met).
So yes the bond holder can choose to convert after Dec 1st 2018 and Tesla can force them to convert when the bonds come due in March 2019
One would think that if he has people willing to invest $50 billion into taking Tesla private that securing a credit of 8 billion looks like a lesser matter in comparison.
(First, I don't see any really legitimate possibility that Saudi investment funds are going to pony up $40 billion to take Tesla private, that being said...) I don't see any possible reason why CFIUS would reject this deal. CFIUS deals with national security implications, of which Tesla is not relevant to.
> over the next 7-12 years there will be countries banning petrol/diesel cars.
Even today you cannot go to downtown Lisbon with a car built in the early 2000s, and last week the city of Turin announced that they'll basically forbid vehicles with Euro3 engines or less from the city's streets (Turin being the birthplace of FIAT and also hosting a most wonderful car museum). The writing is on the wall.
> over the next 7-12 years there will be countries banning petrol/diesel cars
I do not think so. At most, in that timeframe we will see countries starting to ban sales of new cars which are not plug-in hybrids or better. And then remember the average lifespan of a car today is ~20 years, you will still see old pure petrol cars on the roads in 2050 is my bet. Just like you still see old cars on the road today without any catalytic converters.
If you look at the electric car market today, you have lots of small cars with reasonable-ish range, one sedan with good range and two pretend-SUVs (Model X and I-pace) with good range.
No manufacturer anywhere makes a pure electric estate car (station wagon); this is the most popular type of car in Europe. Nobody makes an electric pickup; this is the most popular type of car in the US. Nobody makes an actual SUV, Ford Expedition/Toyota LandCruiser/etc. style that can fit four mountain bikes in the trunk and tow a 9000 lbs trailer. Nobody makes an electric commercial vehicles of the type electricians, plumbers etc. drive.
What do all these have in common? Inherently terrible aerodynamics / poor mileage and a relatively frequent need to go long distance trips. If you take current battery tech and do some optimistic extrapolation of future developments, you still end up with battery packs costing $50k+ and weighing several thousand pounds. Which isn't going to work anywhere, nobody is going to buy an $80k+ electric pickup when a diesel F150 starts below $30k.
But I do think we will see reasonable plug-in hybrid versions of these car types. And Tesla will never be building cars with internal combustion engines, so they're effectively locked out of what I believe will be the biggest part of the market.
Did Norway actually pass a ban with a date of 2025? Your linked article is from 2016 and says, "Yet there is some denial from other right-wing representatives that the move has been confirmed."
No, there is no ban passed, it was only sensationalist reporting. Here is a follow-up official press release from the ruling Conservative party which explicitly denies that there is a ban, and states there is only agreement between the parties that this is the goal. (Google Translate is pretty crappy at Norwegian.)
That could be more of a problem for ICE car manufactures than a solution. Regulations are the only thing that will force these people to innovate out of their current existence. With that gone, its basically EV departments have to navigate through powerful political cartels within the company running the existing product cash cows. In short it won't happen.
There is a reason why Microsoft cannot product a good mobile OS to date. It requires sidelining their biggest cash cow, their desktop OS.
> Nobody makes an electric commercial vehicles of the type electricians, plumbers etc. drive.
Maybe not exactly a copy of that type of car, but because none of the big car companies wanted to build one DHL started their own electric car for this use case: https://www.streetscooter.eu/
I once sold a four seater IKEA sleeper sofa to a lady who came to pick it up in an Audi A6 estate. We managed to fit the entire thing inside her car (with the rear seats down) and close the trunk. That is an estate car.
The volume in liters may be comparable between a Model X and (say) the Audi A6, but most large objects one needs to transport (furniture etc.) tend to be relatively cubic in shape.
If there wasn't a need for having big boxy trunks, surely we would all have transitioned to the (undeniably cooler) fastback-esque shape of a Model X / Mercedes CLS / BMW GT-series long before electric cars became a thing.
Volvo Estate owner here. Not only can I confirm that it carries things that there is NO way would fit in a large sedan, there are even some things (like sofas!!!) that fit in the estate but won't fit in an SUV with comparable storage volume.
I'm sure the reverse may be true for some SUVs, perhaps there's some large wardrobe box that firs in an SUV that won't fit in the estate.
What makes you say that? I've seen plenty of conversion kits that are adaptable to most cars. I've priced it out to build a fun project car and the only reason not to do it is the currently high price of batteries. So I expect volume to solve that and make electric conversions just easy. "Electric classics" are already a thing and look fun:
It's the closest one gets to an electric work van, for sure, but it's pretty small. It's more comparable to e.g. a Fiat Doblo (sold as the strangely named Dodge Ram ProMaster City in the US).
Next to a proper work van like a VW Transporter or Toyota ProAce, you're looking at less than half the load volume (~4.2 m^3 versus ~9.5m^3).
Germany considers to ban diesel cars from cities to meet polution requirenments of EU.
I consider to buy a new car at the moment. My favorites are electirc or petrol. I don't even consider hybrids. I see no benefits. They have no upsides of an electic car (quit, no exhaust, clean, simple). They are basically more expensive/complex petrols with a slightly lower consumption.
I did the math on this a while ago and calculated I could travel my normal commute back and forth on the battery of a plug-in hybrid. I would only need the petrol engine on longer trips. I'd probably spend 80% of the driving in electric mode and 20% in gas mode. I wouldn't really say that's just a slightly lower consumption.
Not exactly. What you are describing is correct for things like a Prius, with dual drivetrains. It is certainly not correct for cars like the Chevy Volt (or the BMW i3), with the main engine being the electric one, and a gasoline generator. This combination is less complex than a normal car – for one, you can remove basically the entire transmission and hook up the eletric engine directly (with maybe a reduction gear like a Leaf). The gasoline engine can be much smaller and simpler as it is only driving a generator (and maybe not even running all the time, depending on battery and workload).
Such a design is not as clean as a pure EV, but it is definitely better than what we currently have.
The Chevy Volt is not a serial hybrid like the I3. It has a very complex transmission system to blend the gasoline engine and electric motor power. A nice car, but not at all simple.
Keep in mind, the EU pushed heavily for Diesel in 1998 to meet the requirements of Kyoto. It is very ironic that now their most powerful member, Germany, is going against them.
It was supposed to be cleaner...but it generates nitrogen oxide (instead of CO2). Maybe nitrogen oxide is safer than, but I doubt at 40x the levels that most of the diesel manufacturers actually made their cars run at.
You've got it backwards. Germany pushed heavily for Diesel. The EU is pushing back by insisting on clean air in cities which Diesels have a hard time with. German politics is trying absolutely everything to avoid having to introduce driving bans.
That's kind of a glass-half-empty way to look at it, which is true for conventional hybrids. But real range-extended EVs also have the upsides of both cars:
- Quiet, no exhaust, clean, and simple when driving on electric (which is most of the time)
- Most (but not all) of the reliability of a real EV. (You can go almost a whole year on a single oil change, since you aren't using the gas engine much. You can go forever on a single break pad set, since you regen most of the time)
- The full range + refill speed of any gas vehicle (for roadtrips or other instances you needed it)
There's also some fun minor efficiencies in there too. Batteries in EREVs are smaller and weigh a lot less when they only have to carry you 50 miles instead of 250. Gas is a lot more convenient when you really do want to roadtrip across the whole USA as quickly as possible, (no hunting for charging ports, which might be broken or offline. No waiting for recharge)
I don't have the figures right here, but I believe it worked out that you could eliminate ~75% of all personal automobile tailpipe emissions in the entire USA today, if you put a Chevy Volt drivetrain into every single vehicle, and convinced just the people who park a car at a single family residence, to plug in their car at night. (even ignoring all apartment/condo/street-parking folks who cant charge)
Station wagons have better aerodynamics than sedans. They are worse on weight distribution (more hanging mass, higher center of gravity) and chassis rigidity (which means they can't be as sporty). It's a shame no one makes an electric wagon, but SUVs are in fashion. In addition, SUVs make for easy battery placement: just take a standard chassis, raise it 10-15 cm, and put the batteries on the bottom.
You're right that pickups and commercial vehicles are the hardest markets for electric cars. Conquering those segments means the rest of the mass market would be completely dominated by electric cars. The United States will also be one of the last markets to be dominated by electric cars, because of its characteristics (long commutes, big distances, heavy car usage).
>>nobody is going to buy an $80k+ electric pickup when a diesel F150 starts below $30k.
This is the same as saying nobody will buy a $600 iPhone. Only to realize in months that component prices have fallen by 50% and its not that expensive after all.
>Tesla are by far the most advanced of all "green" car manufacturers
Are they? I don't follow these things closely and I didn't realize that it was the case, I always thought that Musk's great idea was not so much technical superiority but rather aiming for the super high end and market an electric "luxury" car niche. How far ahead are they compared to, say, Toyota who's been making hybrid vehicles for a while now?
I also think your timeframe might be slightly optimistic, I can't really imagine a large western country banning internal combustion cars within the next 12 years, much less developping countries. I hope you're right though, I want to live in a world where ICEs are in museums.
It really depends on what you consider the "hard" part about making electric cars to be. Do you think that the design and engineering of an electric car is the difficulty? Or is it manufacturing millions of them at scale? If the former is the real difficulty, then you might be able to make sense of the Tesla stock price; if it's the latter, then the traditional auto-manufacturers should be able to easily come into the EV market transfer their brands crush Tesla on greater manufacturing quality and efficiency.
