By paying a large premium to the all time high? If he's worried about the stock going down, paying more for it doesn't make a ton of sense. You should wait until the stock is down and then take it private.
By paying a 20% premium he's ensuring that the short sellers will need to buy shares at the premium price guaranteeing that they've lost at least 20% of what they've gambled.
(If this happens) What does this mean for owners (non-employees) of TSLA stock? Will you be able to maintain your holdings in the company after it is delisted from an exchange?
It means he’d rather not be under the scrutiny of wall st investors. He thinks the volatility is off-putting to his employees. He thinks wall st isnt forecasting correctly or is short-term focused. These are his reasons.
Wall Street investors and analysts focus heavily on the bottom line. Elon believes that the work Tesla is doing requires more time, sustained attention, and focus than public investors have tolerance for. Furthermore, he thinks the volatility demotivates employees.
These are all completely true, and very reasonable, but do show (at least to me) that the near-term promises regarding profitability he made at the last earnings call are probably in jeopardy.
Thank you for asking for a clarification rather than just knee-jerk down voting, though. :)
I agree with your assessment. It seemed clear that Tesla was cutting back investment in new supercharger locations and maybe even service centers to reach profitability. I can't say that now felt like the best time for that kind of slowdown to me.
Either that or he has realized that the focus on consistent profitability over the next 1-2 years will significantly impact the company's long term prospects.
That was the previous high it hit before it was halted for this news to come out. Trading is now scheduled to re-open in 6 minutes (3:45 PM EST). Going to be a very interesting 15 minutes before the market closes for the day.
If you're a heavy TSLA short-seller, you're already in deep trouble, unless this falls through very quickly. There will be margin calls. Welcome to the losing side of short-selling.
Of course, but everything he says implies he has the funding. Announcing this before funding is in place (the most crucial piece of this puzzle) would be incredibly irresponsible.
I wonder who Elon has been having dinner with over the last weeks/months...
I am sure hes already been lining up those who would want to do something - and it should be a clear sign about the Saudi position that was announced...
Basically, he's likely got House of Saud involved as they are flamboyant gamblers and would love to be associated with this if it succeeds, because the fame of this is worth more to them than the money at this point... so I am sure he already has the major financing arranged.
He’s not guaranteeing anything. He hasn’t mentioned financing to do this, and it’s not a small amount of money to raise. Shareholder approval isn’t a given either. It’s probable that he’d get the votes if he showed the financing necessary for a $420 stock price, but it’s not a guarantee.
If can demonstrate guaranteed financing for this deal from outside investors at $420/share, then he just tweeted material news about his company, and he had all the rights to do so.
If he can't prove guaranteed financing for this deal, that's securities fraud and SEC investigation is the next step of this drama. Imagine... well, SNAP CEO tweeting "Some rich folks are going to take us private at $50 per share lmao ayee, cover your shorts". This is a market manipulation.
Any experienced non-retail short seller would've bought some long term out-of-the-money call options as insurance for a scenario like this. Most retail shorts know it's best practice... but they're retail after all, so many are going to get burnt if this hype goes through.
Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.
Private companies are still allowed to give share to employees.
Employees are then allowed to sell their stock periodically (every 6 months in this case).
Depends, the company could buy back, or during a founding round, some part of that founding can be reserved to buy employee shares.
External investors are also allowed to buy from employees during this period.
The main difference though is sell to whom? In the case of a public company, you sell your shares via the market to whomever will buy them. In the case of a private company, you're selling the shares back to the company, and the valuation is formulaic instead of market-based (unless there is some kind of private "market" that continues, but I've never seen that and would doubt its legality).
This is not an uncommon arrangement in companies that plan to remain private forever, or just have no rush to IPO. Without some exercise clause, it's hard to compete with public tech companies on compensation: I've seen way too many people stuck in companies that they've worked on for 4-5 years, but when leaving meant throwing away all the stock compensation, as the costs of exercise are not affordable without a seller.
Typically companies in those situations have investors from earlier rounds that want to increase their holdings, and the board doesn't have a problem letting get a percentage or two of extra shares, so they create some kind of liquidity opportunity, with the company serving as an intermediary between the employees and the investors.
