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Discussion in 'News' started by 30seconds, Jul 20, 2015.
Mr. Ritholz on Bloomberg
Tesla Just Did Something Really Big - Bloomberg View
Great article with one exception, I think Tesla should be its own company and not a subsidiary of another. They will probably do better on their own.
If one of these auto companies (or maybe all of them pooled together) buy Tesla, I bet they will kill Tesla and bury the tech for another 100 years.
Thankfully, buying up Tesla is going to be a remarkably difficult endeavor to succeed at. I figure there are 2 ways to do it - with and without Elon's support.
With Elon's support, the deal has to be structured in a way that would garner Elon's support. In this case, I'm not worried about whether Tesla gets buried or even whether the mission continues. The only way this happens is if Elon is convinced that the merged / bought entity can hasten the advent of sustainable transport EVEN faster. And in this particular instance, though I suspect that the merger would get the necessary votes to be agreed to, I can also imagine it not getting the votes and coming up short. Of course, Elon has consistently indicated that selling Tesla isn't in the cards, so this seems unlikely.
The alternative is a hostile takeover. Somebody offers enough money that enough shareholders decide to sell anyway. My understanding is that Elon personally controls less than 50% of the company, so this is at least theoretically possible. How much money would need to be offered for 50.1% of the shareholders to vote to sell, with a NO recommendation from Elon? I'm pretty sure $1000/share wouldn't be enough - would 10x or $2700/share be enough? I kind of doubt it would be enough.
End result - I'm thinking that Tesla becoming a subsidiary under any circumstances outside of Elon's will is a non-issue.
This is very reassuring. Also, great article.
The largest hurdle to a better future is now cultural... not technological or economic. The main reason our society continues to power our present at the expense of our future isn't lack of resources or technology... it's ignorance, laziness and callousness.
Change our culture.... change the world.
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BTW, substantial percentage of TSLA shareholders have deep respect for Elon and would give a lot of weight to how Elon would advise to vote on any matter, especially on hostile takeover one. There are things like so called poison pill that allow management to essentially eliminate such threat, if they are backed by shareholders etc. With Elon holding north of 27% plus some options that could to increase that number, and with loyal team of insiders/investment buddies like Steve Jurvetson etc there is no chance, zero chance of hostile takeover attempt going through.
great editorial - "end of gasoline fueled automobile"
Tesla has no need to be purchased by anyone. It can raise enough funds to expand whenever it is ready to do so.
I am glad to see articles saying "gasoline-powered cars are toast" but that is not just because Telsa is able to build cars that go 0-60 in 2.8 secs for a fraction of the price of the competition's fastest cars. There are a multitude of other more compelling reasons why ICE's are history.
Just added this comment to the ones stacking up in the article. Lots of ignorance and negativity, but also a refreshing amount of people trying to set the nay-sayers straight.
I'm not sure I'm a good enough person to pass up an offer of $2,700/share.
True 'dat. But I'd bet you'd vote no in a heartbeat with Elon for $500/share (I realize I could be wrong about that too). So what's that threshold for you?
And most importantly for this particular point - who in the world has that kind of money, wants to spend it buying a car company, and can get their shareholders on board with it? Apple could pay cash or pretty close to it, but would Apple shareholders think that was a good way to spend just about that entire pile of cash? I suppose a government could make an attempt, but really - now we're just getting outlandish and making **** up.
It's a comment that makes for good copy and draws eyeballs and keeps tongues wagging, but Tesla isn't somebody else's entree into EV manufacturing.
I agree with a lot of what you are saying.
BUT I also think the expense of change is very high (AND even higher if we don't) and making change more difficult for many.
But I paid more to update my lightbulbs (over $500 to go to LEDs at home and work vs halogens), to recycle the vast majority of my "trash," to get a geothermal unit over forced air gas, and to buy the only current EV that gets good mileage on a charge (the Model S). So bringing the price down on energy savings (and decreased CO2 emissions) is also extremely important.
When Tesla (and Chevy, with the Bolt?) come out with much more affordable EVs with decent range (200+ miles), I will be very curious as to how the world goes round...
The article highlights the ADVANTAGE that TM has over its competitors and that's the ability to upgrade features, the OS and the performance at virtually light speed.
