TSLA Market Action: 2018 Investor Roundtable

[mongo]

First off, I haven't posted here in awhile (or anywhere really). Elon Musk deciding not to take Tesla private was by far the worst decision he has made and I was 100% convinced he would do it.

Sad.

Now that I've eaten my crow...

I need to point out something that I'm not seeing enough discussion about regarding the recent events. While everyone is focusing on "funding secured" and "420", I'm focusing on Elon saying that he didn't envision a situation where his percentage stake in Tesla would change substantially if Tesla went private. I am also focusing on his ability to determine a $420 price. Also, I'm focusing on an elephant called SpaceX. You'll see why.

Elon Musk is not just a CEO who randomly decided he was taking his company private...it's just not that simple. He is a ~25% owner and a CEO who also happens to own ~60% of a company called SpaceX, which happens to be valued at $30+ billion dollars, who decided he wanted to take his company private. This changes the dynamic in a way that the SEC will eventually have to come to terms with. They chose to omit this from their filing because it really hurts their case.

As someone who commands a $20 billion dollar position in another company, which can be borrowed against, the SEC is choosing to ignore that Elon Musk himself has the ability to make an offer to buy Tesla shares in mass at a specific price, because he has a way to fund it, especially if the majority of large shareholders hold. His $420 offer can come out of a unicorn's ass, it doesn't really matter where it comes from, if he has the ability to buy a shitload of TSLA shares at that price, if the deal goes as he wants with other holding, during this period of "considering" he spoke of. Him saying that he didn't envision a situation where his TSLA holdings would change too much proves that he thought there was a small chance it may become necessary to do just that. If he wasn't considering that as an option, he would have said, "my position will not change at all".

If a CEO worth $1 million says he is going to take his company worth $20 billion private, and he hasn't talked to anyone, it's a problem.

If the CEO worth $30 billion says he is going to take his company private at a $72 billion valuation, and he's talked with a few funds and sees most large shareholders staying around, and he thinks small shareholders can do a SpaceX-style-ownership situation (and be mistaken on that) and he subsequently says funding secured...I'm sorry, but he is allowed to do that. It's not criminal for a CEO and major owner, who thought his one private company's ownership plan could be applicable to his other company if he takes it private, to make an accident and be wrong. Unfortunate, yes. Reckless and misleading investors on purpose? Laughable.

Contrary to popular ignorance, Elon Musk is not an idiot. He isn't going to admit he did anything wrong when he literally possesses the ability to do everything he said and clearly had been in talks with MANY people regarding this idea prior to his tweet. The SEC does a great job showing how much time was spent on this prior to his tweets. I appreciate them painting the picture. If Elon spent any amount of time speaking to others about this, then you know it was on his mind in a big way.

Ignore the context and everything looks terrible. Remembering that the guy with $20 billion dollars in another company can leverage that money and buy a significant portion of the company he wants to take private if necessary...well...that sort of changes everything.

Elon Musk has NO BUSINESS AT ALL accepting ANY penalty for his actions by the SEC. To do so would be completely irresponsible and would hang a "damager" and "damaged" sign around him and the company. I fear a settlement being reached at some point in the future because, unfortunately, that how the system works, and I will be very unhappy that day if it happens because of what I just described. But, knowing Elon, he'll be the one to pay the extra money and go the extra mile to fight it to the very end, as he should.

I'll take "SEC Ignoring Context" for $500 Alex.

P.S.

...Page 4 of the filing...

• "In 2018, stock analysts and investors increasingly began to question whether Tesla could meet its previously announced production targets and begin to earn sufficient cash in order to sustain its operations and pay its existing debt load."

Excuse me...the only "investors" questioning the ability of Tesla to survive is short sellers. Get the **** outa here putting that *sugar* in an SEC filing and acting like longs holding the stock believe that trash.

SEC filling their documents with copy-pasta nonsense from Jim Chanos and David Einhorn's emails to the SEC...oh lordy...

DISCLOSURE: LONG TSLA. DON'T BUY IT. THE SKY IS FALLING. ELON KILLED JESUS.

One point: Elon was not taking Tesla private from his position as CEO, it was a personal action as a ~20% shareholder. He reiterated this in the second blog post on Tesla.com.

With that interview and when you see who Elon has retained

Musk has hired Stephen Best at Brown Rudnick, who successfully defended internet billionaire Mark Cuban in an insider trading case, according to people familiar with the plans who also asked not to be identified. He also hired former Assistant U.S. Attorney Chris Clark of Latham & Watkins to defend him in the case, the people said.