I am a bit ignorant as to the mechanics of how this would work. Can anyone with the knowledge elaborate on what this means? Im thinking in terms of a few scenarios here:
1) I read this news and want to get on the Tesla train and throw all my liquidity into the current stock.
2) I already have x number of shares. What happens to them?
3) If I dissent, am I cut a check and told to hit the bricks?
4) is he going to need to raise capital to do this?
5) would the private company/person still be able to buy/sell "shares" on some off the stock market exchange?
Or an alternative to number 2, the acquisition does not go through and the stock plummets 20% from current price and you're now deeply in the red. I don't know enough about Tesla to predict which one is the mos likely but I have seen this happen in other companies.
If a majority votes to take the company private, you would have the option of selling or accepting private stock (some non-voting class I'd assume) that you can trade. Voting class stock would be only offered to investors with >X% current holdings, probably the 5% the Saudi's just purchased. Employees may have a third class stock. As an investor, you'd be given paperwork to sell or accept the new stock in exchange for your old stock. Rules for buying and selling private stock are pretty common and there are several organized indexes for private stock trades.
All of the short-sellers would lose every penny they gambled.
Thanks. Your last sentence seems to sum up the motive here in my opinion, not so much to screw the short sellers, but to limit/stop the ability of them to influence the value of the company through whatever means.
Short sellers aren‘t evil. They are a mechanism how the public trade exchange improves its estimate how much a company is worth.
After the very ugly financial news over the last months (but probably true — nobody has credibly refuted them), it‘s not hard to see why Musk and the less rational part of his supporters would love to see short sellers disappear, and „punished“.
Shorting is fine when you're predicting the stock will go down, it starts leaning towards evil when you try and damage the company to cause the price to go down.
Billions on the line create a nasty incentive and a publicly traded company is more at risk of negative attacks when they're not yet profitable.
There is zero evidence of shorts trying to damage the company.
Every time when TSLA stock was down last year it was some material news regarding missing Model 3 production estimates previously provided by Elon Musk himself or something like that.
Oh I wouldn't discount Elon's interest in screwing the short-sellers. There's ample evidence of his disdain for these people and even if you're bearish on Tesla, I think a lot of the short-sellers are fueled by oil & gas interests, so Elon's ire is not unwarranted.
I don't think the media portrays this battle appropriately. Tesla is the #1 enemy of the combustion engine supply chain and that is no small thing.
Every single auto parts store, every car manufacturer that does not sell EV's, and especially the oil & gas industry is at risk of Tesla's success.
This is a titanic battle. Don't anyone ever forget that.
I'm not fueled by oil and gas interests - I know a fraud when I see one. I'm short the equity, since dividends aren't a concern.
Tesla cannot manufacture at scale - they do not have the experience or capital to execute on this. Their financial statements demonstrate as much, and the build quality/reliability issues that are prevalent on forums/reddit/twitter demonstrate this.
If Musk gets the funding to go private, gets the 2-4 years of runway he needs to make the business work, that's a good thing.
I'm not a fan of businesses that run red year after year, but in some cases, there are societal benefits that vastly outweigh those concerns. A successful mass-production battery and EV business is something that can have a massive impact on reducing CO2 emissions.
So a lot of people and investors are less concerned about making money and financial models than they are about moving from fossil fuels to renewables. And if Tesla gets a few more years, the profits will come.
If you're only concerned with the bottom line, why are you investing in or against a startup? That seems like gambling to me and if you lose, that's on you, not on Tesla.
Short sellers aren't the only ones getting screwed. If you had taken a long position by buying call options with a strike price over $420, you're not gonna have a good time.
For example, the bids on $430 call options expiring in January and June 2019 were down ~20% and ~25%, respectively. If Elon's plan goes to fruition, those options can (probably) never be exercised.
The further out the expiry and the higher the strike, the worse it gets. Liquidity just evaporated, and the spreads are getting wider.
If Tesla announces this (causing the stock to rise, since the suggested price is much higher than the current price), and then doesn't go through with it, is it considered stock manipulation? I don't mean to accuse them, I'm sure they covered their bases, but I'd like to understand how it works.