Dude, the Bolt is a compliance vehicle that loses a massive amount of cash every-time it is sold.
Secondly, the sales of the Bolt have already collapsed and all the Tesla car outsell it. The model 3 outsells it 7 to one and this month probably 10 to 1.
Just comparing range and not looking at the economy or the sales number is basically spreading FUD.
> The 3 and other models are also plagued by quality control problems. The Bolt is both more reliable and has a better interior. And a speedometer!
I'm sorry but that is ridiculous. The Model 3 has some quality control issues on the frame and GM does that a bit better. However if you go into the electronic, the software, the drive-train, the charging network, the suspension and so on its not even comparable in terms of quality.
See for some info on an independent evaluation of the Bolt:
>I'm sorry but that is ridiculous. The Model 3 has some quality control issues on the frame and GM does that a bit better. However if you go into the electronic, the software, the drive-train, the charging network, the suspension and so on its not even comparable in terms of quality.
The software in the Model 3 is famously buggy. Did you see the Edmonds review?
> Nav screen going haywire: zooming, scrolling, pinching, pixelating all at once.
> Audio system turning on by itself at full volume.
> Audio system came on and went to full volume all by itself while the car was off, locked and unoccupied. I heard it from 100 yards away. "Who is that joker playing his stereo so loud I can hear it from here?" Oh, it's Elon. I turned it down, but it kept wavering up and down as I started driving, working against my repeated attempts to dial it down. Then it blasted all the way to maximum. My ears are still ringing two hours later. Fixed after reboot. Not sure about hearing damage.
> Audio page leaping up and down rapidly like the up-caret button to expand the source menu was being played with by a kid who ate too much candy. Concurrent with the volume problem above. Same reboot.
> The passenger vanity mirror fell off completely. Installed and held on only by double-sided tape. Reinstalled by pressing really hard on the mirror.
> The screen went completely dark on startup, no music or operation. Restarted the car. The screen worked; the backup camera did not.
> The car will not shift into Drive or Reverse upon startup. "Vehicle Systems Are Powering Up. Shift Into D or R After Message Clears." Have to wait for it to power up. A loud click comes from the rear of the car as if a drive shaft is engaging and the message on the screen goes away.
> The car displays a new message: "Cannot Maintain Vehicle Power. Car May Stop Driving or Shut Down." No shutdowns yet, but keeping an eye out.
> The software in the Model 3 is famously buggy. Did you see the Edmonds review?
The Tesla software also way more better feature then most other cars. Compare Tesla software experience and the interaction of the car and the app is not even comparable to anybody else and most reviews reflect that.
Also, Tesla can update over the air and they are consistently fixing these bugs.
Clearly it has not hurt Tesla sales or the consumer rating they are getting.
Comparing that problem to the Bolt complete lack of integration of the different system and losing money on every car, are not even comparable in terms of how problematic it is.
They are both products of the same class, but one of them just obliterates the other both in terms of technological sophistication and cool factor. Turns out that has an impact on market success.
The "hard" party is actually nothing you have mentioned. The hard party is to make it PROFITABLE. The simple fact of the matter is that no other car manufacture has a clear plan of how they will do that.
All of them are building up the technology base, at least in terms of the drivetrain, but they have failed to vertically integrate the electronic to the same extent and the do not have a reliable low cost battery access.
Lets do an example. The battery is a huge part of the cost of a car. If you have to buy this you have to pay a profit on that, not to mention that because all non-Tesla car buyers compete for the same batteries the margins will be huge.
Independent evaluation of the Bolt for example are showing that GM is losing money on every single Bolt that is produced. They have competently bought the battery and and the electronics part. Its a integrated mess in a GM box. That gone cost you a lot and GM will never built 300'000 Bolts. The Bolt is built for compliance and to be able to build more SUVs (because the strange fuel economy regulation system).
So the game that the other manufactures are basically waiting until they can build profitable electric cars while Tesla is hellbent on producing as much battery capability as they and that allows them already to have a cheapish car on the market and to make billions of $ selling it.
> Lets do an example. The battery is a huge part of the cost of a car. If you have to buy this you have to pay a profit on that, not to mention that because all non-Tesla car buyers compete for the same batteries the margins will be huge.
Panasonic is the one who manufacturers Tesla's batteries, that's not a operational advantage for them. Many other car companies have similar deals with other battery manufacturers, like Toyota/Mastushita. Also, I don't get why you think battery margins will be huge? What is the major reason that prevents significant supplier competition?
> Independent evaluation of the Bolt for example are showing that GM is losing money on every single Bolt that is produced.
Yes, it was mainly built for compliance reasons as a compromise vehicle, but it isn't that Tesla has been able to construct a vehicle for less price than Chevy constructs the Bolt.
> So the game that the other manufactures are basically waiting until they can build profitable electric cars while Tesla is hellbent on producing as much battery capability as they and that allows them already to have a cheapish car on the market and to make billions of $ selling it.
What cheapish car? The Model 3 is $49,000 as you can configure it currently?
> Panasonic is the one who manufacturers Tesla's batteries, that's not a operational advantage for them. Many other car companies have similar deals with other battery manufacturers, like Toyota/Mastushita. Also, I don't get why you think battery margins will be huge? What is the major reason that prevents significant supplier competition?
There is a shortage of battery production. As I have already said, the reason EV are not sold is because the large manufactures can not make a profit on it.
Tesla has massive internal work on everything from the pack to the chemistry on the cell and that is licences technology by Tesla that Panasonic can not sell to anybody else. Tesla is simply ramping up production because they know demand will exists.
As with many industries, EV are not profitable and the car manufacturers or not gone order millions of battery packs, so there is not quite the large scale investment there yet. What you say is simply not true, the integration battery tech and production into Tesla is far deeper then for the other manufacturers.
And the video I provide is by a company that is reputable for cost analysis and that is the conclusion they come to.
> Yes, it was mainly built for compliance reasons as a compromise vehicle, but it isn't that Tesla has been able to construct a vehicle for less price than Chevy constructs the Bolt.
It is not relevant to compare direct production cost. The question is how much does it cost to product to how much you sell. Tesla can make 20-30% margin on the avg Model 3. While the Bold loses GM 5-10k per car sold.
> What cheapish car? The Model 3 is $49,000 as you can configure it currently?
Fair enough, cheapish is not the right word. Lets say a mass market car, meaning a car they can product 300k to 500k off and make a healthy profit on each car sold.
For the class that they are operating in that is competitive price and that is why they have 50% market share already, and that is gone jump up quite a bit more. It simply makes sense for them to focus on high value cars for now, ramping production on higher value cars gives you better cashflow in a time where you need it.
Even at 35k its not really a cheap car, but independent analysis and their own guidance has shown that they can make and expect to make a profit on that and they will have to do this in the next half year or so.
They are essentially unopposed. But they are also solving the problem that the other car manufacturers have already solved: Mass producing cars.
Why would Mercedes or BMW or Audi try to compete with Tesla directly right now? They have combustion engines that are mature, known tech with sunk R&D costs that they want to sell as long as possible. This is of course Teslas chance. The others are just doing R&D while Tesla is selling cars. But it's still hard to see Tesla having a market share in EVs in 15 years time that justifies it's current valuation.
> They are essentially unopposed. But they are also solving the problem that the other car manufacturers have already solved: Mass producing cars.
No. Wrong. Sorry.
Tesla is not just trying to mass produce cars. They are trying to mass produce profitable EVs, something that the others simply can not do.
> Why would Mercedes or BMW or Audi try to compete with Tesla directly right now?
My very argument is that they are not competing at the moment.
> The others are just doing R&D while Tesla is selling cars. But it's still hard to see Tesla having a market share in EVs in 15 years time that justifies it's current valuation.
Why? Unless you believe Tesla makes somehow fundamentally worse cars then everybody else, there is no reason why the other manufactures should have an easy time boxing Tesla out of the market once the have major mass production of their cars set up. They are not magic.
Tesla will have a huge established direct to end user sales force, a massive charging network, a well integrated app and software stack that will help costumers to their brand and a positive public image.
> My very argument is that they are not competing at the moment.
And my argument is that that's by choice rather than by inability.
Also there is a large amount of overlap between mass producing electric cars and mass producing combustion cars.
Finally, there is no question that Tesla has the potential to be a competitive car manufacturer. Let's say they are super successful and gain a market-share comparable to BMW. I'd say that's a top end scenario for Tesla. It has a good Brand but so do its competitors.
But Tesla is valued at the same level as BMW _right now_. I just don't see that. There certainly is downside risk, but I just really fail to see the upside potential. What should enable Tesla to grab a larger market share than BMW? Or Audi? Or Toyota? Nevermind the Chinese battery manufacturers that might want to push into the low end of the EV market.
> Panasonic is the one who manufacturers Tesla's batteries, that's not a operational advantage for them. Many other car companies have similar deals with other battery manufacturers, like Toyota/Mastushita.
Panasonic = Matsushita
AFAIK, Toyota does not currently have a battery partnership (other than the R&D-based old partnership with... ahem, Tesla), but in December last year they + Panasonic started a feasibility study to see if Panasonic could become their main supplier.
> What is the major reason that prevents significant supplier competition?