I will give it 95/5 to Elon

With appropriate time value of the dismissal option

A teeney bit of me wishes I had bailed out right away (near recent high) because I would certainly be back in now. Been in this rodeo/roller coaster for maybe a dozen cyles. I guess I am a slow learner since FOMO has mostly kept me from profiting from trading a small fraction on the waves.

I feel ya. Bumped up my stake to have as many types of accounts as possible to give the highest change of being able to transition to TESLAP. Now SEC wants to remove the reason for doing so???

@Fact Checking
As long as short percentage us is less than 50%, would you say the SEC's job is to protect actual owners of the stock over shorts? Given the simple math, they can't have it both ways....

 

[mongo]

The above statement is VERY IMPORTANT.
This means the cars was built only 10 days before SALE.

This destroys the only FUD I have given the slightest credence to.

The build date is month/year (unlike your Martian calendar, ours is ambiguous) 28 days max from build (inclusive).

 

[TheTalkingMule]

You assume that they're trying to win the court case, and not something else entirely.

Exactly.

As we saw with the attacks on SolarCity, and the solar market in general, most aggression was clearly unlikely to be "successful" but functioned as one blow in an effective campaign.

The strings are certainly being pulled by folks outside the SEC and all this needs to do is slow Elon down by limiting access to additional funding for expansion.

 

[dondy]

First off, I haven't posted here in awhile (or anywhere really). Elon Musk deciding not to take Tesla private was by far the worst decision he has made and I was 100% convinced he would do it.
...

Check it out even the japanese know it:
Panasonic uneasy about partner Elon Musk's bombshells

...
About two weeks later, facing strong opposition from shareholders, Musk withdrew the plan to go private.

A senior Panasonic executive described Musk's announcement, which could have triggered a class-action lawsuit if the plan had been pursued, as "unimaginable....

Dell case shows a perfect example. A vulture owning some big hedge fund bought more than 10% percent of Dell stock and actively blocked privatization. His actions delayed privatization by almost a year and have costed Dell additional billion paid in extra compensations.
Musk has probably a few opponents and much more than 10% to cover with additional fees.
As I wrote immediately after the news the world needs to know his "heroes". It's important if only for historical reasons to know the names of institutional investors who blocked the deal.

 

[lklundin]

the process will be long and depress the stock price and possibly lead to more Tesla employees leaving fearing uncertainty.

Difficult to say. Employees may also feel less likely to be screwed over by a CEO who doesn't compromise on his integrity.

 

[heltok]

Fremont: Friday 250, Saturday 450
Minneapolis: Friday 140, Saturday 150

Any more reports on deliveries? Tally should be pretty high.

 

[lklundin]

Check it out even the japanese know it:
Panasonic uneasy about partner Elon Musk's bombshells

I am highly skeptical of that article. Its only substance is:
'
About two weeks later, facing strong opposition from shareholders, Musk withdrew the plan to go private.

A senior Panasonic executive described Musk's announcement, which could have triggered a class-action lawsuit if the plan had been pursued, as "unimaginable."

In early September, the Panasonic executive was stunned to watch the CEO, appearing on a webcast, taking a deep drag on what was apparently marijuana.
'

So one unnamed senior Panasonic executive found Elon Musk's go-private plan 'unimaginable' and was "stunned" when Elon Musk did (not) inhale (the legal substance) marijuana.

The rest is just a rehash of the usual anti-Tesla arguments, with no specifics regarding Panasonic.

Big deal.

 

[mongo]

My view from planet mongo....

Once there was a person would wanted to make the world better.
So they decided to fight disease and become a doctor.
They worked a bunch of long hour high risk jobs to save up tuition.
Then they went to school for many years, and their bank account declined.
They started a small practice, which was mildly profitable, took up.all their time and helped a few people.

Then this person bought an old hospital so they could save more people with a cure no one else wanted to develop. The cure worked, too well, other doctors did not want to use it since it new, would mean less patients, less tests, less revenue.
But they bought the hospital and all the equipment needed.

They started help more people, but instead of slowing down and keeping the fees, they used the money to make a new cure. A cure that was more affordable and they could make more of. The cure was still not available to most people and they new they neeeed to create a new formulation.

To do this, they had to create their own supplier for the raw ingredients needed for the new medicine. So they did that, even though they had to borrow money to do it and hadn't yet paid off the first hospital that was treating people worldwide as fast as it could.