Examples of offenses that would violate rule 10b-5 would be: executives making false statements in order to drive up share prices ... interestingly, it's as serious as ... or a company hiding huge losses or low revenues with creative accounting practices.
As an investor since 2012 I think Tesla would be far more operationally efficient private. Also a bit of schadenfreude but I've personally enjoyed watching Wall Street shorts collectively lose hundreds of millions of dollars over this.
Wouldn't that assume that every short seller would lose $420 per share? They probably purchased their shorts at like ~$350 per share, so they'd only stand to lose 420-350=$70 per share, correct?
I'm a newbie when it comes to calls and puts, couldn't they just fill their shorts now (no pun intended, I seriously don't know the terminology) if they're worried about it? Tesla closed at $370.
Sure, but they didn't start from zero. If you sold short at $350 the amount to cover is $70. Options are also a common way to hedge, so it's really hard to say what the total loss would be.
There was a HN discussion a couple of days ago complaining about companies going public much later. Could the short term quarterly horizon of public investors, as pointed out here, be a big reason companies don't IPO sooner?
> As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.
> SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held.
Isn't SpaceX success due to the fact that most of its orders come from the US government while Tesla has to compete in the free market and isn't that successful there?
That may be true, but the stability comes from it being privately held -- the SpaceX stock doesn't swing wildly every time some news about their competition with Boeing is released.
A profitable company has no need to be excessively concerned about its stock price. Of course, at some point, shareholders might consider putting on pressure, but that doesn't really seem to have happened even with Tesla. And in closely held companies, that kind of pressure is much stronger — it's not like Musk has $70B of spare change in his couch pillows, so he'll always have to deal with co-owners.
Most importantly, the co-owners are less likely to ask why a particular step to maximize profits in this quarter hasn't been done. To say nothing of activist shareholders who theoretically could sue; such things killed a few still-profitable companies, and Tesla isn't one yet.
NASA certainly did save SpaceX early on with some funding and contracts, which SpaceX fully delivered on at a competitive price.
I'm not going to look it up right now, but for now and the past several years, most of SpaceX's income has come from sources outside of NASA. That is, commercial launches.
The free market of automobile manufacturing in which the USA has propped up both GM and Ford, and in the past Chrysler? The one in which the Japanese government is carefully intertwined with their automotive industry?
The government is a customer of space x but they still compete against other companies for that business.
The French government is also a big shareholder of Renault and Volkswagen is partially owned by the regional government where they’re domiciled, if I’m not mistaken, plus the German government itself always putting the interests of the German big 3 (MB, BMW, VW) ahead of almost everything else, even their citizens’ health (see the tax incentives given to diesel vehicles for the last couple of decades).
That‘s simply wrong. We don‘t have a speed limit because the majority of the people would hate that.
On the other hand, German carmakers have a longstanding gentleman‘s agreement to electronically limit their cars to 250 km/h. Seems they can live with limits.
So it appears that a speed limit would be supported by the majority if it starts out reasonably high. (That's the same way the Swiss did it: They started with a relatively high speed limit, and then lowered it as the majority mindset shifted towards higher energy efficiency.)
Tesla has also received a substantial amount of government support, including state and federal EV rebates for buyers of its cars (roughly $300 million), an extremely large handout from the state of Nevada ($1.3 billion), a large handout from New York ($1 billion), handouts from US Government ($500 million), carbon credits ($520 billion as of 2015). Collectively, Tesla's government support actually exceeds the government's bailout of Ford by several orders of magnitude...
GM and Ford were propped up by the government during the Great Recession to protect tens of thousands of jobs. Both companies have since repaid those loans...though GM discharged much of its loan through bankruptcy.
> Tesla has also received a substantial amount of government supporting, including EV rebates for buyers of its cars.
All automakers are eligible for this support...if they build electric cars. Ford and Tesla are the only automakers to have never declared bankruptcy. These are tiresome arguments that hold no water.
Which is why I edited my comment to provide more detail. It's not just the EV rebates, Tesla has also received substantial government handouts; on the order of billions.
My understanding is that in 2009 Ford rejected the bailout the US automakers were offered (taking instead a loan which they are still repaying, through 2022).
GM was effectively nationalized (at a reported cost of $11b) and the creditors lost their shirts.
