Tesla CEO Elon Musk Wants to Take the Company Private to Avoid Short Sellers

cageymaru

cageymaru

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In a letter to employees, Tesla CEO Elon Musk expressed his desire to take Tesla private to avoid the scrutiny of short sellers. He set a target price of $420/share which is a 20% premium on the company's post second quarter earnings and values the company at $71.7 billion. All he needs is a shareholder vote as he says that the funding is already secured.

Finally, this has nothing to do with accumulating control for myself. I own about 20% of the company now, and I don't envision that being substantially different after any deal is completed. Basically, I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible.
 
To clarify, I think he said not that he wanted to buy all outstanding shares at $420 per share. That would require absolutely massive funding.

He said he was hoping to convert existing shareholders to privately held shares, and only buy out those who didn't want to at $420 per share.
 
Wasn't it last week there was a problem with short sellers? This is a smart move if that's the case.
 
This probably has more to do with the ticking bond bombs that goes off in Nov and March. If Tesla's share price can't hold $560 in Nov they'll have to pay down $230 million in convertible bonds and if not $360 share price in March they have to pay down a nearly $1 billion convertible bonds. It's spiked up sharply this week. They're trying to keep their heads above water.
 
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I don't blame him, the US is a shit place to run a public company if your goal is to build something great and be successful long term. If your goal is to make as much money as quickly as possible, regardless of the consequences to the corporation/product/employees, then running a publicly traded company in the US is a good idea.
 
wizdum said:
I don't blame him, the US is a shit place to run a public company if your goal is to build something great and be successful long term. If your goal is to make as much money as quickly as possible, regardless of the consequences to the corporation/product/employees, then running a publicly traded company in the US is a good idea.
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This is an absolute truth. Very few companies operate that making a good product or fulfilling your mission while satisfying your customers beyond reason with said service or product will yield the greatest long term profits and success. No they just want the dollar now. With leaders looking to sell a company rather than lead it... is it no surprise?
 
I was wondering when this was finally going to make HardOCP. I guess Montu wasn't working, and the news wasn't "OMG Tesla is gunna bankwupt!!1" enough to make the news sooner.
 
This is why I hate the stock market. I lost a decent amount of money this week with a couple companies that made profits, and beat Wall Street expectations.

TSLA though? They're constantly losing money, second quarter loss was wider than expected, and the stock soars 11%. When Musk announced going private? Went up even more. I swear, he could say he blew through all the investors money on hookers and coke, and the stock would go up 20%.
 
Nytegard said:
TSLA though? They're constantly losing money, second quarter loss was wider than expected, and the stock soars 11%. When Musk announced going private? Went up even more. I swear, he could say he blew through all the investors money on hookers and coke, and the stock would go up 20%.
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Amazon lost money for how many years before they started crushing just about every sales metric that exists.

Tesla is hiring and building their Asian plants. Selecting the location for their EU plants. Will soon ship their big rigs, taking pre orders for their Roadster 2, then will start taking preorders for their Model Y, then after they are planning a pick up truck and a mini-esq type vehicle also. But today they are still sitting on about 400k worth of Model 3 orders.

If they wanna go private and have funding for all this, good for them! Yes that might miss a deadline or two but they are still an amazing company, as is Space X.
 
I think he's trying to cash out part of his stock before things go further south.
 
I dont blame him for wanting to go private and avoid fly by night investors.
 
You take a company public because you need more investment capital - then violate the spirit of SEC law by announcing that you will take the company private before there is a actual concrete agreement. More manipulation. All because your company is not meeting investor goals and is getting shorted to shit. Sort of sucks taking a company public and having to expose all of your financials. Probably should secure 70B dollars or whatever you need before opening your yap again.

Edit - typos
 
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Accursed said:
Amazon lost money for how many years before they started crushing just about every sales metric that exists.
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This is such a terrible comparison. Tesla is a car company, subject to automotive market conditions and should be compared to other automotive companies in the space in combination with macro factors such as their balance sheet when calculating enterprise value. Let me throw a couple of numbers on the table here:

BMW market cap: $55B
GM market cap: $53B
Ford market cap: $40B
Porsche market cap: $17.6B

A buyout for Tesla at $420 per share gives it a value exceeding $70B. Sorry, but giving Tesla that valuation given their sales and revenue compared to the above companies in the space, and given their cash burn and struggles to raise capital, is simply weapons grade stupid.
 