That it's hard. Lithium ion batteries at scale is a difficult manufacturing process. All the R&D is going into battery. Essentially the electric engine is easy, but the battery is hard. It's exactly the other way around than in classic cars. Imagine if all major car companies would be buying engines from a few Asian tech giants.
There is quite some debate on how much of the profits will go to the battery manufacturers eventually, but I've seen 30-70% from serious analysts. I think nobody really believes the top line number, but even the more reasonable 30% would be massive.
But note also that if Musk pulls this off, he might be able to do it without external financing, because virtually all Tesla creditors and shareholders today (i.e., people who are in one way or another net-long the company) are true long-term believers in Musk's vision who are unconcerned with the company's short-term financial issues. (People concerned with Tesla's financial issues are either avoiding exposure to the company or betting against it.) True-believer shareholders (including converted creditors) will want to hang on to their shares as the company goes private and shares start trading "by appointment" on less liquid, secondary private equity markets, potentially at more unicorny prices due to the absence of short selling.
If I'm right, short sellers are in for a world of pain. They will likely have to scramble to cover their short positions in the face of a limited supply of shares before delisting.
Most of the equity investors are institutionals that cannot keep the investment in a non-traded stock even if they wanted to. And bond-holders care about the coupon, not about Musk's vision.
Define "short term financial issues". I don't know about you, but if I'm someone owed a loan or payment for supplies at a specific date, I expect to be paid in full, regardless of whether I believe in their long term vision. Many of the investors who you call "converted creditors" are not people interested in investing in a highly illiquid stock.
You may be right, but history has shown otherwise. Tesla seems to always find a way to defy what seems obvious but is not. Musk would not have made this tweet wit ha specific target unless he was pretty sure he could get it all financed and finalized.
According to internal memos, at SpaceX they have liquidity events roughly every six months, by bringing new investors on board and allowing stock-holding employeees to be part of the transaction. The same could be done at Tesla - new investment rounds would be extremely easy with everyone dying to get onboard the privately held company.
No, because the shares actually represent ownership in a company that's engineering and building rockets.
I believe a Ponzi scheme is when you pay "interest" to early investors, via investments from new members. There is never any income generating activity other than recruiting new members.
No, that's a Ponzi scheme. Ponzi schemes and pyramid schemes are very similar. Essentially, a Ponzi scheme is where you pay people based on the enrollment of new people. A pyramid scheme is where the payout is based entirely on the new recruit's ability to recruit more people.
You are correct in saying Tesla is neither a Ponzi nor pyramid/MLM scheme, but you have erred in your distinction between the two.
A Ponzi scheme purports to have some amazing business opportunity, but secretly pays returns using money from new investors. They will often use MLM/pyramid-style recruiting tactics, and not solely rely on the fraudster for recruitment.
It's true that MLMs pay out fees collected from newer recruits, but everyone knows where the money is coming from. Usually MLMs also have some semblance of actual business activity (Mary Kay, Amway, Herbalife, etc.)
I hope he pulls this off. It would be excellent if he could get out of the public company weeds, and get more brain bandwidth to focus on executing and solving problems.
I really don’t get the obsessions with going private. It used to be everybody’s goal to go public, an IPO was one of the greatest achievements. Musks wants to go private to have better control of “his” companies and to prevent market pressures?
I think being a public company is good for many reasons, amongst other: the public can participate in the success of companies and for the company it provides a great reality gauge. Maybe that’s what he’s afraid of...
>I think being a public company is good for many reasons, amongst other: the public can participate in the success of companies and for the company it provides a great reality gauge. Maybe that’s what he’s afraid of...
The return to some sort of 19th century capitalism dominated by private industry magnates has been going on for a while.
He stated multiple times that he doesn't like public market because investors don't care about long term goal. That's why he said he will never take SpaceX public (if he can), as his goal with SpaceX is to go to Mars, not to optimize for revenue.
I believe he also said he only took Tesla public because he had no choice, not because it was his goal.
There's hundreds of public companies focused on long term goals. Amazon, Berkshire Hathaway, Starbucks, etc. Why is Elon Musk special compared to these others?
If you read what Elon Musk wrote...he does not believe Tesla will be private in the long term. He believes the stock price is a distraction, and invites people to crap on, or harm the company because they are shorting it.
Public companies have pressure to perform every quarter, rather than focus on the long term goal. General Motors stopped reporting quarterly car sales (or monthly?) because it's a distraction. GM's focus, is actually electric vehicles and self driving cars.
Per Musk's announcement, once Tesla is stable, and producing at a constant rate with predictable growth...like Amazon like Berkshire Hathaway, like Starbucks, then he will consider making Tesla public again.
> If you read what Elon Musk wrote...he does not believe Tesla will be private in the long term. He believes the stock price is a distraction, and invites people to crap on, or harm the company because they are shorting it.
Cynically, I think it is hard to reconcile the Elon Musk who says "our stock price is a distraction" that we need to not consider it moving forward, and the Elon Musk who has borrowed against 40% of his stock in the company and whose pay package is entirely based in stock. This move prevents him personally from facing many possible downside risks, and it is hard to take his statements at face value.
> Public companies have pressure to perform every quarter, rather than focus on the long term goal. General Motors stopped reporting quarterly car sales (or monthly?) because it's a distraction. GM's focus, is actually electric vehicles and self driving cars.
General Motors stopped reporting monthly sales numbers in April, citing that monthly numbers are too volatile to gain meaningful insight from. That strikes me closer to a decision meant to provide greater transparency than one of Tesla's sort.
> Per Musk's announcement, once Tesla is stable, and producing at a constant rate with predictable growth...like Amazon like Berkshire Hathaway, like Starbucks, then he will consider making Tesla public again.
None of those are anywhere close to the predictable business you seem to think they are.
Berkshire especially. Prior to 2017, Berkshire consistently posted extremely up and down earnings due to its huge positions in the re-insurance business. Since 2017, it has posted even more volatile earnings because its public stock positions were required to be marked to market instead of at book value. And you know what? Wall Street hasn't cared about the quarterly choppiness of the Omaha company.
My point here is that Wall Street cares about quarterly financials... for some companies. If Elon had one that had proven himself capable of meeting his own goals or generating cash, he would be in that category. But instead he has a company with $10 billion in debt, only been cash flow positive for two quarters, and never come close to meeting its own stated estimates. It's kind of hard for his debt and equity holders to not start eventually asking "where's the beef?"
I'm pissed. I've been invested in Tesla for over two years. I was hoping to hold for the long term and maybe retire early. It seems to me that taking Tesla private is just another investment opportunity being taken away from the masses. Think about SpaceX, think about all the startups that Google and Facebook buy up that are never publicly traded. There are many investment opportunities out there, probably most of the best opportunities, that are only accessible to an elite club of billionaires.
Musk claims people will still be able to invest in Tesla and hold shares, but I'm heavily skeptical. I'm Canadian, and many US financial companies do not deal with foreigners. There is also no way for me, currently, to invest in SpaceX. That opportunity is reserved to the ultra rich. As a Tesla investor, this is a real blow. As someone who grew up poor and only became "middle class" after years of hard work, I feel like I've been spit in the face.
If this goes through, Tesla will no longer be listed on the stock exchange, and all those shares will be force-bought at the sale price. There is talk of creating an investment vehicle that allows existing shareholders to retain their ownership after the company has gone private, but there isn't any information yet on how this would affect foreign investors.
Elon already said this was not the case. You will be able to continue to hold. Stop spreading a panic when you have no evidence that your story is true.
> I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share[...] My hope is for all shareholders to remain
Yes, I got that part, but "stay investors in a private Tesla" doesn't mean that this will magically happen by default. Depending on how your broker operates, you will at the very least have to sign some documents. I don't know enough US securities law to know what happens with the currently listed shares, but they will probably disappear and be replaced by some other ownership structure.
There is also the possibility that your broker won't do the necessary paperwork and will just liquidate your position, or require you to move your shares to a legal entity that can assist you. Granted, they probably wouldn't do this without notifying you. And if you're a non-US person, there are probably issues regarding transfer of shares, potential tax realization and so on. Not to mention the requirement to be an accredited investor, which I'm not sure how Tesla will skirt. There are a lot of open details here.
I can see that my initial comment could be misinterpreted, but my point was that "You will be able to continue to hold" is not quite the complete picture.
This can be summed up as “it sucks to be not-rich.” But that’s always been true. Class mobility has been the exception rather than the rule, and I’m not sure there are ways of changing that other than on an individual basis (i.e. starting a startup and winning).
A grim outlook, to be sure. But look at the flipside: emperors of old could only dream of the luxuries we enjoy on a daily basis. We can eat peaches in winter!
Unless I'm mistaken, you are an accredited investor by default, by US rules, if you are not a US person. I wouldn't give up the possibility of retaining your ownership share just yet.
I don't get the obsession with going public. It has killed or derailed many a great company. It's not exactly a good thing to constantly be chasing short term profits and quarterly results over long term health.
The idea that companies should have the goal of going public is deeply flawed/unhealthy, I think. Though it makes sense for some.
That's true of Apple - how about SNAP or SHOP? or a ton of other smaller software companies that most have not even heard of apart from the ones in the know?
Saudi money is dripping with blood - the kingdom's wealth and control is a result of well documented massacre of dissidents, of Shias and of funding terror and patronizing the Wahabis, especially against philosophies opposed to the kingdom.
