TSLA Market Action: 2018 Investor Roundtable

[Electroman]

Quick request. Relevant because David is a super smart M&A attorney and Tesla supporter on Twitter recently be was mocked by the evil @TeslaCharts on Twitter so let's get for 10k followers:

Reciprocity on Twitter

Can everyone please follow @davidtayar5 Twitter apparently isn't something he is good at. So I'm trying to help him out. Thanks.

Tell all your friends.

Will do

 

[TradingInvest]

Tesla Replaces General Counsel With Seasoned Trial Lawyer Tesla Replaces General Counsel With Seasoned Trial Lawyer

What up with this? How will the market respond to this development?

This is great news for Tesla. Research a bit about the new lawyer and his firm.
Williams & Connolly LLP is a prominent law firm based in Washington, D.C.. In 2019, it was ranked the most selective law firm in the United States. This new general counsel is the Chairman of Williams & Connolly. The firm has 200~300 attorneys, not a small firm. Everything Elon is setting up is top notch, he will not settle for the second best.

Statement from this new lawyer:
“Tesla’s mission is bigger than Tesla—one that is critical to the future of our planet.”
“It’s hard to identify a mission more timely, more essential, or more worth fighting for”

Statement from the leaving lawyer: “Being part of Tesla for the last five years has been the highlight of my career, Tesla has been like family to me, and I am extremely grateful to Elon, the board, the executive team, and everyone at Tesla for allowing me to play a part in this incredible company.”

I have no clue and also don't care if this news will affect the stock in near term. I expect Tesla to have spectacular growth in the next 3 years, and the next 10 years.

Edit: "In 2019" should be "In 2019 Vault Ranking List"
They are #1 among the most selective law firms;
#1 Best law firms for white collar defense and internal investigations.

 

[gaswalla]

" In 2019, it was ranked the most selective law firm in the United States. "

Typical lawyer: they always make statements like they know the future

 

[EVNow]

Can you point me to a spreadsheet? The website I use to calculate options pricing sometimes goes down.

Here is a quickly cleaned up copy. No explanations or anything like that - you can use this if you are in a hurry. Over the weekend I'll make it a little bit user friendly and post it.

 

[Artful Dodger]

Williams & Connolly LLP is a prominent law firm based in Washington, D.C..

Aha, so that's why Elon flew to D.C. as we were told by @printf42 yesterday.

Cheers!

 

[TradingInvest]

Tesla's blog regarding the new general counsel Dane Butswinkas:

Tesla Hires Williams & Connolly Chairman and Trial Lawyer, Dane Butswinkas, as General Counsel

 

[Doit]

Googled " Dane Butswinkas" and found this:

Bloomberg, October 5, 2018
Musk Hires Williams & Connolly Chairman Dane Butswinkas in SEC Case

Dude was first hired by Musk personally about 2 months ago and now is sort of "promoted" to Tesla's general counsel - same pathway to the current one: Elon's personal (divorce) attorney > Tesla general counsel

PS: just following the above article, is Dana Hull's
Musk Meets With NASA on SpaceX Launch Key to Flying Astronauts, December 6, 2018, 6:03 PM EST
So Musk must be multitasking for his trip to DC, not unexpected anyway

 

[trils0n]

Tesla Replaces General Counsel With Seasoned Trial Lawyer Tesla Replaces General Counsel With Seasoned Trial Lawyer

What up with this? How will the market respond to this development?

A good move. Previous general counsel was Elon's divorce lawyer, iirc. Glad to see Tesla finally get rid of him and replace w/ a more appropriate choice.

 

[Cobbler]

New lawyers firm and the SP has some big Falcon Heavy boosters preventing it from dropping:
Tesla is being bought by one of the big guys before the news hits the streets!

 

[Fact Checking]

Tesla Replaces General Counsel With Seasoned Trial Lawyer Tesla Replaces General Counsel With Seasoned Trial Lawyer

What up with this? How will the market respond to this development?

So this could be the reason why Elon flew to Washington DC two days ago, to talk to Dane Butswinkas in person.

This is a big catch for Tesla, trial lawyers of Dane's caliber almost never join corporations - they are partners at highly lucrative, independent law firms like he was already as the Chairman of Williams & Connolly.