It's a national security interest that the United States has a automotive industry that pushes meaningful (3+ million vehicles a year domestically) volume.
There is absolutely nothing special about a Tesla BEV other than that unlike most automakers, it's extremely unprofitable. Go read Tesla's financial statements.
Going private, wouldn't it be a bigger distraction for everyone working at Tesla to wonder whether they can find a private buyer or not for their shares and what their shares are actually worth?
> Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.
So how do all the other companies do it then? It is not like Tesla is the only public company where some or all employees hold stock, and it is not the only one with a volatile stock price either.
There's a financial crisis of one type or another every 7 years. Each time, more and more regulation is put in place to make sure it doesn't happen again. It's only a matter of time before congress hangs too many ornaments on that particular christmas tree and it falls over.
I remember when Sarbanes Oxley was passed in 2002. I was in college and one of my professors was advocating becoming a SAP engineer specializing in SOX compliance. The cost of compliance was estimated to be gigantic, which meant lots of highly paid (but boring) work for enterprise programmers.
I feel like it mainly does that because Musk fails to set realistic expectations and then goes on tantrums whenever someone is negative about the outlook.
I admire his ambition and he is great for Tesla in general but as far as managing a public company his approach hasn't been very successful.
> I feel like it mainly does that because Musk fails to set realistic expectations and then goes on tantrums whenever someone is negative about the outlook.
That's about as fair as saying there's a cabal of billionaires shorting Tesla stock and using their media companies to drive the price down every chance they get. Either way, going private eliminates the noise.
This is true. For example, deadline for Model 3 was set much lower compare the Bolt. Even though Tesla make money on every sell of Model 3 and GM loses on every sell of Bolt money. Tesla is the one in negative news because of too high expectations.
While there's some good reasons here, I can't help but think this is more an emotional reaction on Elon's part, to the shorting and general negativity around the company.
I seriously doubt $70bn are changing hands because someone got "emotional". In my understanding, this is a great deal for Tesla, the key question is how Musk got the enormous amount of money to pull this through...
Emotions are a perfectly acceptable reason to initiate a $70 billion deal. It's important that the emotions line up with the logic and reason, but in this case, they do seem to align.
I think it's uncharitable to call it purely an emotional reaction. While that is certainly a component, I think this is actually one of the best mission-oriented strategic decisions Elon has made in a while.
The shorting and general negativity around the company are a morale drain on a scale that few companies have ever experienced before, let alone any companies that push their employees as hard as Tesla. I have friends who work very, VERY VERY hard at Tesla to help achieve their overall goal, and all of the hate really drags them down and makes them question why they work so hard, let alone the anxiety over the value of their shares. The cloud of negativity is a huge productivity sap and I suspect it is a contributor to the legendary rates of turnover at Tesla as well.
True story: I was standing on my back porch, finishing my morning coffee. It was one of those January Silicon Valley mornings where it can't quite decide whether its raining or not. Between the clouds, a rainbow appeared. From my vantage in the hills in South Fremont, the end of that rainbow sat squarely on the Tesla factory.
Being the sophisticated investor that I am, I know a 'buy' signal when I see one.
Here's to Elon and any Tesla employee who ever broke a sweat to deliver the pot of gold at the end of that rainbow.
Yes he is, Where do you get 66 billion $. Investor support dosen't mean he has the financing. Don't quote a tweet, get some real sources.
"And yet it also left many questions unanswered, namely how Musk -- who owns almost 20 percent of the company -- would be able to come up with the $66 billion necessary to complete the transaction. At $420 a share, Tesla would have an enterprise value of about $82 billion including debt. To take it private, the billionaire would have to pull off the largest leveraged buyout in history, surpassing Texas electric utility TXU’s in 2007."
This thought occurred to me as well. And if this really all is a bluff to raise the share price, and to buy his company a couple extra months of runway, it would be the marketing manipulation crime of the decade.
I'm talking Enron level stuff, where Musk gets sent to jail.
Instead of taking it private, what's stopping Tesla as a company from buying back shares from public market when the price is low? It not only stabilize the price it is also have long term benefit if the company is confident for the future.
