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Given the number of times I've been showing off my Model S or Model 3 and been asked "Do you work for Tesla?" this made me smile.
Imagine getting *paid* for Tesla time...
adiggs
Well-Known Member
mickificki
Member
Anyone know if deferred compensation (my workplace’s idea of a 401k plan) would not allow me to hold private stock?
This waiting is killing me.
This waiting is killing me.
Would love to hear the details after you speaking with Fidelity on Monday. Do they allow IRAs to hold private shares? My other question will be whether I can participate in the future share purchases via a regular Fidelity brokerage account, if I hold my private shares and hence retain "future purchase rights" at a Fidelity IRA account.
It *appears* TDAmeritrade allows private share holdings. See the doc below. The more brokerage options we have, the better.
https://www.tdameritrade.com/retail-en_us/resources/pdf/TDA3745.pdf
Elon said something about SpaceX already making shares available to all through Fidelity. I did a bit of searching, and from what I can tell, Fidelity bought a stake in SpaceX, and they do have some exposure to SpaceX. However, they have NO pure plays. If you want to invest in SpaceX, through Fidelity, you have to buy one of their funds (and pay MER)... and from the sounds of it, their funds only have 0.5$ - 3% exposure to SpaceX. So, one would get a lot of exposure to a lot of other things that are irrelevant, if they are trying to buy SpaceX.
If you can confirm this, that would be nice. If Elon sets up Tesla the same, there would be no pure play for retail investors.
david_42
Member
All of my shares are in retirement accounts. I do qualify as an accredited investor, IF retirement funds are included, but even so, with only 330 shares, I doubt I would be one of the 2000 investors allowed by law.
There appear to be ways around the 2000-investor rule. (For instance, being a "public unlisted company", or having a "pass-through fund" which owns nothing but TSLA.) Those pass-through funds do NOT get around the accredited investor rule, though (it looks like being a public unlisted company *does* allow you to sell to non-accredited investors) and probably neither of those things would be allowed in most types of retirement accounts. Many require listed stocks only.
You can have practically anything in a US IRA but it has to be "self-directed" which usually comes with $300/year fees and poor service.
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cpa
Active Member
Generally speaking, this sort of privatization would not be a taxable event. But Tesla will have to receive legal advice from competent counsel. However, the corporate rules in Subpart B are inordinately complex. Fortunately for us shareholders, there are no accumulated E&P with Tesla.
We still do not know how Tesla is going to accomplish their quest to delist the stock. Once the details are known, there will be more information to digest and determine if some or none of this change in equity would be considered a taxable event. Then we shareholders will vote on this proposal.
For example, Tesla could decide to form an LP or LLC with all us shareholders limited partners or members. We would receive a prorata interest in this partnership based upon our stock holdings by contributing our shares to this new entity. While this would not fall under the corporate rules, it would fall under the partnership rules and would be a taxable event for those shares not held by a qualified pension plan.
Ordinarily, the transfer of money or property in exchange for a partnership interest is not a taxable event. But the transfer of appreciated marketable securities and real estate have exceptions to this general rule. Section 721 (I believe) explains when this sort of structure becomes a taxable event in the hands of the transferee.
We still do not know how Tesla is going to accomplish their quest to delist the stock. Once the details are known, there will be more information to digest and determine if some or none of this change in equity would be considered a taxable event. Then we shareholders will vote on this proposal.
For example, Tesla could decide to form an LP or LLC with all us shareholders limited partners or members. We would receive a prorata interest in this partnership based upon our stock holdings by contributing our shares to this new entity. While this would not fall under the corporate rules, it would fall under the partnership rules and would be a taxable event for those shares not held by a qualified pension plan.
Ordinarily, the transfer of money or property in exchange for a partnership interest is not a taxable event. But the transfer of appreciated marketable securities and real estate have exceptions to this general rule. Section 721 (I believe) explains when this sort of structure becomes a taxable event in the hands of the transferee.
anticitizen13.7
Not posting at TMC after 9/17/2018
This is exactly the issue I am trying to figure out.
So far, according to everything I've read, from the published SEC regulations to the opinion of experts in the area of securities law and regulation, suggests that there is no way for ordinary, non-"accredited" investors, to hold on to their shares if Tesla goes private.
This doesn't mean that it is impossible. There is always the chance that Tesla's leadership and legal team can find a loophole or novel investment vehicle, but without more information, I don't think any of us at risk of forced sale can count on it.
I believe that anyone who is not an "accredited" investor should immediately begin creating a contingency plan to deal with possible (1) tax consequences and (2) where to invest assets, should one's holdings in TSLA be "cashed out".
Psychologically, the outcome of "cashed out" is going to be difficult for many of us to deal with. I know it will be for me personally, because I have always felt that TSLA was likely to be the biggest and most insane bet of my lifetime. I haven't had this sort of opportunity since the 1990's, and I wasn't in a financial position to take advantage of Amazon, Apple, or Google 10-15 years ago. Being forced out at this stage would really suck.
At the same time, there is no sense in denying what will happen if Tesla goes private and there is no legal means for many of us to maintain shareholder status.
