For reference, I’m one of the strongly opposed shareholders. I share the feelings that Techmaven and others expressed initially about being infuriated at the move, but the more I think about it, the more I think part of the problem is communications by Tesla. They are selling the M&A in the wrong way. They are doing it in an opaque manner and ignoring the risks that we obviously see. If they were more open and transparent with Tesla shareholders, and forthright withour concerns and sold us on what exactly Tesla would get, I don’t think the shareholder reaction would be nearly as negative. I think if they did a 4-part discussion and blog post like this, I think it would be much better received.
1) Solar City today- Solar City, and the entire solar industry, is struggling from an execution and stock price perspective. If you are going to ask TSLA shareholders to buy a business, we are naturally going to ask why the stock price is depressed. It’s depressed for a clear reason: execution has not been what many thought it would be in ’14 due both to internal and exogenous factors. This maybe temporary and the SP may be below fair value, but address that we are buying a depressed business.
2) Based on the depressed stock price, we see opportunity- With the capabilities of SCTY combined with the cross-sell and cost minimization ability of TSLA, costs can be significantly reduced while volumes will grow disproportionately from synergies. Elon, instead of saying we plan to save 30-40% in OPEX, TALK ABOUT HOW YOU WOULD SAVE IT. We would save 20 percent basis points on a lack of sales. Our volumes would grow to spread out fixed costs over a larger base. 1000 basis points would be saved by consolidating shared services (Reducing HR, IT, Finance overlap). We need more concrete details on what a win for Tesla shareholders would even look like, not just talking about synergies.
3) We recognize risks to Tesla- Acknowledge the debt on the balance sheet. Explain what is the true proportion of debt Tesla would be assuming. In the worst case scenario, debt burdens would be X. Talk about any other risk factors. SCYT is so convoluted, as a TSLA shareholder we don’t know what to make of it so translate it in easy to understandable ways.
4) Tesla will be able to mitigate the risks- By doing the following steps, we will reduce debt burdens to Tesla the company and ensure we get a disproportionate expected reward for the risk we take
a. Steps 1 (TBD)
b. Steps 2 (TBD)
c. Steps 3 (TBD)
It doesn’t exactly have to be like what I laid out, but Tesla needs to do a better job of acknowledging the situation and detailing the risks/rewards that we as Tesla shareholders would receive. The frustrated feeling I have as a TSLA shareholder is that what we have not been sold on this deal, and in order to be sold you have to address all the facts, talk about the solutions, and lay out the risk/rewards. They are doing parts of point 2 and none of the other points, which leaves all of us as shareholders feeling out in the forest alone. If you tee the deal up for us as shareholders, we might actually be swayed in favor of the deal and the SP won't drop like a rock. Also, don't wait until you have the offer ready, do it at a high level NOW before the damage is done.
What is everyone else’s thoughts on this? I feel like this is basic corporate communications. Is there any way we can tweet this to Elon directly? In any normal company I would try to communicate this to corporate communications, but given how ad hoc the communications strategy is, I think our thoughts would be best communicated to Elon directly. If this is good and we get like 10 people to tweet to Elon, maybe he might read this lol.
1) Solar City today- Solar City, and the entire solar industry, is struggling from an execution and stock price perspective. If you are going to ask TSLA shareholders to buy a business, we are naturally going to ask why the stock price is depressed. It’s depressed for a clear reason: execution has not been what many thought it would be in ’14 due both to internal and exogenous factors. This maybe temporary and the SP may be below fair value, but address that we are buying a depressed business.
2) Based on the depressed stock price, we see opportunity- With the capabilities of SCTY combined with the cross-sell and cost minimization ability of TSLA, costs can be significantly reduced while volumes will grow disproportionately from synergies. Elon, instead of saying we plan to save 30-40% in OPEX, TALK ABOUT HOW YOU WOULD SAVE IT. We would save 20 percent basis points on a lack of sales. Our volumes would grow to spread out fixed costs over a larger base. 1000 basis points would be saved by consolidating shared services (Reducing HR, IT, Finance overlap). We need more concrete details on what a win for Tesla shareholders would even look like, not just talking about synergies.
3) We recognize risks to Tesla- Acknowledge the debt on the balance sheet. Explain what is the true proportion of debt Tesla would be assuming. In the worst case scenario, debt burdens would be X. Talk about any other risk factors. SCYT is so convoluted, as a TSLA shareholder we don’t know what to make of it so translate it in easy to understandable ways.
4) Tesla will be able to mitigate the risks- By doing the following steps, we will reduce debt burdens to Tesla the company and ensure we get a disproportionate expected reward for the risk we take
a. Steps 1 (TBD)
b. Steps 2 (TBD)
c. Steps 3 (TBD)
It doesn’t exactly have to be like what I laid out, but Tesla needs to do a better job of acknowledging the situation and detailing the risks/rewards that we as Tesla shareholders would receive. The frustrated feeling I have as a TSLA shareholder is that what we have not been sold on this deal, and in order to be sold you have to address all the facts, talk about the solutions, and lay out the risk/rewards. They are doing parts of point 2 and none of the other points, which leaves all of us as shareholders feeling out in the forest alone. If you tee the deal up for us as shareholders, we might actually be swayed in favor of the deal and the SP won't drop like a rock. Also, don't wait until you have the offer ready, do it at a high level NOW before the damage is done.
What is everyone else’s thoughts on this? I feel like this is basic corporate communications. Is there any way we can tweet this to Elon directly? In any normal company I would try to communicate this to corporate communications, but given how ad hoc the communications strategy is, I think our thoughts would be best communicated to Elon directly. If this is good and we get like 10 people to tweet to Elon, maybe he might read this lol.