It's deeply disappointing to see Musk legitimatize the Sauds, who threatened Canada with a 9/11 style attack just 24 hours ago
If anything it looks like one of the reason to go private is specifically to prevent the Saudi fund from being able to increase their ownership by buying on the public market.
FT which broke the story, said that the Saudis approached Tesla to buy a stake, but Tesla refused, for whatever reason, probably financial, or maybe didn't want to dilute the stock.
Musk can do nothing to stop anyone from buying or shorting Tesla shares, that's regulated by the government.
So how is this true again?
>It's deeply disappointing to see Musk legitimatize the Sauds
Also, don't you know that the Saudis put $50 billion into Softbank's fund?
> Also, don't you know that the Saudis put $50 billion into Softbank's fund?
Anyone with a conscience would refuse Saudi funding, funneled via SoftBank or directly. Remember how HN and googlers were up in arms against accepting Pentagon money, this is a million times worse.
It is true that Musk is accepting a bailout from the Sauds, are you disputing that?
Hence, it's disappointing that he's ignoring, or somehow rationalizing all the blood shed by the Sauds
> It is true that Musk is accepting a bailout from the Sauds, are you disputing that?
How did you reach that conclusion? He declined to sell them new shares, so the Saudis bought them on the open market. Tesla didn't get a dime. What bailout are you referring to?
All: please stick to specifics and don't go into MuskMania (the fever that results when MuskLove meets MuskHate). That's always the same and therefore off topic here.
I don't mean to rub it in , those people who said to short Tesla a couple weeks ago were sure wrong. Last week Steve Eisman who rose to fame in 2008 by betting against the housing market, shorted Tesla. That position is probably at least 25% underwater now. Not only that, but Tesla losing money does not mean it is insolvent, because it can keep raising money and most of those losses are capital expenditures instead of operating losses.
While I don't necessarily disagree with your statement it is important to note when Eisman and others shorted the housing market before the 2008 collapse their positions also took big negative hits having to pay hundreds of millions to hold their short positions. Obviously in the end of the housing market collapse they made massive profits. Still very early in their TSLA position to determine the winners & losers.
If Tesla goes private, that is the end for the shorts - there is no "after" after that. Everyone who shorted will have to pay back their shares at $420 a share (or whatever the final price ends up being).
That if is a big if. Tesla is currently trading $40 under their supposed acquisition price. That's not exactly high confidence from the market that this deal will go through.
that is because nothing has been finalized. it can easily get there just based on market momentum. Tesla gained $70 in a week. another 40 is not that hard
Wall Street loves free money. The stock was trading at $360 before this proposal was announced, and only moved a third of the way to the purchase price on the news. That's not implying investor confidence that this will happen. Otherwise, plenty of people would be willing to load up on the stock on the assurance it would be bought at $420.
I'm not sure Tesla's public market story is over. It's somewhat absurd for a company to announce a plan that would require $40 billion in capital to be raised to finance it, and offer no details on where that is coming from.
Two, Tesla has large operating losses to go along to its CapEx and many shorts dislike how exactly their choosing to classify many of their expenses. Depending on how you look at their accounting, you can easily believe this company is completely structurally unprofitable.
The people who are betting against Tesla are not stupid.
ok bro, I'm not sure we have the same definition of smart people if yours are people decided to buy a bunch of cryptocurrency and keep it all in a website built in php
Their are insane. They have absolutely no leg to stand on.
Tesla has sustained enough Model 3 production that they produce positive cashflow and they will be profitable in Q3/Q4. As one large investor said, Tesla short term guidance has been pretty reliable.
Unless some massive macro event happens there is no way Tesla stock is gone fall back to prices where many of the shorts hold once they have proven the are able to mass produce cars.
Their reasons for the short positions are getting worse and worse. The main argument has been that Tesla is unable to produce Model 3 and will not have positive cash flow. Those arguments are all but dead in the water if you look at current sales numbers.
Elon has just written an email to employees, also published on the site, explaining how he thinks going private would be good for Tesla and very generally how it could work.
It doesn’t appear to include any more specifics about where funding for the opt-in buyout would come from.
TSLA resumed trading just before closing bell and closed at $379.57 up 11% for the day.
"First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium." - https://www.tesla.com/en_GB/blog/taking-tesla-private?redire...
If you hold shares in a company that gets bought, your share is converted into your portion of the proceeds. You can't refuse.
In this case, Elon wants to let current investors stay investors, so you should be able to hold your share and it'll convert into whatever the private equity equivalent will be.
352 comments
[ 3.4 ms ] story [ 228 ms ] thread"Am considering taking Tesla private at $420. Funding secured." Elon
The replies raise an interesting question: does this count as stock manipulation? I’m not sure it would, but the rules seem a bit arbitrary sometimes.
It’s the size of the download.
Its a joke. The only alternative is that Elon Musk is manipulating the price of his shares by tweeting private and sensitive information and therefore needs to be fined by the SEC and possibly jailed for stock manipulation.
Therefore, its a joke. Because as stupid as Mr. Musk has been this past year, I am sure he's well aware of the illegality of stock manipulation on American markets.
It's not...
https://mentalfloss.com/article/62749/what-meaning-behind-42...
From the article
> You may have heard that 420 is police code for possession, or maybe it’s the penal code for marijuana use. Both are false.
420 is also somewhere in the range of 15-20% higher than the current price, making it a realistic offering price.
Also:
* https://twitter.com/elonmusk/status/1026885883482365953
* https://twitter.com/elonmusk/status/1026890900885184514
But thanks for your valuable input.
Normally, announcements for stock buybacks, taking a stock private, etc. etc. need to be filed with the SEC months in advanced and announced to the general community.
Apparently, I'm mistaken. Its a minor violation, but still not in the spirit of how major stock market announcements are supposed to happen.
The requirement to comply with Regulation FD is that investors should be able to have some reasonable confidence that the source in question - the twitter account - is a legitimate source for the company. The two Twitter accounts that would clearly apply to would be @tesla and @elonmusk.
https://www.nasdaqtrader.com/trader.aspx?id=TradeHalts
If this isn't a joke, then that means Mr. Musk announced the news before the T1 halt. Expect an SEC investigation soon. I'd definitely expect his actions to be illegal, although I'm not a lawyer.
Its probably going to be a slap on the wrist / a relatively small fine, but there's a proper dance to releasing information on the stock market to ensure everything is fair.
If there is an investigation into stock manipulation the fact that there's funding secured would factor heavily against it.
https://www.sec.gov/news/press-release/2013-2013-51htm
They also put in $400 million into magic leap, ar large bet on Uber and about $50 Billion into the Softbank vision fund that is throwing money around.
I think this puts them about the 8th largest shareholder of Tesla.
As an aside, with Musk's recent tweet I think he's going to get a pretty stern talking to by the SEC about discomfiture and Reg FD.
Even if its true,
1) You've now used that bullet in your gun against the short sellers
2) Did it in a very dubious way, via twitter rather than RegFD disclosure.
3) will now have to answer questions about this "private takeover", ie where is the money coming from? how long is it committed for?
For what? An SEC headache a momentary pop that was immediately erased?
The tweet caused a momentary pop in the stock price which was erased about 2 minutes after it popped. The market can be exceedingly good and correcting itself.
Elon seems to be doubling down
https://twitter.com/elonmusk/status/1026879404905885697
The stock is now right about where it was when Musk tweeted.
By 12:48 just before the tweet it had risen to $359.88. Immediately after the tweet it hit its intraday high of $371.15 and then quickly fell back to $362.
It’s been trending upwards since and now sits around $367.
Considering it was below $300 a week ago, it’s been a pretty good week for Elon.
interesting, i look at that same 2 minutes and think “a little market distortion”, because in that time, some institutional investor(s) probably took advantage of some individual traders using their algorithmically-enhanced speed and information asymmetry (not taking sides here, as both should know the game they’re in).
an “exceedingly good” correction wouldn’t have been a blip at all, because the correction would have been happening simultaneous to the distortion.
Yep.
https://twitter.com/elonmusk/status/1026894228541071360
>Shareholders could either to sell at 420 or hold shares & go private
And he might have even confirmed his statement selectively
https://twitter.com/GerberKawasaki/status/102687455159283712...
Trading for $TSLA currently halted (T1: halted pending the release of material news)-
https://www.sec.gov/news/press-release/2013-2013-51htm
> so long as investors have been alerted about which social media will be used to disseminate such information.
and if the stock has been halted for news before you post on twitter.
At the very least he violated the later making this a moot point.
I can't speak to if Elon's personal twitter account can be used for official Tesla news but it seems pretty suspect.
Agreed on the halt.
> Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time.
Sounds like Twitter is the perfect mechanism to achieve this in a fair manner.
> The report of investigation explains that although every case must be evaluated on its own facts, disclosure of material, nonpublic information on the personal social media site of an individual corporate officer — without advance notice to investors that the site may be used for this purpose — is unlikely to qualify as an acceptable method of disclosure under the securities laws
So the question is did Elon/Tesla ever put investors on notice that material statements could be made through his Twitter account?
Since it seems like he’s done this regularly in the past. There was even an institution investor that joked about Elon’s “Return on Tweet” and many articles written about Musk’s Twitter habit. I couldn’t say if a long past history of breaking news on Twitter is enough to have put investors on notice that material statements could come through that channel.
> Sounds like Twitter is the perfect mechanism to achieve this in a fair manner.
