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If they communicated the M&A to us like this....

Discussion in 'TSLA Investor Discussions' started by TSLA_Hopeful, Jun 22, 2016.

  1. TSLA_Hopeful

    TSLA_Hopeful Member

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    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.
     
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  2. Krugerrand

    Krugerrand Active Member

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    As I mentioned in the ST-thread, Tesla can't talk about a lot of what you want to hear about. They can't talk about anything that would be the result of the companies merging before they've merged. They can only throw a bone and be vague.
     
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  3. TSLA_Hopeful

    TSLA_Hopeful Member

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    I think that's what Elon says, but I think that is more of an excuse to not relay information. Following article details step by step process to manage communications BEFORE an acquisition is announced.

    Managing Message in an Acquisition - Chiefmarketer
     
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  4. Drivin

    Drivin Member

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    Since when is that true? What restrictions do you think there are to describe the rationale for a deal?

    Companies can not act as if the deal is done before a deal is done - they have have to operate as separate companies. That does not preclude them from planning. That is why shortly after a deal is finalized there are announcements about the layoffs or new products or plans for plant closing or whatever. That happened as a result of planning prior to a deal being finalized, it didn't all happen the day the deal was finalized.
     
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  5. Krugerrand

    Krugerrand Active Member

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    That's (the link) not how Elon Musk works. He wants something and thinks it's important enough to do, he simply goes and does it. Quoting statics on success and failure is lost on him. Reason by first principles, not analogy.

    He's involved in both companies, he owns large chunks of both companies, both are publically traded companies, and the 'acquisition' is 'friendly'. He's got to be careful what he says.

    The message he's decided to put to shareholders is: this is good for Tesla because (see conference call from this morning). You're not happy with that answer, nor are a lot of other people but there it is. To him it's a no-brainer, as in it makes total sense as a piece of the puzzle for a one-stop sustainable energy existence shopping experience brought to you by Tesla. He just told you the end game.
     
  6. Krugerrand

    Krugerrand Active Member

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    Bingo.

    Of course they've already been talking and making plans. But nobody EVER says 'When we take over company B, we're going to layoff 50% of the employees and do this and do that etc..." You hear about all that stuff AFTER the deal is done. So why are people expecting to hear details now?!?
     
  7. Drivin

    Drivin Member

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    FWD were a no brainer too.
    For a $2.2B investment, maybe brains are actually required - or at least a good communication plan so you don't wipe out billions of $ of value.

    It is still a public company and there are obligations associated with that.
     
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  8. Krugerrand

    Krugerrand Active Member

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    Yes, I know you think they were a mistake. Lots of customers think otherwise and are glad for them. One line quips don't boost your argument, just in case you thought otherwise.

    What public company obligations haven't been met? Please state the section/subsection of the laws/regulations, tx.
     
  9. Drivin

    Drivin Member

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    Did you read what Elon said about them and the X in general? Or does his one line quips not matter either? LOL.

    I did not say there were specific obligations that were not met.
     
  10. Krugerrand

    Krugerrand Active Member

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    Here's the opening comment from the conference call by Todd Maron which clearly explains why no specific information was given at the time and why there won't be - I underlined or bolded key sentences:

    Good morning, everyone. Thanks Jeff. So, I just wanted to briefly touch on some of the process points and why yesterday’s announcement might have looked somewhat different to people who normally see these kinds of announcements. It’s actually somewhat of a easy explanation but it’s somewhat of a unique situation.

    So, usually, I know that everyone is used to seeing an announcement when there is actually a definitive agreement is reached and not just simply an offer. And obviously, in our situation, we are only announcing an offer. And then, as a result, you didn’t receive the same kind of information that you would receive when an agreement is reached, such as the agreement itself and detailed financial information about the combined company. The reason for that is that Elon is a 5% stockholder in SolarCity and he is required by the securities laws to keep the market informed through a scheduled 13d filing about his plans with respect to those holdings. And because of Tesla’s decision to make an offer to SolarCity and Elon’s support for that decision, it was appropriate to amend his schedule 13d to update the market even though no definitive agreement has yet been reached.

    It’s obviously our hope to engage in the due diligence process with SolarCity and ultimately reach that agreement. And all that information that you would customarily see at that time including the agreement itself and detailed financial information about the combined companies would be provided then. But the result of this is that this is actually a more transparent process because you’re essentially seeing behind the curtains more than you would ordinarily see in a transaction because you are actually getting additional information upfront at the offer stage and getting an advanced look at the strategic business rationale for the deal.

    Further in the transcript are statements about why they won't discuss future products, why they no longer want to work with Solar City at arm's length, what the end goal of the merger is and so on.

    http://seekingalpha.com/article/3983785-tesla-motors-tsla-ceo-elon-musk-hosts-offer-acquire-solarcity-conference-call-transcript
     
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