The software upgrade mechanism Tesla has developed is IMO a killer app that the old car companies are afraid to do. In the videos sub-forum someone posted a lecture done by one of the top engineers at Tesla. The video dates from May of this year. He talked about working with traditional car companies and they fundamentally feared software controlling anything critical. They could not get their minds around the concept that correctly written and tested software can control the motor just fine and you will never have a scenario out of a Hollywood movie. Having a lot of IT people at the core of the company is a fundamental difference.
I think it would be a far better thing for Tesla to stay independent rather than become a subsidiary of a larger company. My sister is a petroleum Geologist (I know cue Darth Vader music, I'm not telling her I'm going to get a Tesla...) and she read an article in the Oil and Gas Journal back in the 1980s that has stuck in my mind all these years. The article was about oil related companies, but it clearly applies to any tech company and to a lesser extent non-tech companies. They said companies have three phases:
1) Entrepreneurial - This is the early days of a company when things are changing almost daily. Ideas are plentiful and fresh. It's a very dynamic time with wild growth curves. Unfortunately most entrepreneurs are not very good business people and a lot of companies fail in this phase.
2) Engineering - This phase is usually after the founders have stepped down, been forced out, or the founder turned out to be a good business person and is still running things. Most of the top positions are second generation people who came up through the ranks. In a tech company, many of these people are engineers or scientists who did the jobs they now supervise. They understand the business and the technology quite well. Growth is usually far more modest, but companies very rarely fail during this phase.
3) Bean Counter - In this phase, the technical people are pushed out by people who have never done anything with the technology the company is known for, they are business people obsessed with maximizing profits, often at the expense of the products. It takes a while in this phase, but companies will eventually go bankrupt as the bean counters strip the company of all it's wealth and "retire" wealthy while everyone else ends up broke and unemployed.
I've watched this dynamic play out in the US over the last 30 years. With relaxing of the anti-trust enforcement, the bean counter companies have largely stayed alive buying up companies at the end of the Entrepreneurial phase. This just keeps the obsolete company on life support and stifles further innovation from the new company. The new company doesn't have the opportunity to evolve on its own and the world loses another Engineering phase company.
There are exceptions, but almost all are in the high tech arena. These are companies that grew fast enough and were different enough the bean counter companies didn't notice them until it was too late. These include Microsoft, Google, Amazon, EBay and a number of other companies. These companies too have stifled their potential competition by buying them out before they got big enough, which is not great in the long run, but it's probably better for the long term for a company in the Engineering phase to buy out a start up than a dinosaur. The Engineering phase company usually has more clue what to do with the technology.
Microsoft is IMO on the decline into Bean Counter land. Their core products matured and they keep releasing new versions because their stock holders demand it, but they haven't had a new product hit in some years now. Bill Gates is/was a ruthless business man, but he was an entrepreneur who understood the business world much better than most of his competitors. He had the advantage of having a grandfather and father as partners in one of the most cutthroat business law firms in the country. Definitely the most cutthroat in the Northwest. He learned the inside of how the business world worked before he ever saw a computer.
I didn't include Apple on the list because it had a weird evolution, it went from Entrepreneur to Bean Counter and then to Engineering when Steve Jobs returned. It's the only company I've seen that managed to fully turn around from Bean Counter.
Tesla is still in the Entrepreneur phase, but the company has the advantage of being run by people who have experience in the tech world and are a bit older than the typical tech start up leaders. Elon Musk and others near the top have a lot of business experience and know how to run a company. As a result, Tesla is a good mix of Entrepreneur and Engineering phase. It has the ingredients to become one of the top tier companies up there with other companies mentioned above. Staying independent is important for this to happen. The people running the company today have a unique vision that I think could work, but it needs to stay unclouded by outside bureaucrats who don't understand.
The great thing about Tesla is that it's led by people who know the science and engineering very well themselves, first of all Elon. It would be death if it were run by MBAs. That's the quickest path to hell.
Well I suppose the Apple shareholders would need to see whatever it is that you see in Tesla (presumably future profitability). If you wouldn't SELL for $500 or $1000 or $2700, why wouldn't they want to BUY at the current price. Try to remember, for every seller there is a buyer (and vice versa).
I'd just like to say that you made a truly great comment here, wdolson, and everyone should read it all the way through. The company lifecycle is a critically important thing to understand for investing, and even more so, for economics and politics.
+1! On a side note, I facepalm.jpg'd when I read the article and they equated having a slightly quicker 0-60mph time as being "faster". I wish these journalists would learn the difference between quicker and faster.