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It looks like Tesla is suffering the consequences of Elon Musks false statements regarding the $420 "Privatization" claim.
From what I understand, Tesla has issued/sold hundreds of millions of dollars of convertible bonds that are callable if the stock is below fixed prices. At the time Musk made those Tweets, Tesla was below those prices and new financing would be needed because the bonds would not convert to ordinary stock, but instead, require re-payment.
Tesla has enjoyed remarkable investor support at valuations that do not remotely resemble other auto manufacturers. No profits have been generated and none are likely at these production and margin levels. When you compare Tesla's stock multiples to its competitors like Ford, Porsche, GM, VW, Mercedes, BMW and others you have to understand that Tesla is in rarified air when it comes to valuations. Tesla's very existence has been financed on speculation of profits that are now unlikely to materialize.
Musks fall from grace (if it happens) will have serious ramifications for the future of Tesla and it's shareholders.
What ramifications will spill over to Porsche or other EV manufacturers if Musk is disqualified from management roles at Tesla?
It looks like Tesla is suffering the consequences of Elon Musks false statements regarding the $420 "Privatization" claim.
From what I understand, Tesla has issued/sold hundreds of millions of dollars of convertible bonds that are callable if the stock is below fixed prices. At the time Musk made those Tweets, Tesla was below those prices and new financing would be needed because the bonds would not convert to ordinary stock, but instead, require re-payment.
Tesla has enjoyed remarkable investor support at valuations that do not remotely resemble other auto manufacturers. No profits have been generated and none are likely at these production and margin levels. When you compare Tesla's stock multiples to its competitors like Ford, Porsche, GM, VW, Mercedes, BMW and others you have to understand that Tesla is in rarified air when it comes to valuations. Tesla's very existence has been financed on speculation of profits that are now unlikely to materialize.
Musks fall from grace (if it happens) will have serious ramifications for the future of Tesla and it's shareholders.
What ramifications will spill over to Porsche or other EV manufacturers if Musk is disqualified from management roles at Tesla?
At this point one can argue Musk stepping aside as CEO is a net positive for Tesla overall (long term). The question is impact on stock price- Tesla’s ability to raise vast amounts of inexpensive capital makes its success close to a self-fulfilling prophesy, and that’s in part down to Musk’s cult of personality. Tesla does need more cash, and if Musk’s removal impacts their stock at the wrong time that can go two ways:
1) Overall minor Tesla troubles are a tactical net positive for Porsche in that reduces Tesla’s ability to compete with the coming wave, but that’s only true as long as Tesla doesn’t crater.
2) If it does crater (one of the highest profile bankruptcies of our time) that would seriously impact customer perception and slow adoption of EVs across the board.
Personally I’m thinking Tesla’s next quarter will be very positive (artificially) to the point that this is a very good time for Elon to step down. Almost suspiciously so.
If Musk is removed it is a significant negative for Tesla and its valuation, no question about it. It would call into question its ability to raise the near term financing it needs to avoid bankruptcy. IMO, he and the board took a big risk in rejecting the settlement, essentially betting the company on his ability to avoid penalties entirely, as the penalties under the settlement weren't severe at all. Either Musk or the SEC is seriously misreading the hand they have.
Last edited by Archimedes; 09-28-2018 at 04:11 PM.
At this point one can argue Musk stepping aside as CEO is a net positive for Tesla overall (long term). The question is impact on stock price- Tesla’s ability to raise vast amounts of inexpensive capital makes its success close to a self-fulfilling prophesy, and that’s in part down to Musk’s cult of personality. Tesla does need more cash, and if Musk’s removal impacts their stock at the wrong time that can go two ways:
1) Overall minor Tesla troubles are a tactical net positive for Porsche in that reduces Tesla’s ability to compete with the coming wave, but that’s only true as long as Tesla doesn’t crater.
2) If it does crater (one of the highest profile bankruptcies of our time) that would seriously impact customer perception and slow adoption of EVs across the board.
Personally I’m thinking Tesla’s next quarter will be very positive (artificially) to the point that this is a very good time for Elon to step down. Almost suspiciously so.
$.02
#2 is the exact reason why Porsche is taking such a huge gamble on their EV movement. In the most recent Panorama article about the Taycan , a discussion with Dr. Stefan Weckbach ( VP of the Porsche EV program) says that you can't mention pure electric cars without mentioning Tesla. I believe Porsche's success in this arena will be hugely tied to the success or failure of Tesla.
#2 is the exact reason why Porsche is taking such a huge gamble on their EV movement. In the most recent Panorama article about the Taycan , a discussion with Dr. Stefan Weckbach ( VP of the Porsche EV program) says that you can't mention pure electric cars without mentioning Tesla. I believe Porsche's success in this arena will be hugely tied to the success or failure of Tesla.
That is why to me the Taycan is a disappointment compared to the Mission-E. If Porsche had the Mission-E as it's flagship EV then it would have to arm it's dealers with tasers to keep back the buyers. The Taycan is nice but the Mission-E is SEX-On-A-Stick. What happens to Tesla would not matter. If you were offered a Mission-E would you care a plugged nickel what happens to Tesla?
#2 is the exact reason why Porsche is taking such a huge gamble on their EV movement. In the most recent Panorama article about the Taycan , a discussion with Dr. Stefan Weckbach ( VP of the Porsche EV program) says that you can't mention pure electric cars without mentioning Tesla. I believe Porsche's success in this arena will be hugely tied to the success or failure of Tesla.