But they did it, and the new cure worked too, and the loans were paid off, and everyone was happy....

Well mostly everyone, those with the cure were out and about enjoying their new freedom. But the doctor was still at work, because there were more sick people out there, and they couldn't forget about them. So on they toiled on, not knowing whether all would be cured or not, whether any other hospitals would join them, being heckled by the quacks, other doctors, the regulatory agencies, the very people they were trying to help, but knowing that they would press on as long as they could. Help as many as they could. Do as much as they can because








ELON NEVER QUITS!

 

[CuriousSunbird]

As long as short percentage us is less than 50%, would you say the SEC's job is to protect actual owners of the stock over shorts? Given the simple math, they can't have it both ways....

I think the SEC would say it is protecting all market participants by enforcing the rules. Doesn't matter if you're long or short, put option holder or call option holder. Rules are rules.

 

[Zaxxon]

The above statement is VERY IMPORTANT.
This means the cars was built only 10 days before SALE.

This destroys the only FUD I have given the slightest credence to.

Well, it means they were built up to 27 days before sale in this specific case. And I'm only talking the handful I assisted with. I have no reason to believe that's not representative, but to be clear it is a small sample size. I think the original estimation I was responding to, that Tesla sells within 60 days of build, should be a pretty safe call.

 

[EVNow]

Once Tesla moves past the growing pains, when exactly is the first big ICE automotive player going to declare bankruptcy?

Tell me when the next recession is going to hit, I’ll tell you when the ICE manufacturer is going bankrupt.

BTW, the industry is truly worried about autonomous cars. They know that will kill the big auto. EVs are just a small irritants to them, at this point.

 

[elasalle]

Check it out even the japanese know it:
Panasonic uneasy about partner Elon Musk's bombshells


Dell case shows a perfect example. A vulture owning some big hedge fund bought more than 10% percent of Dell stock and actively blocked privatization. His actions delayed privatization by almost a year and have costed Dell additional billion paid in extra compensations.
Musk has probably a few opponents and much more than 10% to cover with additional fees.
As I wrote immediately after the news the world needs to know his "heroes". It's important if only for historical reasons to know the names of institutional investors who blocked the deal.

I think EM overall Japanese cred increased sharply recently with a japanese being the 1st passenger in SpaceX.
Also SpaceX won contract to launch two satellites to the moon for a japanese company just few days back

& Panasonic is installing 3 more lines at GF & is a willing partner in China GF efforts ...

 

[Lessmog]

The market reacts negatively to uncertainty. So it would objectively have been better if Elon Musk had first consulted with his legal team along the lines of:

"I am considering delisting Tesla or taking it private in some form. To what extent will it be possible for current investors to keep their stock?"
- and then either not tweet at all or communicate something more substantial.

I have to assume he did not inform himself sufficiently on matter since the resourceful Ark Invest appealed to him not to go forward with the deal, exactly because it would preclude a number of current investors from remaining with Tesla and that this contributed to him cancelling the attempt.

It is still possible that some preparation for a deal had been ongoing and that the revelation of the Saudi buy-in (on the open market) and its effect on the stock price forced his hand.

So I am not even convinced that his tweets were reckless, they may very well have been what he considered the least bad reaction to the timing of events beyond his control.

Anyway, it is very true that Musk's "first principles" analysis of physical problems (e.g. on how to populate Mars) is remarkable, and I think he is less convincing in his dealing with financial challenges.

Yes, but what many people forget is the time constraints. Sure, it would be better if market-affecting communications happened outside of trading hours -- but that had already happened, the news was out of the bag that Saudi was buying into Tesla and looking for a bigger bite. And that put the hurry on. Elon absoutely needed to act quickly, so he did, by letting the world into his planning in general terms -- not just a dozen or so of the major guys but everyone on an equal footing. Legend has it he tweeted from his car going to the airfield, I believe. (Hope he was stationary at a signal ...) Just the barest of bones, as a heads-up. That was very decent of him; that's who he is.

Generates much envy and hatred in some circles, it seems.

 

[bhtooefr]

Your indicating they are tying to win the public opinion despite loosing the case?

I'm indicating that they're trying to kill Tesla, through any means necessary.

They killed Tucker through starving them of funding, but they were too slow on Tesla, hence the tactic of trying to remove Musk from power instead.