What about investors that were blocked by Elon on Twitter?
They have been:
> Item 8.01. Other Events.
> Tesla Disclosure Channels To Disseminate Information
...
> For additional information, please follow Elon Musk’s and Tesla’s Twitter accounts: twitter.com/elonmusk and twitter.com/TeslaMotors
https://www.sec.gov/Archives/edgar/data/1318605/000119312513...
from the BBC piece here: https://www.bbc.com/news/business-45105674
Symbolically that is a pretty potent signal.
Not at Tesla's valuation
https://www.theguardian.com/business/2016/apr/01/saudi-arabi...
Pretty much everyone; the fact that Saudi Arabia and Kuwait has been for years investing large amounts of oil-derived funds in both a wide array of other fields, including alternative energy, was one of the things that created the difference in economic interests between them and Iraq that was among the sources of the disputes which saw their anti-Iran alliance breaking up and Iraq invading Kuwait and threatening Saudi Arabia in 1990.
> The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil.
So they have a big problem 20-30 years from now.
It's very smart on Saudi Fund's part... They would own the worlds largest solar, battery, and EV producer. They could cover a desert in panels and sell the cars and batteries across Europe/Asia, while providing the power as well. They would once again have the largest control of the world's energy.
There's a decent chance of a bidding war driving the share price far higher than that.
This is strategic for the Saudis. And there are other strategic investors and sovereign wealth funds who will not want to see Tesla taken private for 10% above today's closing price.
Tesla's market cap is only 6% of Apple's, and Apple isn't geopolitically strategic.
Norway, China and Abu Dhabi all have SWFs larger than Saudi Arabia [1], and the energy implications of letting Tesla go would be strategic for each of them.
[1] https://en.wikipedia.org/wiki/Sovereign_wealth_fund#Largest_...
>He is willing to take it private at the $420 price, probably way higher than the Saudi's were planning on
> how the Saudis would be negatively affected by Musk tweeting out that he effectively wants the stock to go up in price.
Saudis would have to shell out more money if valuation keep going higher
Doesn't seem like you can reasonably charge a car in europe/asia from solar panels in the middle east. You'll be dealing with some pretty nasty transmission losses.
First of all, the oil reserves in Saudi-Arabia aren't going to last forever - but they will need massive amounts of energy to maintain their cities, especially for drinking water. Desalination is ridiculously expensive, and water access will be the war driver in the entire Middle East once climate change really hits. Cover the desert with solar plants, the coasts with desalination plants (and don't care about the brine) => control who gets the electricity and/or the water, control the region. Saudi-Arabia is actually already going pretty far in their fight for regional supremacy, that would fit perfectly.
As for transmitting the energy to Europe/Asia, well... there's technology in the works to synthesize gas (both gasoline and, well, gas) using electricity, which can be fed into the existing gas pipeline infrastructure and thus sold to the wide world.
If you have cheap desalinization capability, why would there be wars over water?
More likely, they'll be centered around points of availability in areas of relative scarcity.
There is, in fact freshwater in the Middle East, just not a lot. Which makes what is there a potential source of contention.
"Cheap" desalinization is like "bargain" chip fab. It's still an inherently expensive proposition.
According to the first link I found about large scale desalination, it can be done for a wholesale price of around $0.58/cubic meter.[1]
For comparison, my local water authority (in a part of the US that is not particularly dry) charges about $0.94/cubic meter.
Without knowing exactly what the difference is between wholesale and retail rates, I feel reasonably confident that desalination technology is currently sufficient to avoid civilization collapse and/or war.
[1]https://www.technologyreview.com/s/534996/megascale-desalina...
Yes. But the experience up until now, is that desalinization is so much more expensive than other water sources, to the point that such plants often get mothballed when the other sources become available again.
https://www.circleofblue.org/2016/asia/water-scarce-regions-...
The problem is you're gonna need energy to operate these plants and you can't scale stuff up infinitely as the brine will kill off marine life and eventually, the water sources will become so salty that they can not be used for desalination any more: https://www.theguardian.com/global-development-professionals...
Which means, once Peak Salt hits, there will be problems. Oh, and desalinating water for drinking purposes is one thing - using it for agricultural demands is a whole different beast. Egypt, for example, already had problems in 2010, and the issue won't get smaller over the decades. http://edition.cnn.com/2010/WORLD/africa/11/09/egypt.water.s...
Where do you think the water will go? I mean, if it doesn't end up in the ground, or the ocean...
Somewhat OT, but... there has been enormous progress in energy efficient desalination, to the point that Israel has become a net exporter of water. See DOI 10.1016/j.desal.2017.10.033 for more technical information on recent progress desalination.
Doubt it. Too many cultural problems. Tribal, backward societies with people who don't like to work (companies prefer to hire foreigners. They are obligated to hire locals, locals stay often at home while getting paid). Based on the huge discrepancy of wealth, they don't seem to be very successful in the War against Yemen.
https://www.meforum.org/articles/other/why-arabs-lose-wars
[1] https://www.wateronline.com/doc/pub-and-hyflux-sign-water-pu... [2] http://www.waterwise.co.za/export/sites/water-wise/downloads...
1: https://en.m.wikipedia.org/wiki/High-voltage_direct_current
The only problems are that the day-night cycle still exists and storage is expensive, that it would be a massive capital investment, and that the governments of most countries in the Sahara aren't very stable.
In 2011, France and the US forced a regime-change that resulted in civil war and de-facto partition of the country. I would expect most of that investment has been destroyed by now, and the security situation is unlikely to be stable enough to restart this sort of grand plan for at least a decade.
In the meantime, Morocco (faithful French ally, an absolute monarchy with extremist-Islam undertones) started its own effort, which is now considered to be the largest solar-panel plant in the world: https://en.wikipedia.org/wiki/Ouarzazate_Solar_Power_Station
I'm afraid I have to shatter this dream. There is a thing called Ohm's law, and it is not taught in business schools as I know... :)
HVDC has losses at about 3% per 1000km, from Saudi Arabia to the center of Europe is less than 5000 km as the crow flies. Doesn't seem too bad to me.
Here are some solar power plants that appear to have the secret to overcoming temperature, sand, and wind. Any ideas what they're doing?
• 1547 MW capacity: Tengger Desert Solar Park
• 1000 MW capacity: Kurnool Ultra Mega Solar Park
• 1000 MW capacity: Datong Solar Power Top Runner Base
• 850 MW capacity: Longyangxia Dam Solar Park
• 746 MW capacity: Bhadla Solar Park
• 600 MW capacity: Pavagada Solar Park
• 579 MW capacity: Solar Star, Rosamond, CA, United States
• 552 MW capacity: Copper Mountain Solar Facility, Boulder City, NV, United States
• 550 MW capacity: Topaz Solar Farm, San Luis Obispo County, CA, United States
• 550 MW capacity: Desert Sunlight, Desert Center, CA, United States
• 500 MW capacity: Huanghe Hydropower Golmud Solar Park
• 452 MW capacity: Mount Signal Solar, Calexico, CA, United States
• 400 MW capacity: Mesquite Solar Project, Arlington, AZ, United States
• 140 W capacity: Mars Spirit Rover (ok, the experiment failed in 2011)
• 140 W capacity: Mars Opportunity Rover
Also, I think PV prices may have declined around 50% since that article was written.
And yeah, Deserts work well given how predictable the weather is there. Don't forget consistency is an another factor.
Maintenance problems exist with dams or for that matter with any power generation mechanism.
None of these are show stopper problems.
-Birds fly everywhere; can't hide from them. It can be hard to diagnose some of the problems they create.
"Robotic" cleaning is really not as common as the headlines make it seem. A couple of big projects have used them to target settled dust that can be removed without water. For most projects, the robotic systems don't pencil out and people default to paying a small crew every couple of months to go out and wash them.
They are masters of market timing... just not the good kind.
https://twitter.com/matt_levine/status/1027245773237436416
My guess is that they had run the numbers on taking the company private before. Since the Saudis had approached Elon before and he denied their offer (for whatever reason) he probably was upset that they acquired a stake through secondary markets and tweeted their half-baked plan... (not a good course of action IMO)
Not super coincidental. It's incidental and on-purpose. What a day
How so? They've just got 5% of Tesla and he's talking about taking it private at +15%. It seems like instant profit to them just from the reaction to them buying it.
https://www.cnbc.com/2018/08/07/tesla-stock-jumps-on-musks-t...
Other buyouts of such scale involved companies with huge cash flows/profits - think RJR Nabisco, Hilton, TXU (big US utility).
Tesla of course is a very different animal. Hard to imagine any kind of conventional financing working for this type of deal.
Beyond the Saudis maybe some other SWF or deep pocketed individual investors?
https://www.nasdaqtrader.com/trader.aspx?id=TradeHalts#
The sudden announcement gained immediate criticism from former regulators who suggested it may conflict with SEC rules for potentially market-moving statements. Harvey Pitt, a former SEC chairman, told CNBC on Tuesday that Musk’s tweets “might consittute fraud if any of the facts he disclosed are not true” or if there was any indication that he had floated the proposal purely to boost the stock price
From his point of view, if he is serious about it, then it's not a false fact and it's not floated purely to boost the stock price, so why should he be afraid?
Living in America :)...
I'm very glad that a number of countries require nothing more of public companies than timely disclosed financials.