I do not know exactly what I will do with my proceeds should this happen, but I believe that beyond sustainable energy, advanced manufacturing, and AI, the next major step is engineering ourselves. Gene sequencing, genetic therapies, bioreactors, wet-dry interfaces between life and digital computers (like neuralink), and much more, will push human evolution at an unprecedented pace. I believe that it will be much more shocking than the transition from the analog world (telephones, mail order catalogs, snail mail) to the digital world (smartphones, e-commerce, social media), and ultimately transform Homo Sapiens at a very fundamental level.
So exactly where do you see a requirement that there can be only 35 non accredited investors? That there can be no small investors? I've taught this concept for Series 7 for almost 20 years and I know of nothing like this. I've stated this before and I'll try to do this once more. The accredited investor concept is a primary offering thing. It was created to limit the number of uninformed (unknowledgeable, inexperienced) regular folks from getting taken when a company sells stock. Typically this is pre IPO but it applies to all primary offerings. Once you're in I know of no requirements to get rid of individual investors. NOTHING. At least none to my knowledge. Would be great to learn something new if there is a requirement to divest of small investors in private companies. There are techniques to force investors to do things e.g. forced conversions designed to push convertible bond holders into common stock but this is at the company's discretion. Not a FINRA, NASD, SEC requirement.
The logistics to figure out who and who does not satisfy the $200k income and $1million net worth would be pretty difficult. Tons of individual investors to vet. Also folks make it seem like there are serious documentation requirements to prove you are worthy. NOT true. There is nothing that gets turned into any SEC/NASD office. This is not like getting a loan to buy a house. I did not work in compliance or legal but I have been a part of SEC/NASD inspections and they look for bad things and generally required documentation. Like a tax audit they do randomly grab customer files but typically they spend more time on your customer complaints logs. They do not go thru and verify that Cal has x amount of $'s or that he proved his net worth. Margin and option accounts do require much more but then again they do a credit check before they let you do things. No one is going to loan you $ to buy stock without checking to see if you are good for the $.
There is much less regulation that requires a company to do something than you might think. They don't have to let you vote, send you dividends. There are tons of different types/classes of corporate stock. Your Tesla 401K shares are common shares but a non voting class. You won't get a proxy statement asking you to vote on anything.
The fact that you're limited on information, have much reduced liquidity etc is nothing new. This is exactly what happens when you buy a limited partnership. You have even more limited options to sell. I've had horrible experiences with them in the 80's after they legislatively changed the rules regarding these tax shelters. I couldn't give them away and there was no place on any exchange for bids or asks. You did have initial capital requirements to get buy directly from the general partners but after that you were on your own. And the buy you sell it to even more so.
The logistics to figure out who and who does not satisfy the $200k income and $1million net worth would be pretty difficult. Tons of individual investors to vet. Also folks make it seem like there are serious documentation requirements to prove you are worthy. NOT true. There is nothing that gets turned into any SEC/NASD office. This is not like getting a loan to buy a house. I did not work in compliance or legal but I have been a part of SEC/NASD inspections and they look for bad things and generally required documentation. Like a tax audit they do randomly grab customer files but typically they spend more time on your customer complaints logs. They do not go thru and verify that Cal has x amount of $'s or that he proved his net worth. Margin and option accounts do require much more but then again they do a credit check before they let you do things. No one is going to loan you $ to buy stock without checking to see if you are good for the $.
There is much less regulation that requires a company to do something than you might think. They don't have to let you vote, send you dividends. There are tons of different types/classes of corporate stock. Your Tesla 401K shares are common shares but a non voting class. You won't get a proxy statement asking you to vote on anything.
The fact that you're limited on information, have much reduced liquidity etc is nothing new. This is exactly what happens when you buy a limited partnership. You have even more limited options to sell. I've had horrible experiences with them in the 80's after they legislatively changed the rules regarding these tax shelters. I couldn't give them away and there was no place on any exchange for bids or asks. You did have initial capital requirements to get buy directly from the general partners but after that you were on your own. And the buy you sell it to even more so.
Basically, all they do is ask you to sign a form saying you're an accredited investor. No-one checks. It's a CYA move to prevent unsophisticated investors from suing them later.
cpa
Active Member
This has been what I have been thinking about. Tesla could come up with a de minimus quantity of shares to own in order to be invited into the private ownership group. Everyone beneath a threshold would be cashed out automatically. Tesla might even simultaneously declare a reverse split to weed out even more of us.
It's really hard to get rid of bad tenants in real estate. They will have a much harder time getting rid of us. Throwing $ around will tempt the weak short sighted. But they can't just cash the rest of us out. There is no financial mechanism to do this. They can't call back common stock shares. Well if it was written into their corporate charter I guess they could, but I've never heard of such a thing. Preferred stock, bonds, yes but common.... It would detail specific pricing, timelines etc. Most folks don't plan on this in their initial company registration. Of course they can change it but that would require voting.