Part of me wonders if it isn't a side-effect, but the goal: put the squeezin' on the shorts. But, man, if that tin-foil hat theory is true, Musk better have someone in the wings at least pretending to want to finance this lest the SEC come a-knockin'. Normally, I'd just pass that off as "haha, wouldn't that be funny!", but given some of Musk's tweets lately, there's still a little part of me that entertains the idea as plausible.
Yeah I'm really wondering whether this was legal - I would've been on his ass if I were the SEC for illegal price manipulation. Even if he doesn't go through with it, it's still bumped the stocks up by a lot. Could've been a move to scare off the shorts?
By the time you had made your post, Tesla had already issued a press release saying the same, and news had come out that Musk had been talking to the board about it for the past week. So, yeah, he was serious and not being manipulative, and AFAICT completely legal.
Can someone please ELI5 this for me? Why is a private Tesla better? As long as Elon and employees own more than 51% of the stock (do they?), can't they not just ignore the stock price swings?
You still have to publicly reveal all the quarterly numbers, estimates for next few quarters, do all the GAAP accounting etc. which puts a lot of toll on a company that's going through wild swings in capital spending and production.
If they don't keep their promises, the stock will crash, so everyone goes on a production death march close to the end of the quarter under extreme stress, instead of just growing organically at a steady pace. Good estimates are hard, just like in IT. That's why many companies delay going public, for example Uber.
You mean the email? "...I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission," => what difference does private or public make for this?
It's better from the company perspective because the truth Tesla as a public firm is required to regularly disclose keeps undermining the puffery Tesla is pushing to generate consumer-focussed media interest.
Being private gives them much better control of public information.
In the Tesla case I feel that the shareholder concerns are pretty valid and provide an interesting counter pressure to Musk's "This is fine" attitude. Not saying either is right, but the friction is likely valuable.
I'd not want to be an investor in a private Tesla. It would seem way to volatile.
I am a shareholder. I will not be selling after going private. This is really good for me because we can finally stick it to the shorts and the only people who we lose are "traders" - I don't care about what they think. Long term investors only is a good motto :)
If Elon's tweet is motivated by a desire to stick it to the shorts, and he does not in fact have funding lined up to take Tesla public, he could (probably would) face a massive stock manipulation lawsuit that would bankrupt him, in addition to any SEC settlements which would likely result in him being banned from holding an executive or board position in any publicly traded company.
How do you know he doesn't have funding lined up? Usually, if Musk says something like this it's true. (And don't start with he has a history of underestimating deadlines etc., this is totally different)
He tweeted that he had funding and in the email mentions no funding. This is a really weird announcement that feels like an empty pump of the stock. He could have chosen any number...
I don't think it was an intentional pump, I think he needs someone to change his Twitter password, not tell him the new one and post on his behalf, just like Trump also needs.
The main question I have is about financing. If Elon owns 20% of the company now, and he doesn't intend for that to change, and he is giving the option of public shareholders to sell at $420, then who is financing this? Usually a private takeover requires a partnership with a huge private equity firm. Wouldn't releasing this without having (or identifying) that partner be premature? And wouldn't the resulting stability be dependent on that partner's exit strategy?
So there's the real story. Who is this financer (or group) with ~40 billion in capital that is willing to bet long on Tesla? That's really interesting to me, if Musk is being truthful here.
I highly doubt it. For starters his wealth isn't liquid enough. He would need to give up shareholder control of Amazon or take on huge debt with his control of Amazon as collateral.
Google/Alphabet. Larry Page has stated that instead of giving away his billions to charity he would prefer to give it to someone like Musk that is trying to fix world scale problems.
Does that prove anything though? Let's imagine a bank is working on this deal; why would they tell a reporter? It's common for companies to deny things to the press even when they're true.
It's Wall Street and there would be rumors if someone was shopping the largest LBO ever. It's not like there are a lot of places you can go for this service, Tesla isn't going to back out on the deal because it leaked your bank has met with Elon.
It's rare for word of mega deals like this to not leak out in some fashion, doubly so after it's already been tweeted about by the CEO. If they had seriously been shopping this deal it would have already been in the WSJ. Considering the letter mentioned no funding I am under the impression that this is more of an Elon solo project and less of a serious undertaking by the company.