Americans, are you happy with your country very likely having the world's most complex securities laws?
RE: Elizabeth Holmes "This is pretty standard practice with the SEC. The regulator explains on its website that, while it works with law enforcement agencies, it's investigations lead to civil or administrative actions. It routinely penalizes brokers and traders by banning them from working in the industry or accepting outside money. "
https://www.businessinsider.com/will-elizabeth-holmes-go-to-...
Only if he's announcing news, which he likely is not. The method itself makes it feel more like a muse and less like an announcement.
[edit]
Well, everyone seems to be taking him seriously...
Remember when he said the will but 'baseball glove' on a bot and try to catch the fairing.
Or when he said they were gone sell flamethrowers
Ignore this twitter account at your peril
my interest being I just ordered a III on Monday. Oh joy.
It only benefits him if
1. The news is false
2. He cashes out before the stock price returns to it's previous level
We can check if he is doing 2, because insider trading rules requires he announces trades in advance.
Has he announced any trades?
[1] https://en.wikipedia.org/wiki/Trading_halt
Have anybody given weight that even an SEC chairman can't give a yes or no answer on application of US securities law, but uses word "might"
Perfect example. Nicholas Cruz ..just googling and picking an article.
"Cruz is accused of gunning down students and teachers in various classrooms at the school in Parkland on February 14, in one of the deadliest mass shootings in modern US history."
Why is he accused? We all know he did it. Why not say "Cruz gunned down..."? This is after he confessed to it, after security footage was reviewed.
All this tells me is that Pitt is being appropriately careful.
I think he's put up.
He's done a lot, but "started with nothing" is seriously disingenuous. Additionally: you don't have to "start from nothing" for your achievements to be worthy.
Case in point: Musk calling a professional diver a pedophile for having a informed opinion based on his personal experience and expertise.
The kids were rescued, Musk had nothing additional to put up, and would have been better following the path of shut up. He was already getting a ton of praise for quick action, and got upset that not everyone universally appreciated it.
That being said I care more about Musk's real accomplishments than a few minutes of Twitter asshattery.
https://news.ycombinator.com/newsguidelines.html
https://seekingalpha.com/news/3379457-tesla-trading-halted-l...
Does anyone know more about how this is organized? My understanding (which could well be wrong) is that organizations with over 500 owners must do normal quarterly filings in the same way a publicly traded company would. Yet in previous years I've searched and come up empty handed on SpaceX.
The billion of debt coming due is convertible above a price of $360 and if he can keep the price propped up will almost certainly force all bond holders to convert into equity holders.
https://seekingalpha.com/article/4191711-tesla-stealth-capit...
I mean, think about this rationally, if it wasn't for the public markets Tesla would already be bankrupt. Going private means giving up this access to capital as well as having to come up with 9 Billion to fund debt commind due.
With stock you have something to bargain with when selling debt. Without it you've lost a huge weapon.
Same for paying your employee's. No more tesla stock that appreciates each quarter that you can sell as soon as it comes to you.
Also just did some digging on Tesla bonds and CDS...
At current levels, they imply a about a 30% chance of a Tesla default in the next five years. It costs around $1.3 million to insure $10 million of bonds against default.
And if Tesla went private and he funded it with debt he's looking at a rate somewhere around the low teens from what Bloomberg is reporting which means borrowing $58 Billion to finance this would cost aroudn $7.1 Billion a year in interest payments at 12.5%.
And keep in mind he's paying that to cut off public markets access for raising money, one of his best sources of cheap capital in the past 5 years.
> Readers should also note that, unlike the 2018 and the 2021 convertibles, where the principal is always repayable in cash, the 2019 convertibles may be redeemed wholly in shares (at Tesla's option and if the requisite conversion ratio has been met).
So yes the bond holder can choose to convert after Dec 1st 2018 and Tesla can force them to convert when the bonds come due in March 2019
Forbes says [1] it’s $920 million due in March 2019 convertible at $360/share, and a total of $1.8 billion coming due through November 2019.
You can also check Note 10 on Page 24 of their latest 10Q filing (Quarterly Financials through June 30, 2018) [2]
[1] - https://www.forbes.com/sites/jimcollins/2018/04/02/forget-th...
[2] - http://ir.tesla.com/node/18946/html#Notes_to_Condensed_Conso...
I started talking about the 8.65 in liabilities due and then started talking about the 1 billion in convertible debt coming due.
Tesla are by far the most advanced of all "green" car manufacturers; over the next 7-12 years there will be countries banning petrol/diesel cars.
If Tesla can scale their battery and car production by that time then you could be looking at a market share of Apple proportions.
They normally weigh in on takeovers but this is in their jurisdiction as it would be a foreign entity taking on ownership of a US company.
If CFIUS allows this or not is definitively up for debate and probably a 50=50 call at this point.
At best you can say it would require some negotiation with Saudi Arabia at a time when things are great between the two countries.
Even today you cannot go to downtown Lisbon with a car built in the early 2000s, and last week the city of Turin announced that they'll basically forbid vehicles with Euro3 engines or less from the city's streets (Turin being the birthplace of FIAT and also hosting a most wonderful car museum). The writing is on the wall.
I do not think so. At most, in that timeframe we will see countries starting to ban sales of new cars which are not plug-in hybrids or better. And then remember the average lifespan of a car today is ~20 years, you will still see old pure petrol cars on the roads in 2050 is my bet. Just like you still see old cars on the road today without any catalytic converters.
If you look at the electric car market today, you have lots of small cars with reasonable-ish range, one sedan with good range and two pretend-SUVs (Model X and I-pace) with good range.
No manufacturer anywhere makes a pure electric estate car (station wagon); this is the most popular type of car in Europe. Nobody makes an electric pickup; this is the most popular type of car in the US. Nobody makes an actual SUV, Ford Expedition/Toyota LandCruiser/etc. style that can fit four mountain bikes in the trunk and tow a 9000 lbs trailer. Nobody makes an electric commercial vehicles of the type electricians, plumbers etc. drive.
What do all these have in common? Inherently terrible aerodynamics / poor mileage and a relatively frequent need to go long distance trips. If you take current battery tech and do some optimistic extrapolation of future developments, you still end up with battery packs costing $50k+ and weighing several thousand pounds. Which isn't going to work anywhere, nobody is going to buy an $80k+ electric pickup when a diesel F150 starts below $30k.
But I do think we will see reasonable plug-in hybrid versions of these car types. And Tesla will never be building cars with internal combustion engines, so they're effectively locked out of what I believe will be the biggest part of the market.
The love affair with the SUV and Stations will have to end unless technology improves greatly. It sucks but it's the price we have to pay.
Norway's ban starts in 2025:
https://www.independent.co.uk/environment/climate-change/nor...
The Netherlands in 2030:
https://electrek.co/2017/10/10/netherlands-dutch-ban-petrol-...
France a decade later in 2040:
https://www.theguardian.com/business/2017/jul/06/france-ban-...
https://translate.googleusercontent.com/translate_c?depth=1&...
There is a reason why Microsoft cannot product a good mobile OS to date. It requires sidelining their biggest cash cow, their desktop OS.
Maybe not exactly a copy of that type of car, but because none of the big car companies wanted to build one DHL started their own electric car for this use case: https://www.streetscooter.eu/
The volume in liters may be comparable between a Model X and (say) the Audi A6, but most large objects one needs to transport (furniture etc.) tend to be relatively cubic in shape.
If there wasn't a need for having big boxy trunks, surely we would all have transitioned to the (undeniably cooler) fastback-esque shape of a Model X / Mercedes CLS / BMW GT-series long before electric cars became a thing.
I'm sure the reverse may be true for some SUVs, perhaps there's some large wardrobe box that firs in an SUV that won't fit in the estate.
But wow, estates are sooooooo convenient.
Model X has 88 cubic feet with the seats down (if you have the bench-seat option)
Its a very big car.
https://electrek.co/2016/12/03/tesla-model-x-5-seat-configur...
https://youtu.be/AJLdzRJdKrs
How about Nissan e-nv200?
https://www.nissan.co.uk/vehicles/new-vehicles/e-nv200.html
Next to a proper work van like a VW Transporter or Toyota ProAce, you're looking at less than half the load volume (~4.2 m^3 versus ~9.5m^3).
I consider to buy a new car at the moment. My favorites are electirc or petrol. I don't even consider hybrids. I see no benefits. They have no upsides of an electic car (quit, no exhaust, clean, simple). They are basically more expensive/complex petrols with a slightly lower consumption.
Such a design is not as clean as a pure EV, but it is definitely better than what we currently have.
It was supposed to be cleaner...but it generates nitrogen oxide (instead of CO2). Maybe nitrogen oxide is safer than, but I doubt at 40x the levels that most of the diesel manufacturers actually made their cars run at.