We will get to vote on the current proposal to go private. A fact that seems lost in all the discussions. We'll have a say in our faith. I've not seen any data saying that most shareholders just follow the Board of Directors recommendations but I'll bet it's pretty high. Just look back at the Solar City proposal. Passed pretty easily. Hard to say if this will be as much a slam dunk.
If approved they will do a tender offer outlining the details for anyone willing to give up their shares, all or none, best efforts. Once you sell out your last share you won't be able to get back in unless they go public again. You'll be able read about the offering in all the major pubs and you'll get something from your broker if you own the shares directly e.g. IRA, individual or joint accounts. You'll get nothing (regarding voting) if your shares are owned by your mutual fund. The fund manager (registered investment advisor company) will vote those shares. If you're an international investor it will probably be handled like American Depository Receipts. Those shares are voted by the US bank that is holding your Sony stock.
Another point that seems to keep getting missed is the reason he wants to do this. Once he feels the company is on solid enough ground they can re-offer shares to the public again. Those who hold on will be doing nicely indeed. If they don't need to raise capital they might never go back into the public sector. Reoffering is not a sign of weakness, just a way to raise more money without taking on debt. Sometimes it makes sense to use other peoples $ to finance your expansion. Sometimes it's not worth the hassle.
We will get to vote on the current proposal to go private. A fact that seems lost in all the discussions. We'll have a say in our faith. I've not seen any data saying that most shareholders just follow the Board of Directors recommendations but I'll bet it's pretty high. Just look back at the Solar City proposal. Passed pretty easily. Hard to say if this will be as much a slam dunk.
If approved they will do a tender offer outlining the details for anyone willing to give up their shares, all or none, best efforts. Once you sell out your last share you won't be able to get back in unless they go public again. You'll be able read about the offering in all the major pubs and you'll get something from your broker if you own the shares directly e.g. IRA, individual or joint accounts. You'll get nothing (regarding voting) if your shares are owned by your mutual fund. The fund manager (registered investment advisor company) will vote those shares. If you're an international investor it will probably be handled like American Depository Receipts. Those shares are voted by the US bank that is holding your Sony stock.
Another point that seems to keep getting missed is the reason he wants to do this. Once he feels the company is on solid enough ground they can re-offer shares to the public again. Those who hold on will be doing nicely indeed. If they don't need to raise capital they might never go back into the public sector. Reoffering is not a sign of weakness, just a way to raise more money without taking on debt. Sometimes it makes sense to use other peoples $ to finance your expansion. Sometimes it's not worth the hassle.
Musk didn't vote his shares in the solarcity purchase IIRC. If going private goes to a vote it will very likely pass. Tesla structures its capital deals to favor large investors first. The few large investors who want to own less Tesla will be cashed out at $420 and replaced by large investors who want more stock.
However Tesla structures equity ownership they will ideally avoid issuing publicly available quarterly reports. I'm not sure if a private equity mutual fund accomplishes that goal.
Stretch2727
Engineer and Car Nut
Have all my shares as a small portion of my 401K. Hard to see how I would be able keep these shares given the limitations. I had no plans to sell and planned to hold for at least 10 years. Do not have enough assets outside of retirement funds to match what I have in TSLA now. So I am not selling at price less than $2000 unless forced.
Reading some of the limitations on private equity. Accredited investors, 15% max limit in mutual funds etc. It seems it will be hard for some individual investors to stay purely in TSLAP. The rules are there for a reason as there is much less disclosure and liquidity on private equity. The rules make sense to me as the a trade off between public and private equity.
In the end the vote will depend in the institutional holders. Individual investors only hold 12% of the stock. Institutions can likely hold TSLAP in portions of mutual funds much like they do for SpaceX. I saw a number like 50% on institutions would stay....I actually think this will be higher. On the individual Investors side I think it will be lower given the limitations.
Reading some of the limitations on private equity. Accredited investors, 15% max limit in mutual funds etc. It seems it will be hard for some individual investors to stay purely in TSLAP. The rules are there for a reason as there is much less disclosure and liquidity on private equity. The rules make sense to me as the a trade off between public and private equity.
In the end the vote will depend in the institutional holders. Individual investors only hold 12% of the stock. Institutions can likely hold TSLAP in portions of mutual funds much like they do for SpaceX. I saw a number like 50% on institutions would stay....I actually think this will be higher. On the individual Investors side I think it will be lower given the limitations.
an uneducated question. I'm seeing a lot of folks posting that only, 2,000 folks and only accredited investors with at least 1-2 bazillion dollars will be allowed into TSLAP, so it "won't happen"
I see elsewhere that employees are allowed in tho at any level of money input, which may or may not be true.
is it crazy to ask, could one be an employee and the "work" performed be infusion of money, money = work, and the "salary" be in the form of options for more shares or 1 dollar/time period/share, say 26 months or every Mars opposition?
I see elsewhere that employees are allowed in tho at any level of money input, which may or may not be true.
is it crazy to ask, could one be an employee and the "work" performed be infusion of money, money = work, and the "salary" be in the form of options for more shares or 1 dollar/time period/share, say 26 months or every Mars opposition?
bhtooefr
Active Member
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