BoogerBomb said:
I dont blame him for wanting to go private and avoid fly by night investors.
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Other than the IPO, stock trades and share prices have little to nothing to do with the company other than shareholder votes. Of course this is a simplified opinion.
 
The invisible elephant in the room - in spite of Tesla's debt and their need to raise capital to continue their expansion, there are at least three entities hoping that Tesla will 'fail' so they can buy them out.

One of those is China, who I believe has tabled several offers.

If Musk just wanted money he could have sold the whole caboodle years ago. Why do we disparage companies that sell out for money, but then also deride the CEO that tries to hold on to his company and build his vision? Tesla is a real American company making a quality American product that is desired by the entire world. I don't think a little American pride is out of place, people call Musk a showman but those Tesla cars he's making aren't show, they're real, they are quality, they are futuristic, and I find them impressive.

The man is doing what we keep crying for. He is building a modern American manufacturing company. Actually, he's building two. No wait, he's building three. In 2010 the United States had 0% of the world-wide commercial space launch market. This year we have almost 65%, all thanks to one company, SpaceX, good lord, I'm gonna get a nosebleed the next time someone writes an attack piece on Elon Musk, the man is obviously a talented industrialist, will someone pleeeeease get all of these soapboxes away from me, I can't stand on all of them, they're crowding me everywhere ....
 
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Man, has anybody noticed the musky smell, where is it coming from? Leave him alone to focus.
Granted, he didn't send a boring machine to Eros to slow that roll and lay claim, but, that's your Mars shuttle right there.
 
I hope he was telling the truth about securing sufficient funds. Reporters haven't found the financier, yet. The short sellers, shareholders, and the SEC are going to eat his cake in court if he was anything but 100% accurate.
 
wizdum said:
I don't blame him, the US is a shit place to run a public company if your goal is to build something great and be successful long term. If your goal is to make as much money as quickly as possible, regardless of the consequences to the corporation/product/employees, then running a publicly traded company in the US is a good idea.
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Agreed, Elon comes across as someone who wants to make a difference in the world through SpaceX and Tesla. His vision doesn’t fit in with corporate greed at all costs mindset. Everyone wants to see him fail and I hope he keeps sticking to the doubters.
 
What I don't understand is why is everyone still of the opinion that Tesla operates solely as a car company? They have like four distinct product sets all working together, cars is a segment of that. Software & AI, battery, solar and vehicle lines.

The auto makers, even if they can match the hardware can't touch the software side of things. OTA updates are so far ahead of the rest of the automotive industry that it will take ages for them to come close to service parity.
 
DarkStryke said:
What I don't understand is why is everyone still of the opinion that Tesla operates solely as a car company? They have like four distinct product sets all working together, cars is a segment of that. Software & AI, battery, solar and vehicle lines.

The auto makers, even if they can match the hardware can't touch the software side of things. OTA updates are so far ahead of the rest of the automotive industry that it will take ages for them to come close to service parity.
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I don’t see OTA updates being that hard. I worked in the mobile industrial sector and there’s OTA monitoring of equipment. The cost adder is small. I am not sure the value of adding that cost to a traditional vehicle though.
 
Noticed his share jumped after he announced he wanted to sell for more than it was worth. Dirty pool mr.musk, now you've got to commit or it looks like you were just saying stuff to boost your share price.
 
aokman said:
Agreed, Elon comes across as someone who wants to make a difference in the world through SpaceX and Tesla. His vision doesn’t fit in with corporate greed at all costs mindset. Everyone wants to see him fail and I hope he keeps sticking to the doubters.
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My more cynical mind sees him coming across as someone who just wants to be remembered and revered in history, money be damned because he can't take it with him after he dies anyways. He does too much of blowing his own horn to be a simple philanthropist.
 