He almost certainly joined Tesla not primarily for money and stock, but for the Tesla mission:

“After 30 years as a trial lawyer at Williams & Connolly, I would have never imagined joining a company in-house. But Tesla presents a unique and inspiring opportunity. Tesla’s mission is bigger than Tesla – one that is critical to the future of our planet. It’s hard to identify a mission more timely, more essential, or more worth fighting for.”
​

Williams & Connolly is one of the most prestigious and most successful trial law firms in the U.S., they were the law firm who defended President Clinton in the impeachment trial.

This is how Williams & Connolly describes Dane Butswinkas:

Law360 named him one of the top fifty "Trial Aces" in the nation. Benchmark Litigation recognized Dane as "National Commercial Lawyer of the Year" in February 2016.

Chambers USA reported that clients describe Dane as “‘[a]n extraordinary trial lawyer’ who is known for his ‘fantastic courtroom presence.’” Benchmark Litigation emphasized Dane’s “celebrated trial acumen,” noting that he is “recommended by his peers and clients alike for his ‘absolute trial-ready preparedness.’” The Legal 500 reported that clients single Dane out as a “once in a lifetime generation trial lawyer.”
​

Tesla's litigation power just got a huge boost.

 

[wipster]

A good move. Previous general counsel was Elon's divorce lawyer, iirc. Glad to see Tesla finally get rid of him and replace w/ a more appropriate choice.

Honestly, while it may be a great move, and it sounds like it is, I'm concerned about the perception that it was done because of potential criminal charges being brought up against Elon. We all know that perception is reality...

 

[wipster]

...And I do worry about the name Butswinkas...

 

[SpaceCash]

Honestly, while it may be a great move, and it sounds like it is, I'm concerned about the perception that it was done because of potential criminal charges being brought up against Elon. We all know that perception is reality...

I'm not phased by this idea. This is actually massively bullish as explained by good ol' FC just above. I'm really stoked about this tbh. Now they can actually win some court cases rather than settling just to move on

 

[Tslynk67]

To save time, we've combines shorting and Brexit into a single topic: Big Short investor bets against the UK

Am I thinking about the following correctly?

Bondholders convert at 2.77 share pr 1000$ Bond value. (359.87).

if SP is above 359.87, bondholders still get 2.77 share pr, so TSLA doesn't suffer further dilution.
If Tesla hadn't hedged their convertible debt and SP was above 359.87 they would be paying off debt with shares worth more than 359.

BUT - Tesla hedged the convertible bonds by buying call options at 359.87, allowing them to buy up to 5.6 million shares at 359.87.

So; between at a share price between 359.87 and 512.66 Tesla effectively owns 56.000 contracts of 359.87 call options on their own shares.
As far as I know Tesla hasnt sold the call options off. The Mar15'19 360 Call option is currently trading at 43$.
Is Tesla sitting on a call option position worth ~240m$ right now?

"In connection with the offering of these notes in March 2014, we entered into convertible note hedge transactions whereby we have the option to purchase initially (subject to adjustment for certain specified events) a total of 5.6 million shares of our common stock at a price of $359.87 per share. The total cost of the convertible note hedge transactions was $524.7 million. In addition, we sold warrants whereby the holders of the warrants have the option to purchase initially (subject to adjustment for certain specified events) 2.2 million shares of our common stock at a price of $512.66 per share for the 2019 Notes and 3.3 million shares of our common stock at a price of $560.64 per share for 2021 Notes. We received $338.4 million in total cash proceeds from the sales of these warrants. Similarly, in connection with the issuance of the additional notes in April 2014, we entered into convertible note hedge transactions and paid a total of $78.7 million. In addition, we sold warrants to purchase initially (subject to adjustment for certain specified events) 0.3 million shares of our common stock at a price of $512.66 per share for the 2019 Notes and 0.5 million shares of our common stock at a price of $560.64 per share for the 2021 Notes. We received $50.8 million in total cash proceeds from the sales of these warrants. Taken together, the purchases of the convertible note hedges and the sales of the warrants are intended to reduce potential dilution and/or cash payments from the conversion of these notes and to effectively increase the overall conversion price from $359.87 to $512.66 per share for the 2019 Notes and from $359.87 to $560.64 per share for the 2021 Notes. As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost incurred in connection with the convertible note hedge and warrant transactions was recorded as a reduction to additional paid-in capital on the consolidated balance sheet."