I respect what you are saying but like to speculate on what would happen if Tesla craters?
If Tesla declares bankruptcy and is bought for pennies on the dollar, whoever gets the charging network and the Tesla name could be a big winner:
They would acquire an established and loyal Tesla customer base and provide a dealer network to capture the relationships and support those owners. The new cars being developed by the acquiring company can become the next generation of what are becoming dated Teslas.
Manufacturing efficiencies will be effected positively.
The charging network will be a great asset to provide instant charging access for the acquirers line/lines of vehicles.
The acquiring company would own the battery production factory and materials sourcing relationships.
40 million $$$ fine - Elon is no longer Chairman for 3 years - but remains CEO - worse fine/penalty than he walked out on in a temper tantrum on Thursday - Elon doesn't like people telling him what to do even when they're right which is why no one with any experience/brains works for him for very long…I hope he's learned a lesson but I doubt it - and the not chairman of the board but remains CEO is a sham - as long as Elon is in a position of power he'll be calling the shots (right and wrong ones) the supposed chairman will likely be an Elon puppet.
we'll see how this plays out - but more popcorn is going to be required.
(1) . The SEC is a regulator
(2) . Did Musk break the law
(3) . Is the Board executing its duties
To put it simply, in Australia Musk would have been prosecuted for misleading and deceptive conduct in commerce or industry - the outcome would likely have been he would be ineligible to be a company officer or director for a minimum of 3 years (possibly 5) plus other punishment ranging from fines to jail time.
Some would consider the outcome (a) Musk stepping down as Chairman (b) fines totalling ~ $US40m (c) the addition of two new independent directors (d) Musk retains his role as CEO as a pragmatic outcome.
There will be many others in the business and finance community shaking their heads - its not for the SEC to pick winners or losers, its for the SEC to uphold the regulations and support the regulatory environment its responsible for.
In my view Musk took the deal because (a) it would be difficult to raise finance and (b) there are a lot of bonds out there at $260 which are up in Q1 2019 - the current share price is perilously close to this. (c) he would lose - with knock on consequence for other legals.
My personal view is the DOJ should go after him - he went out to hit the short sellers (who have a very legitimate position) he has made plenty of noise about them which goes to intent.
Unless Tesla get a strong independent chairman it will be business as usual.
"In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the regulator said.
$0.02
Agreed there will be a lot more popcorn to eat before this is really settled
The two new independent directors is the big news. That has the potential to alter the balance of power, and I’m sure that was what he was most resistant to.
The two new independent directors is the big news. That has the potential to alter the balance of power, and I’m sure that was what he was most resistant to.
Well it depends on a couple of factors (1) are they additions to the current Board (2) and who picks them
The company needs a strong knowledgeable Chairman (one who has been an executive director/ managing director/ CEO before) - the Chairman runs the Board and sets the agenda. Also a good Board turns over non - executive Directors on a regular basis.
I think we'll find this is just the start. The regulators words were damning "In truth and in fact.....
40 million $$$ fine - Elon is no longer Chairman for 3 years - but remains CEO - worse fine/penalty than he walked out on in a temper tantrum on Thursday - Elon doesn't like people telling him what to do even when they're right which is why no one with any experience/brains works for him for very long…I hope he's learned a lesson but I doubt it - and the not chairman of the board but remains CEO is a sham - as long as Elon is in a position of power he'll be calling the shots (right and wrong ones) the supposed chairman will likely be an Elon puppet.
we'll see how this plays out - but more popcorn is going to be required.
Just a big yawn, until the Q3 report! Tonight he's laughing as he takes another "hit".
Just a big yawn, until the Q3 report! Tonight he's laughing as he takes another "hit".
Just a big yawn? Seriously?
Production of the supposedly company saving 3 has crashed to only 2,000 cars per week and there is little if any chance that this company will ever make a profit. The promises of 5,000 cars per week have been broken time and time again. Now that they have proven they can build 5,000 3's per week, demand has crashed...
Take a look at the weekly production numbers from Bloomberg and tell us that the Tesla dream is not coming apart at the seams.
Production of the supposedly company saving 3 has crashed to only 2,000 cars per week and there is little if any chance that this company will ever make a profit. The promises of 5,000 cars per week have been broken time and time again. Now that they have proven they can build 5,000 3's per week, demand has crashed...
Take a look at the weekly production numbers from Bloomberg and tell us that the Tesla dream is not coming apart at the seams.
If you’re sure about this analysis I suggest you short the stock ahead of Q3 earnings, which Tesla is sure to miss if you’re correct.
I see a combination of production issues, production upgrades and gaming the Q3 results, which I suspect will look positive (profitable). Artificially so, but more than enough to bounce the stock.
We’ll see who’s right soon enough, but I’d caution that the short’s arguments are one sided and self-serving (as are those of many investors on the other side).
You obviously missed the point, i.e. the SEC problem has gone away without it having a significant effect on either Elon or Tesla.
The key problem for Tesla is the Q3 report coming and Tesla's questionable profitability!
Production of the supposedly company saving 3 has crashed to only 2,000 cars per week and there is little if any chance that this company will ever make a profit. The promises of 5,000 cars per week have been broken time and time again. Now that they have proven they can build 5,000 3's per week, demand has crashed...
Take a look at the weekly production numbers from Bloomberg and tell us that the Tesla dream is not coming apart at the seams.
Where did you find this? I haven’t seen this reported anywhere.
09-27-2018, 06:42 PM
SEC Prosecution re Federal Securities Laws