 

[Lessmog]

Sorry, but in this central paragraph of the SEC lawyers' filing they are uncritically regurgitating short seller talking points and are whitewashing and obscuring the fact that short sellers, by definition, are profiting at the expense of Tesla shareholders:

"15. In 2018, stock analysts and investors increasingly began to question whether Tesla could meet its previously announced production targets and begin to earn sufficient cash in order to sustain its operations and pay its existing debt load. By August 2018, more than $13 billion worth of Tesla shares were being “shorted,” meaning they were sold by investors who did not own them at the time of the sale. Investors who sell stock short typically believe the price of the stock will fall and hope to buy the stock at the lower price to cover their short positions and earn a profit. If the price of the stock rises, short sellers who then exit their short positions by purchasing the stock at the higher price will incur losses."

https://cdn.pacermonitor.com/pdfser..._Exchange_v_Musk__nysdce-18-08865__0001.0.pdf​

This attempt to protect short selling anti-investors goes against the primary purpose, role and mission of the SEC to protect investors.

This sick legal attack against one of the most innovative U.S. companies needs to become a permanent blemish on their record, a career limiting choice. After Elon's lawyers are finished with them their legal careers should be left vaporized in a molten crater, as a warning sign for future would-be attackers, glowing in the dark for centuries.

I'm not willing to cut the SEC any slack here, this lawsuit against Elon Musk is beyond reckless, it's a mockery of justice.

Yes. But I was being sarcastic there. Too hard for me, maybe.

 

[Yggdrasill]

Yes, but what many people forget is the time constraints. Sure, it would be better if market-affecting communications happened outside of trading hours -- but that had already happened, the news was out of the bag that Saudi was buying into Tesla and looking for a bigger bite. And that put the hurry on. Elon absoutely needed to act quickly, so he did, by letting the world into his planning in general terms -- not just a dozen or so of the major guys but everyone on an equal footing. Legend has it he tweeted from his car going to the airfield, I believe. (Hope he was stationary at a signal ...) Just the barest of bones, as a heads-up. That was very decent of him; that's who he is.

Generates much envy and hatred in some circles, it seems.

I would say it's not *that* strange Musk thought he could find some revolutionary way for retail investors to stay with the company. He has shaken up the finance industry before, ref Paypal.

 

[Vitold]

SEC got probably offended when Musk said that being private company would be so much better for Tesla.

It was an indirect criticism of the system that SEC is regulating.

It is a good thing that Musk did not settle because doing so would not make it go away. Going private probably would, oh the irony.

Jut to add, I think it was not a ‘no guilt’ settlement. It implied that Tesla board was incompetent and would probably result in two stooges for oil getting on the board.

 

[Fact Checking]

I think the SEC would say it is protecting all market participants by enforcing the rules.

That's fine in principle when the interests of investors and anti-investors align as users of securities exchanges, but that's not what the SEC lawyers were doing in their filing: in the section I cited they were explicitly siding with short sellers, against the interests of shareholders.

In case there is a conflict of interest between investors and anti-investors, which conflict of interest is a mathematical fact when it comes to changes in the price of stock, investors must take precedence.

In fact even the SEC knows that, and mechanisms like short-selling circuit breakers and outright short selling bans demonstrate that the interests of investors take precedence over the interests of anti-investors. It's certainly not an accident that the first ever short selling transaction recorded in history, hundreds of years ago in the Netherlands, was performed by a fraudster, after which incident short selling was largely banned.

A modern short seller is certainly free to put ethical concerns aside and become the parasitic freeloading barnacle, eye worm, tapeworm, round worm, chigoe flea and human botfly in one person, and go and sell Tesla short and attempt to disrupt investor discussion forums just to earn money - but that doesn't put them on equal footing with Tesla investors in the eye of the law - and I believe Elon's lawyers are going to demonstrate that forcefully, even if SEC lawyers were shortsighted enough to disregard that principle.

 

[EVNow]

I think the SEC would say it is protecting all market participants by enforcing the rules. Doesn't matter if you're long or short, put option holder or call option holder. Rules are rules.

Actually not. SEC clearly prefers longs as an institution (and thus the restrictions on short selling now in effect, for eg).

BTW, where were the rules around 2008 when Wall St caused a trillion dollar meltdown?

 

[ZachF]

As long as it’s not a guy named Elon the SEC won’t care.

During Bob Lutz's time at GM he helped them lose 1/3 of their market share and go bankrupt. Why does anyone listen to him about anything?