- Quiet, no exhaust, clean, and simple when driving on electric (which is most of the time)
- Most (but not all) of the reliability of a real EV. (You can go almost a whole year on a single oil change, since you aren't using the gas engine much. You can go forever on a single break pad set, since you regen most of the time)
- The full range + refill speed of any gas vehicle (for roadtrips or other instances you needed it)
There's also some fun minor efficiencies in there too. Batteries in EREVs are smaller and weigh a lot less when they only have to carry you 50 miles instead of 250. Gas is a lot more convenient when you really do want to roadtrip across the whole USA as quickly as possible, (no hunting for charging ports, which might be broken or offline. No waiting for recharge)
I don't have the figures right here, but I believe it worked out that you could eliminate ~75% of all personal automobile tailpipe emissions in the entire USA today, if you put a Chevy Volt drivetrain into every single vehicle, and convinced just the people who park a car at a single family residence, to plug in their car at night. (even ignoring all apartment/condo/street-parking folks who cant charge)
You're right that pickups and commercial vehicles are the hardest markets for electric cars. Conquering those segments means the rest of the mass market would be completely dominated by electric cars. The United States will also be one of the last markets to be dominated by electric cars, because of its characteristics (long commutes, big distances, heavy car usage).
This is the same as saying nobody will buy a $600 iPhone. Only to realize in months that component prices have fallen by 50% and its not that expensive after all.
Are they? I don't follow these things closely and I didn't realize that it was the case, I always thought that Musk's great idea was not so much technical superiority but rather aiming for the super high end and market an electric "luxury" car niche. How far ahead are they compared to, say, Toyota who's been making hybrid vehicles for a while now?
I also think your timeframe might be slightly optimistic, I can't really imagine a large western country banning internal combustion cars within the next 12 years, much less developping countries. I hope you're right though, I want to live in a world where ICEs are in museums.
The 3 and other models are also plagued by quality control problems. The Bolt is both more reliable and has a better interior. And a speedometer!
Secondly, the sales of the Bolt have already collapsed and all the Tesla car outsell it. The model 3 outsells it 7 to one and this month probably 10 to 1.
Just comparing range and not looking at the economy or the sales number is basically spreading FUD.
> The 3 and other models are also plagued by quality control problems. The Bolt is both more reliable and has a better interior. And a speedometer!
I'm sorry but that is ridiculous. The Model 3 has some quality control issues on the frame and GM does that a bit better. However if you go into the electronic, the software, the drive-train, the charging network, the suspension and so on its not even comparable in terms of quality.
See for some info on an independent evaluation of the Bolt:
> https://www.youtube.com/watch?v=Sl3cUMIX9Uo
The software in the Model 3 is famously buggy. Did you see the Edmonds review?
https://www.edmunds.com/tesla/model-3/2017/long-term-road-te...
Some highlights:
> Nav screen going haywire: zooming, scrolling, pinching, pixelating all at once.
> Audio system turning on by itself at full volume.
> Audio system came on and went to full volume all by itself while the car was off, locked and unoccupied. I heard it from 100 yards away. "Who is that joker playing his stereo so loud I can hear it from here?" Oh, it's Elon. I turned it down, but it kept wavering up and down as I started driving, working against my repeated attempts to dial it down. Then it blasted all the way to maximum. My ears are still ringing two hours later. Fixed after reboot. Not sure about hearing damage.
> Audio page leaping up and down rapidly like the up-caret button to expand the source menu was being played with by a kid who ate too much candy. Concurrent with the volume problem above. Same reboot.
> The passenger vanity mirror fell off completely. Installed and held on only by double-sided tape. Reinstalled by pressing really hard on the mirror.
> The screen went completely dark on startup, no music or operation. Restarted the car. The screen worked; the backup camera did not.
> The car will not shift into Drive or Reverse upon startup. "Vehicle Systems Are Powering Up. Shift Into D or R After Message Clears." Have to wait for it to power up. A loud click comes from the rear of the car as if a drive shaft is engaging and the message on the screen goes away.
> The car displays a new message: "Cannot Maintain Vehicle Power. Car May Stop Driving or Shut Down." No shutdowns yet, but keeping an eye out.
The Tesla software also way more better feature then most other cars. Compare Tesla software experience and the interaction of the car and the app is not even comparable to anybody else and most reviews reflect that.
Also, Tesla can update over the air and they are consistently fixing these bugs.
Clearly it has not hurt Tesla sales or the consumer rating they are getting.
Comparing that problem to the Bolt complete lack of integration of the different system and losing money on every car, are not even comparable in terms of how problematic it is.
They are both products of the same class, but one of them just obliterates the other both in terms of technological sophistication and cool factor. Turns out that has an impact on market success.
All of them are building up the technology base, at least in terms of the drivetrain, but they have failed to vertically integrate the electronic to the same extent and the do not have a reliable low cost battery access.
Lets do an example. The battery is a huge part of the cost of a car. If you have to buy this you have to pay a profit on that, not to mention that because all non-Tesla car buyers compete for the same batteries the margins will be huge.
Independent evaluation of the Bolt for example are showing that GM is losing money on every single Bolt that is produced. They have competently bought the battery and and the electronics part. Its a integrated mess in a GM box. That gone cost you a lot and GM will never built 300'000 Bolts. The Bolt is built for compliance and to be able to build more SUVs (because the strange fuel economy regulation system).
So the game that the other manufactures are basically waiting until they can build profitable electric cars while Tesla is hellbent on producing as much battery capability as they and that allows them already to have a cheapish car on the market and to make billions of $ selling it.
Panasonic is the one who manufacturers Tesla's batteries, that's not a operational advantage for them. Many other car companies have similar deals with other battery manufacturers, like Toyota/Mastushita. Also, I don't get why you think battery margins will be huge? What is the major reason that prevents significant supplier competition?
> Independent evaluation of the Bolt for example are showing that GM is losing money on every single Bolt that is produced.
Yes, it was mainly built for compliance reasons as a compromise vehicle, but it isn't that Tesla has been able to construct a vehicle for less price than Chevy constructs the Bolt.
> So the game that the other manufactures are basically waiting until they can build profitable electric cars while Tesla is hellbent on producing as much battery capability as they and that allows them already to have a cheapish car on the market and to make billions of $ selling it.
What cheapish car? The Model 3 is $49,000 as you can configure it currently?
There is a shortage of battery production. As I have already said, the reason EV are not sold is because the large manufactures can not make a profit on it.
Tesla has massive internal work on everything from the pack to the chemistry on the cell and that is licences technology by Tesla that Panasonic can not sell to anybody else. Tesla is simply ramping up production because they know demand will exists.
As with many industries, EV are not profitable and the car manufacturers or not gone order millions of battery packs, so there is not quite the large scale investment there yet. What you say is simply not true, the integration battery tech and production into Tesla is far deeper then for the other manufacturers.
And the video I provide is by a company that is reputable for cost analysis and that is the conclusion they come to.
> Yes, it was mainly built for compliance reasons as a compromise vehicle, but it isn't that Tesla has been able to construct a vehicle for less price than Chevy constructs the Bolt.
It is not relevant to compare direct production cost. The question is how much does it cost to product to how much you sell. Tesla can make 20-30% margin on the avg Model 3. While the Bold loses GM 5-10k per car sold.
> What cheapish car? The Model 3 is $49,000 as you can configure it currently?
Fair enough, cheapish is not the right word. Lets say a mass market car, meaning a car they can product 300k to 500k off and make a healthy profit on each car sold.
For the class that they are operating in that is competitive price and that is why they have 50% market share already, and that is gone jump up quite a bit more. It simply makes sense for them to focus on high value cars for now, ramping production on higher value cars gives you better cashflow in a time where you need it.
Even at 35k its not really a cheap car, but independent analysis and their own guidance has shown that they can make and expect to make a profit on that and they will have to do this in the next half year or so.
Why would Mercedes or BMW or Audi try to compete with Tesla directly right now? They have combustion engines that are mature, known tech with sunk R&D costs that they want to sell as long as possible. This is of course Teslas chance. The others are just doing R&D while Tesla is selling cars. But it's still hard to see Tesla having a market share in EVs in 15 years time that justifies it's current valuation.
No. Wrong. Sorry.
Tesla is not just trying to mass produce cars. They are trying to mass produce profitable EVs, something that the others simply can not do.
> Why would Mercedes or BMW or Audi try to compete with Tesla directly right now?
My very argument is that they are not competing at the moment.
> The others are just doing R&D while Tesla is selling cars. But it's still hard to see Tesla having a market share in EVs in 15 years time that justifies it's current valuation.
Why? Unless you believe Tesla makes somehow fundamentally worse cars then everybody else, there is no reason why the other manufactures should have an easy time boxing Tesla out of the market once the have major mass production of their cars set up. They are not magic.
Tesla will have a huge established direct to end user sales force, a massive charging network, a well integrated app and software stack that will help costumers to their brand and a positive public image.
And my argument is that that's by choice rather than by inability.
Also there is a large amount of overlap between mass producing electric cars and mass producing combustion cars.
Finally, there is no question that Tesla has the potential to be a competitive car manufacturer. Let's say they are super successful and gain a market-share comparable to BMW. I'd say that's a top end scenario for Tesla. It has a good Brand but so do its competitors.
But Tesla is valued at the same level as BMW _right now_. I just don't see that. There certainly is downside risk, but I just really fail to see the upside potential. What should enable Tesla to grab a larger market share than BMW? Or Audi? Or Toyota? Nevermind the Chinese battery manufacturers that might want to push into the low end of the EV market.
Panasonic = Matsushita
AFAIK, Toyota does not currently have a battery partnership (other than the R&D-based old partnership with... ahem, Tesla), but in December last year they + Panasonic started a feasibility study to see if Panasonic could become their main supplier.
That it's hard. Lithium ion batteries at scale is a difficult manufacturing process. All the R&D is going into battery. Essentially the electric engine is easy, but the battery is hard. It's exactly the other way around than in classic cars. Imagine if all major car companies would be buying engines from a few Asian tech giants.