If this goes through, short sellers are screwed, already lost $2-3 billion on betting against the company post Q2 results.

It's a good idea, Wallstreet might be ok for old established companies, but not the place for a startup focused on long-term planning/growth. I know, a foreign concept these days right?

So yeah, better to stick to the Space-X funding model if you can until the growth phase is complete, I agree with this.

A lucky startup that survived the "short-term" minded WS culture:
https://en.wikipedia.org/wiki/Amazon_(company)
Amazon did not expect to make a profit for four to five years. This comparatively slow growth caused stockholders to complain that the company was not reaching profitability fast enough to justify their investment or even survive in the long-term. The dot-com bubble burst at the start of the 21st century and destroyed many e-companies in the process, but Amazon survived and moved forward beyond the tech crash to become a huge player in online sales
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Fast forward...
As of January 2018, the company employed 306,800 people worldwide in full and part-time jobs.[45] [46]

According to an August 8, 2018 story in Bloomberg Businessweek, Amazon has about a 5 percent share of U.S. retail spending (excluding cars and car parts and visits to restaurants and bars), and a 43.5 share of American online spending in 2018. The forecast is for Amazon to own 49 percent of the total American online spending in 2018
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DarkStryke said:
What I don't understand is why is everyone still of the opinion that Tesla operates solely as a car company? They have like four distinct product sets all working together, cars is a segment of that. Software & AI, battery, solar and vehicle lines.

The auto makers, even if they can match the hardware can't touch the software side of things. OTA updates are so far ahead of the rest of the automotive industry that it will take ages for them to come close to service parity.
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Not to mention that it's going from just 2 sedans and 1 SUV to entering the pickup, semi, and super/hypercar market. Bet you 10 years from now you might see a Tesla bus, van or mini-van.
 
DarkStryke said:
What I don't understand is why is everyone still of the opinion that Tesla operates solely as a car company? They have like four distinct product sets all working together, cars is a segment of that. Software & AI, battery, solar and vehicle lines.
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everyone?? no. but many dont read past the headline, so what do you expect?
 
Nytegard said:
This is why I hate the stock market. I lost a decent amount of money this week with a couple companies that made profits, and beat Wall Street expectations.

TSLA though? They're constantly losing money, second quarter loss was wider than expected, and the stock soars 11%. When Musk announced going private? Went up even more. I swear, he could say he blew through all the investors money on hookers and coke, and the stock would go up 20%.
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There are always up times, sideways times and down times in the stock market. If you are looking to expand your bag-o-trading-tricks, I suggest volatility trading via options. Don't waste your time and money with credit spreads or iron condors unless you are damn good at price prediction.
 
DarkStryke said:
What I don't understand is why is everyone still of the opinion that Tesla operates solely as a car company? They have like four distinct product sets all working together, cars is a segment of that. Software & AI, battery, solar and vehicle lines.

The auto makers, even if they can match the hardware can't touch the software side of things. OTA updates are so far ahead of the rest of the automotive industry that it will take ages for them to come close to service parity.
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AND SURF BOARDS!
 
HockeyJon said:
A buyout for Tesla at $420 per share gives it a value exceeding $70B. Sorry, but giving Tesla that valuation given their sales and revenue compared to the above companies in the space, and given their cash burn and struggles to raise capital, is simply weapons grade stupid.
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No one is forcing you to invest, and soon if he does indeed go private, you won't even have the opportunity to. It would seem like their struggles are mostly over.

And you don't see the comparisons to Amazon? When people where investing in Amazon at the beginning, when they lost money time and time again, you don't think people did your same comparison of "Circuit city market cap is BlahBlah Billions, Good Guys is Blah Blah Billions, and Amazon has lost money for the Nth straight year, Analysts and experts proclaim this online stuff is a fad and the internet is only for pedos and software pirates."

I see it as a paradigm shift, and many others do to. You can choose to invest or buy an EV, or you can deny it and see where that leaves you. I'm not trying to convert any "Truck Bros" as I know no amount of reasoning will do that.
 
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