> Articles/Bylaws would likely give Musk control, even though he only holds 20%.
But Articles and Bylaws can be rewritten at the whim of the majority shareholder, no? I don't doubt that's how it would be initially structured (otherwise it would just be a hostile takeover) I'm just saying it's putting Tesla's future in the hands of whoever holds the most shares.
Google has three classes of shares: A, B and C. A shares get one vote, C shares get none and B shares get 10 votes. Brin, Page, Schmidt own all the B shares. [1]
For FB, Zuck holds a class of shares where each of his counts as 10 vs. the common shares.[2]
Hmm, interesting. I thought we were just talking about voting shares. Musk has said current shareholders would be able to hold on to their shares. Do you think behind that statement he implied "but will lose voting status"?
Lose or reduce. Musk would be at much greater risk as CEO if there were a small number of large shareholders. They could, in theory, band together against him to make a change. So I'd expect that as part of the deal, he'd make arrangements via voting rights to be in control. So your current 1 vote public shares may become 0 vote private shares. Or, his private shares may carry 10 votes each.
On the other hand... he seems to be somewhat an idealist and may reason that his performance will stand on its own merits. I.e., the shareholders would be right oust him if they felt that was the right course of action. Will be interesting to see how this plays out.
Could be Apple maybe? They have a huge amount of dough and IMO the companies are quite similar; Apple's been rumored to work on a car for forever to compete with Tesla. It would make sense for the companies to cooperate, Tesla doing the mechanics and Apple the software / UX.
Google (directly or indirectly) makes a lot of sense. They have the best self driving tech. Elon is miles ahead in electric vehicles. Perfect combination.
289 comments
[ 4.6 ms ] story [ 199 ms ] thread>Either they can stay investors in a private Tesla or they can be bought out at $420 per share...
These are all completely true, and very reasonable, but do show (at least to me) that the near-term promises regarding profitability he made at the last earnings call are probably in jeopardy.
Thank you for asking for a clarification rather than just knee-jerk down voting, though. :)
If you're a short seller, beware the "squeeze." If you're not a short seller, this article can be an amusing read:
https://www.reuters.com/article/us-volkswagen/short-sellers-...
I am sure hes already been lining up those who would want to do something - and it should be a clear sign about the Saudi position that was announced...
Basically, he's likely got House of Saud involved as they are flamboyant gamblers and would love to be associated with this if it succeeds, because the fame of this is worth more to them than the money at this point... so I am sure he already has the major financing arranged.
If he can't prove guaranteed financing for this deal, that's securities fraud and SEC investigation is the next step of this drama. Imagine... well, SNAP CEO tweeting "Some rich folks are going to take us private at $50 per share lmao ayee, cover your shorts". This is a market manipulation.
How does this work as a private company?
Some companies do periodic buybacks. Private shares can generally be sold at any time to accredited investors.
Typically companies in those situations have investors from earlier rounds that want to increase their holdings, and the board doesn't have a problem letting get a percentage or two of extra shares, so they create some kind of liquidity opportunity, with the company serving as an intermediary between the employees and the investors.
2. If this acquisition goes through, each one of your stocks will be worth $420. Congrats.
3. You can't really dissent to shareholder majority agreeing to this deal.
4. $70bn is a lot of mulla, so I would guess this will not be all Musk's personal funds.
5. Theoretically, through some sort of a private equity venue. Just like any other private company.
I'm curious how this will work if you hold TSLA in retirement accounts (all of my TSLA is in a Roth IRA).
All of the short-sellers would lose every penny they gambled.
After the very ugly financial news over the last months (but probably true — nobody has credibly refuted them), it‘s not hard to see why Musk and the less rational part of his supporters would love to see short sellers disappear, and „punished“.
Billions on the line create a nasty incentive and a publicly traded company is more at risk of negative attacks when they're not yet profitable.
Every time when TSLA stock was down last year it was some material news regarding missing Model 3 production estimates previously provided by Elon Musk himself or something like that.
https://electrek.co/2018/07/24/tesla-troll-short-doxxed-oil-...
I don't think the media portrays this battle appropriately. Tesla is the #1 enemy of the combustion engine supply chain and that is no small thing.
