Elon hints he'll buy back shares and "taking Tesla private"

[hockeythug]

No way will this be structured as a takeover. Elon will stay as the head of a newly-privatized Tesla. Look at the Dell deal for a howto.

If Tesla was outright taken over, the buyer could do whatever it wants with the company, including shutting it down. Imagine Exxon-Mobil coming in with a higher buyout offer. Management would have a fiduciary responsibility to take it, even if Exxon-Mobil publicly stated they were going to close it down.

I wonder how individual, non-employee investors would be allowed to play in a private Tesla. Wouldn't they have to be accredited? Elon tweeted:


How do I buy SpaceX through Fidelity? Do I just have to buy one of their funds (ie, Contrafund) to get SpaceX (with a bunch of other stocks I may or may not want)?

Besides being an employee I think the only way is through the secondary market which many require you to be accredited investor status. I assume the Tesla one will be more accessible.

 

[david_42]

Although I've seen several comments about what it would cost to go private, none of them seem to consider Musk's ownership share. That cuts the required funds $15-20B. Personally, given the option, I'd take shares in the private company. My shares are in retirement funds and I don't have to start withdrawals for another six years.

 

[suwaneedad]

This goes back to his "short squeeze of the century" comment.

I would not be surprised if he is doing this just to "fulfill his own prophecy" and squeeze the shorts into massive pain. That, and no longer having to deal with the shorts at all, of course.

"Hell hath no fury like an Elon scorned."

Choose sides as you wish; I'm continuing to side with the guy that has the 1.000 batting average.

 

[TheTalkingMule]

Went to the beach on a big day I guess. This is just an anti-short backstop, right? Force the price permanently above the price where bonds convert, right?

This essentially puts TSLA in the clear for good. When's the next cheaper car announced? I want to see the Outback style Tesla starting at $32k.

 

[P90D]

Agreed. Moving away from oil is a start. Diversification.

I bought my neighbor's lawnmower. He went and bought a nice new quiet one. I get to sleep in on Sundays.

 

[P90D]

What happens to options with an expiration after the date of sale? Is a Jan 2020 400 call only going to be worth $20?

Right, so hopefully you sold it for much more than $20. : )

 

[emupilot]

Right, so hopefully you sold it for much more than $20. : )

The ask price was about double the bid price when I realized there might be a problem... on the other hand, I sold a Jan 2020 400 call to help pay for the Jan 2019 400s, so I'll catch the up-side of time value getting hammered too.

 

[P90D]

The ask price was about double the bid price when I realized there might be a problem... on the other hand, I sold a Jan 2020 400 call to help pay for the Jan 2019 400s, so I'll catch the up-side of time value getting hammered too.

yeah, they'll try to disappoint you on that calendar
I've asked the folks at tastytrade to explain how this will trade tomorrow ... it will be fun, but I'll be clearing out and staying away from things till I understand if there's any market left once the underlying is pegged in a buyback.
In a buyout, it's pretty easy to understand that long theta is toast, but derivatives have a way of ... surprising. : )

 

[neroden]

It's SIGNIFICANTLY more complicated than that. People throw around the terms "Tender Offer" and "takeover" as if it means a single thing, but there are all different kids of "takeovers", including ones where the management team stays in place. This is especially true if the takeover is by a financial investor (ie a sovereign wealth fund, huge PE firm, BlackRock type, or pension fund). Those types don't bring their own management teams (like a GM might) so they need the existing ones to stick around. This is even more complicated because there are relatively few US institutions who could do something like this, (PE firms can't really play, this would be nearly the largest PE deal of all time, and you can't leverage TSLA significantly) so you might need a SWF, which means you need CFIUS approval, and good luck with that.

Betting on something like Apple, Google, Microsoft, or Berkshire Hathaway. There's some institutions which could do it and are US-based. Or their primary shareholders. I think Brin and Page could borrow enough against their Google stock to make the offer personally...

 

[neroden]

Went to the beach on a big day I guess. This is just an anti-short backstop, right? Force the price permanently above the price where bonds convert, right?