There is quite some debate on how much of the profits will go to the battery manufacturers eventually, but I've seen 30-70% from serious analysts. I think nobody really believes the top line number, but even the more reasonable 30% would be massive.
But note also that if Musk pulls this off, he might be able to do it without external financing, because virtually all Tesla creditors and shareholders today (i.e., people who are in one way or another net-long the company) are true long-term believers in Musk's vision who are unconcerned with the company's short-term financial issues. (People concerned with Tesla's financial issues are either avoiding exposure to the company or betting against it.) True-believer shareholders (including converted creditors) will want to hang on to their shares as the company goes private and shares start trading "by appointment" on less liquid, secondary private equity markets, potentially at more unicorny prices due to the absence of short selling.
If I'm right, short sellers are in for a world of pain. They will likely have to scramble to cover their short positions in the face of a limited supply of shares before delisting.
This doesn't involve paying anyone out.
I believe a Ponzi scheme is when you pay "interest" to early investors, via investments from new members. There is never any income generating activity other than recruiting new members.
I don't think Ponzi applies to Spacex.
often, people just use it as a drop-in replacement for the term "organized fraud"
example: "isn't JetBlue air-miles just a classical Ponzi scheme?"
Difference of Pyramid vs Ponzi
- Ponzi: the fund manager/fraudster is the one who recruits new members
- Pyramid: existing members have to recruit other new members
In both schemes, there is no underlying product/service. Money contributions from new members are used to pay existing members.
To be clear, Tesla/SpaceX is NOT Ponzi, NOT Pyramid.
A Ponzi scheme purports to have some amazing business opportunity, but secretly pays returns using money from new investors. They will often use MLM/pyramid-style recruiting tactics, and not solely rely on the fraudster for recruitment.
It's true that MLMs pay out fees collected from newer recruits, but everyone knows where the money is coming from. Usually MLMs also have some semblance of actual business activity (Mary Kay, Amway, Herbalife, etc.)
Tweeting info like this is probably not good for the SEC.
I hope he doesn't turn out like Preston Tucker. Tucker: The Man and His Dream is a good movie.
I think being a public company is good for many reasons, amongst other: the public can participate in the success of companies and for the company it provides a great reality gauge. Maybe that’s what he’s afraid of...
The return to some sort of 19th century capitalism dominated by private industry magnates has been going on for a while.
I believe he also said he only took Tesla public because he had no choice, not because it was his goal.
Spotify, Twilio, Salesforce, Box, Adobe, Workday, Atlassian, Intuit, ADP, to name a few.
Public companies have pressure to perform every quarter, rather than focus on the long term goal. General Motors stopped reporting quarterly car sales (or monthly?) because it's a distraction. GM's focus, is actually electric vehicles and self driving cars.
Per Musk's announcement, once Tesla is stable, and producing at a constant rate with predictable growth...like Amazon like Berkshire Hathaway, like Starbucks, then he will consider making Tesla public again.
Interesting note...Tesla is worth more than GM.
Cynically, I think it is hard to reconcile the Elon Musk who says "our stock price is a distraction" that we need to not consider it moving forward, and the Elon Musk who has borrowed against 40% of his stock in the company and whose pay package is entirely based in stock. This move prevents him personally from facing many possible downside risks, and it is hard to take his statements at face value.
> Public companies have pressure to perform every quarter, rather than focus on the long term goal. General Motors stopped reporting quarterly car sales (or monthly?) because it's a distraction. GM's focus, is actually electric vehicles and self driving cars.
General Motors stopped reporting monthly sales numbers in April, citing that monthly numbers are too volatile to gain meaningful insight from. That strikes me closer to a decision meant to provide greater transparency than one of Tesla's sort.
> Per Musk's announcement, once Tesla is stable, and producing at a constant rate with predictable growth...like Amazon like Berkshire Hathaway, like Starbucks, then he will consider making Tesla public again.
None of those are anywhere close to the predictable business you seem to think they are.
Berkshire especially. Prior to 2017, Berkshire consistently posted extremely up and down earnings due to its huge positions in the re-insurance business. Since 2017, it has posted even more volatile earnings because its public stock positions were required to be marked to market instead of at book value. And you know what? Wall Street hasn't cared about the quarterly choppiness of the Omaha company.
My point here is that Wall Street cares about quarterly financials... for some companies. If Elon had one that had proven himself capable of meeting his own goals or generating cash, he would be in that category. But instead he has a company with $10 billion in debt, only been cash flow positive for two quarters, and never come close to meeting its own stated estimates. It's kind of hard for his debt and equity holders to not start eventually asking "where's the beef?"
Musk claims people will still be able to invest in Tesla and hold shares, but I'm heavily skeptical. I'm Canadian, and many US financial companies do not deal with foreigners. There is also no way for me, currently, to invest in SpaceX. That opportunity is reserved to the ultra rich. As a Tesla investor, this is a real blow. As someone who grew up poor and only became "middle class" after years of hard work, I feel like I've been spit in the face.
> I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share[...] My hope is for all shareholders to remain
There is also the possibility that your broker won't do the necessary paperwork and will just liquidate your position, or require you to move your shares to a legal entity that can assist you. Granted, they probably wouldn't do this without notifying you. And if you're a non-US person, there are probably issues regarding transfer of shares, potential tax realization and so on. Not to mention the requirement to be an accredited investor, which I'm not sure how Tesla will skirt. There are a lot of open details here.
I can see that my initial comment could be misinterpreted, but my point was that "You will be able to continue to hold" is not quite the complete picture.
A grim outlook, to be sure. But look at the flipside: emperors of old could only dream of the luxuries we enjoy on a daily basis. We can eat peaches in winter!
I know you think you know Tesla's prospects better than the market but this could also be a good, if not life-changing, exit at the high point.
The idea that companies should have the goal of going public is deeply flawed/unhealthy, I think. Though it makes sense for some.
That's entirely the company's decision. If they want to focus on long-term growth at the expense of profit (i.e. Amazon), they can.
The owner gets more control - both on the company, it's long term vision, it's investors and the future of the company.
It's a win for all.
What advantage does being public get you?
It gets you $ at a massive cost - both regulatory and quarterly.
Apple is owned by countless pension funds, endowments, likely every politician who invests, and a large % of the general population.
Their success is also part success for all those people. Private companies have far fewer defenders, much easier to vilify and punish.
It's deeply disappointing to see Musk legitimatize the Sauds, who threatened Canada with a 9/11 style attack just 24 hours ago
If anything it looks like one of the reason to go private is specifically to prevent the Saudi fund from being able to increase their ownership by buying on the public market.
What do you mean? I may be missing something here, but I really don't understand this part.
Are you suggesting the Saudis are the one that will provide the 50B$ needed to go private?
Musk can do nothing to stop anyone from buying or shorting Tesla shares, that's regulated by the government.
So how is this true again?
>It's deeply disappointing to see Musk legitimatize the Sauds
Also, don't you know that the Saudis put $50 billion into Softbank's fund?
Anyone with a conscience would refuse Saudi funding, funneled via SoftBank or directly. Remember how HN and googlers were up in arms against accepting Pentagon money, this is a million times worse.
It is true that Musk is accepting a bailout from the Sauds, are you disputing that?
Hence, it's disappointing that he's ignoring, or somehow rationalizing all the blood shed by the Sauds
How did you reach that conclusion? He declined to sell them new shares, so the Saudis bought them on the open market. Tesla didn't get a dime. What bailout are you referring to?
https://news.ycombinator.com/newsguidelines.html
Edit: this is probably not the case, sounds like speculation is of a hostile takeover.
https://www.tesla.com/en_GB/blog/taking-tesla-private
https://www.cnbc.com/2018/08/07/tesla-says-no-final-decision...
Two, Tesla has large operating losses to go along to its CapEx and many shorts dislike how exactly their choosing to classify many of their expenses. Depending on how you look at their accounting, you can easily believe this company is completely structurally unprofitable.
The people who are betting against Tesla are not stupid.
Smart people lose money all the time:
victims of mt gox hack
enron
long term capital management
2000 dotocm crash
Bill ackman's herbalife short.
and and and on
ok bro, I'm not sure we have the same definition of smart people if yours are people decided to buy a bunch of cryptocurrency and keep it all in a website built in php
I go to an economist, or maybe a trader, to learn about money and finances.
Tesla has sustained enough Model 3 production that they produce positive cashflow and they will be profitable in Q3/Q4. As one large investor said, Tesla short term guidance has been pretty reliable.
Unless some massive macro event happens there is no way Tesla stock is gone fall back to prices where many of the shorts hold once they have proven the are able to mass produce cars.
Their reasons for the short positions are getting worse and worse. The main argument has been that Tesla is unable to produce Model 3 and will not have positive cash flow. Those arguments are all but dead in the water if you look at current sales numbers.
It doesn’t appear to include any more specifics about where funding for the opt-in buyout would come from.
TSLA resumed trading just before closing bell and closed at $379.57 up 11% for the day.
https://www.tesla.com/en_GB/blog/taking-tesla-private?redire...
https://www.newsweek.com/saudi-arabia-orders-16000-students-...
In this case, Elon wants to let current investors stay investors, so you should be able to hold your share and it'll convert into whatever the private equity equivalent will be.