Every single auto parts store, every car manufacturer that does not sell EV's, and especially the oil & gas industry is at risk of Tesla's success.
This is a titanic battle. Don't anyone ever forget that.
Tesla cannot manufacture at scale - they do not have the experience or capital to execute on this. Their financial statements demonstrate as much, and the build quality/reliability issues that are prevalent on forums/reddit/twitter demonstrate this.
If Musk gets the funding to go private, gets the 2-4 years of runway he needs to make the business work, that's a good thing.
I'm not a fan of businesses that run red year after year, but in some cases, there are societal benefits that vastly outweigh those concerns. A successful mass-production battery and EV business is something that can have a massive impact on reducing CO2 emissions.
So a lot of people and investors are less concerned about making money and financial models than they are about moving from fossil fuels to renewables. And if Tesla gets a few more years, the profits will come.
If you're only concerned with the bottom line, why are you investing in or against a startup? That seems like gambling to me and if you lose, that's on you, not on Tesla.
For example, the bids on $430 call options expiring in January and June 2019 were down ~20% and ~25%, respectively. If Elon's plan goes to fruition, those options can (probably) never be exercised.
The further out the expiry and the higher the strike, the worse it gets. Liquidity just evaporated, and the spreads are getting wider.
Examples of offenses that would violate rule 10b-5 would be: executives making false statements in order to drive up share prices ... interestingly, it's as serious as ... or a company hiding huge losses or low revenues with creative accounting practices.
(~34 million short shares outstanding * $420/share = ~14 billion dollars to cover. Is my math wrong?)
If there aren’t enough shares available to cover, could the price exceed $420?
> SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held.
Something that I can very well understand.
That's the intended question. Though I don't know what GP's definition of "success" is.
https://www.investopedia.com/news/spacex-will-fly-astronauts...
Or this:
https://arstechnica.com/science/2018/07/nasa-commercial-crew...
(I clarified my original comment)
Having 2 years worth of production in the backlog is not successful?
Ok then.
I'm not going to look it up right now, but for now and the past several years, most of SpaceX's income has come from sources outside of NASA. That is, commercial launches.
The government is a customer of space x but they still compete against other companies for that business.
On the other hand, German carmakers have a longstanding gentleman‘s agreement to electronically limit their cars to 250 km/h. Seems they can live with limits.
That prompted me to look for polls.
> (2015-10-15) 56% of those polled would support a speed limit of 150 km/h on all German Autobahnen
Representative survey by YouGov, source: http://www.faz.net/aktuell/politik/inland/umfrage-mehrheit-d...
> (2018-01-26) A slim majority of Germans (52%) supports a general speed limit of 130 km/h.
Representative survey by Forsa, source: https://www.tz.de/auto/tempolimit-autobahn-knappe-mehrheit-d...
> (date unclear) "Are you for or against a general speed limit of 120 km/h?" - 35% for, 62% against
Source: https://de.statista.com/statistik/daten/studie/258757/umfrag... (they won't disclose source, survey method or date unless you cough up your personal data)
So it appears that a speed limit would be supported by the majority if it starts out reasonably high. (That's the same way the Swiss did it: They started with a relatively high speed limit, and then lowered it as the majority mindset shifted towards higher energy efficiency.)
The reality, I think, is that there is sufficient support for the speedlimit-free Autobahn from Germans.
GM and Ford were propped up by the government during the Great Recession to protect tens of thousands of jobs. Both companies have since repaid those loans...though GM discharged much of its loan through bankruptcy.
All automakers are eligible for this support...if they build electric cars. Ford and Tesla are the only automakers to have never declared bankruptcy. These are tiresome arguments that hold no water.
Yes, the message here is almost all large industries in all countries receive substantial government support.
The amount of goverment subsidy for fossil fuels that normal cars run on, for instance, is much higher than for renewables.
https://www.thebalance.com/auto-industry-bailout-gm-ford-chr...
https://www.reuters.com/article/us-autos-gm-treasury-idUSBRE...
GM was effectively nationalized (at a reported cost of $11b) and the creditors lost their shirts.
Also, I mixed up GM and Chrysler on which of them repaid the loan.
What did you mean to say here?