This is my hope, that it's basically a backstop which will put a floor on the stock price. But I think Musk really wants to go private. I hope the stock price rockets up enough to prevent it.

This essentially puts TSLA in the clear for good. When's the next cheaper car announced? I want to see the Outback style Tesla starting at $32k.

 

[FrANce]

It is interesting that the price of 420 also references Marijuana. I wonder if Musk picked that number for that exact reason.

Or, because it is 'Life, the Universe and Everything' times 10

 

[Vinny809]

What happens to shorts who decide not to cover in the event TSLA goes private? Will brokers force them to cover?

 

[Mario Kadastik]

What happens to shorts who decide not to cover in the event TSLA goes private? Will brokers force them to cover?

Yes, during delisting they have to return all the shares of stock they have loaned. This means that if they don't do, then their broker will have to independent on what it costs. They are the ones who gave the shares that belonged to someone else.

 

[DoctorVenkman]

Betting on something like Apple, Google, Microsoft, or Berkshire Hathaway. There's some institutions which could do it and are US-based. Or their primary shareholders. I think Brin and Page could borrow enough against their Google stock to make the offer personally...

Elon confirmed on twitter that there won't be a majority shareholder in the private company. It's not going to be a single company buying up Tesla.

 

[electracity]

Elon confirmed on twitter that there won't be a majority shareholder in the private company. It's not going to be a single company buying up Tesla.

Exactly. Tesla is not being sold, they are delisting the common stock. The additional outside money needed is for common stock holders who want out. The convertible bond holders also presumably need to be paid out using the $420 conversion rate. A great deal for them.

Elon has signaled two things: 1) He has the votes to go private, and 2) He has a buyer for any common stockholder who wants to be bought out at $420. The Saudis may have provided that financing.

 

[Reality]

Exactly. Tesla is not being sold, they are delisting the common stock. The additional outside money needed is for common stock holders who want out. The convertible bond holders also presumably need to be paid out using the $420 conversion rate. A great deal for them.

Elon has signaled two things: 1) He has the votes to go private, and 2) He has a buyer for any common stockholder who wants to be bought out at $420. The Saudis may have provided that financing.

yep, if any of this is not true then he committed fraud

 

[DoctorVenkman]

yep, if any of this is not true then he committed fraud

And if my mother was the Queen of England I'd be a prince. What's your point? Do you have any evidence that what he said is not true?

 

[neroden]

What happens to shorts who decide not to cover in the event TSLA goes private? Will brokers force them to cover?

Yes. If they don't cover the broker is on the hook to return the shares to the long securities-holder, and the broker never wants to be on the hook, so the broker will force them to cover.

 

[Gifford 3]

If Saudis want to buy our stocks, they have to pay "at least" $420 as the lowest price.

 

[daniel]

I didn't buy my TSLA shares as an "investment." I bought them so I could feel that I am part of a company committed to building clean, quiet, efficient, transportation based on an energy source that can be produced sustainably. And because I loved my car so much. I still want to be part of the company, but at my age I'm not looking for long-term growth, but rather income. If Tesla offered to convert my shares into bonds with a good return I'd jump on it. I already own some solar bonds, but they don't seem to be offering those any more, perhaps because they've moved away from the earlier system of installing solar at no cost to homeowners and selling them the electricity.

As a general philosophical notion, it seems to me that taking a company private while still having shareholders is basically an end-run around SEC rules intended to protect shareholders. What does it really mean other than the shareholders no longer have any rights? How can a company be "private" if it's still owned by shareholders? Will the shareholders still have a vote on stuff?

I'm torn, because I totally support Elon Musk in his goal with Tesla to build electric transportation, and I totally love my Model 3, and I agree that the market is a P.O.S. that makes things harder for Tesla, but I fail to understand the concept of "going private" while still having shareholders. What's the difference between a public company, and a private company that's owned by a broad base of shareholders, other than loss of rights by the shareholders and the inability to sell their shares whenever they want?