Even after 5 espressos, this is too hard to get my head around first thing in the morning

I think we will see $250 again.
After it splits !

This is a point - if there were a stock spit, what happens to pending orders, do they get cancelled or adapted, or the owner needs to take action?

OT

I know China's behavior in Xinkiang is *far* worse than anything the US has done (since the end of the lynching era), yes. I'm just being a cynical old "trust no one" type.

Fact is China imprisons a *lot* fewer people than the US does, and most of the people in US prisons are imprisoned on spurious grounds. But China is a hell of a lot more racist so it's far worse to be an ethnic minority in China than in the US.

China more racist than American, OMG!

Tesla Replaces General Counsel With Seasoned Trial Lawyer Tesla Replaces General Counsel With Seasoned Trial Lawyer

What up with this? How will the market respond to this development?

Honestly, while it may be a great move, and it sounds like it is, I'm concerned about the perception that it was done because of potential criminal charges being brought up against Elon. We all know that perception is reality...

No, I don't read anything into this other than Tesla having the opportunity to get a very good lawyer on-board. You can read from the blog that Todd's departure have been planned since July and that he'll stay to transition until January - all nice an orderly.

Seems to me that Tesla have and will be under continual legal attack from many parties, as well as initiating their own campaigns on many fronts, so it makes sense.

Yet another positive in a sea of positives lately!

 

[Fact Checking]

I'm concerned about the perception that it was done because of potential criminal charges being brought up against Elon.

Elon already hired Dane Butswinkas back in October for the SEC litigation.

Note that trial lawyers of Dane's caliber pick clients and cases, not the other way around. They want important cases they think they'll win. Note that regardless of the amount of money offered clients like Donald Trump are usually not able to hire such big law firms.

Apparently the personal relationship worked very well and Elon managed to convince Dane to join Tesla.

I don't think I can think of a single precedent for something like this, trial lawyers that have their FU money are fiercely independent and they prefer the free choice of clients and cases they get at a big law firm like Williams & Connolly. The usual and only way is for big clients to hire the whole law firm.

So no, this is not about any liability of Elon, and I do think the SEC dodged a bullet by settling their case.

 

[NicoV]

There is something called "Current portion of long-term debt and capital leases" which totals about $2.1 billion. And then there is something called "Long-term debt and capital leases, net of current portion" totalling about $9.7 billion... What's the difference?

They’re both debt, but the current part is the amount that needs to be repayed within 1 year, the other one is the part that doesn’t need to be repayed within one year. You’ll find this split on the balance sheet of every corporation and is intended to give you an idea of how much cash will be needed for servicing debt.

 

[RobStark]

I’d be more worried about a $299 paint job.

I want my 2018 Tesla Model 3 to look like a 1998 Honda Accord that just came out of paint booth at the local Collision Center.

 

[Intl Professor]

...And I do worry about the name Butswinkas...

Anyone who can survive hazing about that name from the third grade on has got to be a "fantastic courtroom presence."

 

[Fact Checking]

They’re both debt, but the current part is the amount that needs to be repayed within 1 year, the other one is the part that doesn’t need to be repayed within one year.

Note that in the case of Tesla GAAP "current liabilities" are overstated, i.e. higher than the real resulting flow of debt/obligation payments.

The reason is that important components of Tesla's liabilities are "probabilistic", such as resale value guarantees and other warranties. They must be accounted at 100% face value, while in reality maybe 1% of the resale warranties get excercised. This kind of "current debt" just goes away as the warranty date passes - but it burdens the "current liabilities" row of the balance sheet while it's active.

This is compunded by the fact that some of Tesla's highest value "current assets" are understated, such as inventory. Billions of dollars of assets are not even on the balance sheet.

So these numbers have to be interpreted carefully, the GAAP balance sheet is particularly misleading for high-tech manufacturing firms like Tesla.

 

[gora321]

Europe +1,13% or 6,3% to the ATH