That GM eliminated (not repaid) the loan through bankruptcy?
Or that GM discharged the loan then repaid it anyway?
So in theory a loan can be completely paid off through a bankruptcy. In the case of GM, it did not happen, IIRC.
There is absolutely nothing special about a Tesla BEV other than that unlike most automakers, it's extremely unprofitable. Go read Tesla's financial statements.
[1] https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes
(Just off the top of my head, tiffs between Costco and distributors when Costco wanted to sell liquor.)
Ref: https://www.spacex.com/missions
I remember when Sarbanes Oxley was passed in 2002. I was in college and one of my professors was advocating becoming a SAP engineer specializing in SOX compliance. The cost of compliance was estimated to be gigantic, which meant lots of highly paid (but boring) work for enterprise programmers.
I admire his ambition and he is great for Tesla in general but as far as managing a public company his approach hasn't been very successful.
That's about as fair as saying there's a cabal of billionaires shorting Tesla stock and using their media companies to drive the price down every chance they get. Either way, going private eliminates the noise.
The shorting and general negativity around the company are a morale drain on a scale that few companies have ever experienced before, let alone any companies that push their employees as hard as Tesla. I have friends who work very, VERY VERY hard at Tesla to help achieve their overall goal, and all of the hate really drags them down and makes them question why they work so hard, let alone the anxiety over the value of their shares. The cloud of negativity is a huge productivity sap and I suspect it is a contributor to the legendary rates of turnover at Tesla as well.
I agree. I didn't call it one.
Being the sophisticated investor that I am, I know a 'buy' signal when I see one.
Here's to Elon and any Tesla employee who ever broke a sweat to deliver the pot of gold at the end of that rainbow.
> Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.
https://twitter.com/elonmusk/status/1026914941004001280
"And yet it also left many questions unanswered, namely how Musk -- who owns almost 20 percent of the company -- would be able to come up with the $66 billion necessary to complete the transaction. At $420 a share, Tesla would have an enterprise value of about $82 billion including debt. To take it private, the billionaire would have to pull off the largest leveraged buyout in history, surpassing Texas electric utility TXU’s in 2007."
$66B is inaccurate, Tesla would only need to buy from the shareholders that wish to sell at $420.
https://www.thestreet.com/investing/stocks/alphabet-autonomo...
I'm talking Enron level stuff, where Musk gets sent to jail.
"Enron Musk" has a nice ring to it, doesn't it?
Until Tesla's economics become obvious to all in the market, this is probably the best decision; this allows them to be more focused on the long run.
If they don't keep their promises, the stock will crash, so everyone goes on a production death march close to the end of the quarter under extreme stress, instead of just growing organically at a steady pace. Good estimates are hard, just like in IT. That's why many companies delay going public, for example Uber.
Being private gives them much better control of public information.
I'd not want to be an investor in a private Tesla. It would seem way to volatile.
He's called a rescue diver a pedo and cried "fake news" when journalists have questioned Tesla's financials.
https://twitter.com/elonmusk/status/1026872652290379776?s=19
Bezos?
That could be Softbank. They already have $200 billion in investment lined up.
And apparently they are to some extent disillusioned investing in internet companies.
Also, even if there are rumors, why would that necessarily logically go from bankers talking to each other to immediately blabbing to the press?
There is a difference between not telling a reporter and denying it to a reporter.
They wouldn't have to come up with the full valuation, only need enough to buy out those who wish to sell.
Articles/Bylaws would likely give Musk control, even though he only holds 20%.
But Articles and Bylaws can be rewritten at the whim of the majority shareholder, no? I don't doubt that's how it would be initially structured (otherwise it would just be a hostile takeover) I'm just saying it's putting Tesla's future in the hands of whoever holds the most shares.
For FB, Zuck holds a class of shares where each of his counts as 10 vs. the common shares.[2]
[1] https://www.investopedia.com/articles/markets/052215/goog-or...
[2] https://www.cnbc.com/2018/03/20/shareholders-wont-force-zuck...
On the other hand... he seems to be somewhat an idealist and may reason that his performance will stand on its own merits. I.e., the shareholders would be right oust him if they felt that was the right course of action. Will be interesting to see how this plays out.