Two often-cited suspects are axed. So where’s the “secured” funding supposed to come from?
The whole scheme kicked off when Tesla CEO Elon Musk tweeted during trading hours that he was “considering” taking Tesla private, “Funding secured,” which caused the already ludicrously overvalued shares to spike. Later he added, “Investor support is confirmed.” But no details, no names, no tidbits, not even a tease. Two days earlier, he’d tweeted that “even Hitler was shorting Tesla stock.”
We can brush off the Hitler tweet as just one more Musk idiocy gone awry, but “Funding secured” and “Investor support is confirmed” are big-ass phrases for a public-company CEO discussing a buyout that would be valued at $72 billion.
Now some folks, including those at the SEC’s San Francisco office, are wanting to know where exactly this money is going to come from – and if funding was even remotely “secured.”
The Tesla true believers instantly figured that a deal had already been worked out, either with SoftBank or with Saudi Arabia’s Public Investment Fund (PIF), or with both, or whatever.
Turns out, it’s not going to be SoftBank, and it’s not going to be the Saudis, either. They’re not interested in creating the magic to pull this off.
Reuters reported today that a source “familiar with PIF’s strategy,” said that the fund was not, as Reuters put it, “currently getting involved in any funding process for Tesla’s take-private deal.”
PIF had made headlines recently when it came out that it had acquired a stake in Tesla of just below 5% by buying its shares (TSLA) in the market. None of this money went to Tesla. It went to Tesla shareholders that wanted to get out.
PIF has also heavily invested in other tech companies in the US, including a $45-billion investment in the Vision Fund, a venture capital fund that SoftBank, a Japanese holding conglomerate, has put together by pouring $100 billion into it.
Reuters went on:
A second source close to the situation also said PIF was not taking part in any such plan at this stage. This source said that the Saudi fund would not make an investment of this kind without seeking guidance first from SoftBank.
SoftBank was struck off the list on August 8, when Bloomberg reported that Musk and Masayoshi Son, the founder and CEO of SoftBank, had met in April 2017 to discuss a deal, “according to two people with knowledge of the discussions”:
The talks touched on taking Tesla private, but failed to progress due to disagreements over ownership. Musk proposed a structure that would have given him disproportionate control over the company through stock with supervoting rights, one person said. There are no active talks between the companies now, said the people, who asked not to be identified discussing private deliberations.
Reuters also reported a few days ago that SoftBank was not pursuing a deal for Tesla, given SoftBank’s investment in GM’s autonomous-vehicle unit, Cruise, which is considered a competitor of Tesla.
Tesla’s board of directors has not received any details on financing the buyout either, and now, roused from its benevolent sleep, is seeking more information from Musk, Reuters reported on Thursday. And it has not hired any advisors yet, which would be one of the first steps in a deal like this.
Wall Street investment banks, the heavy lifters that are needed when it comes to such mega deals involving tens of billions of dollars, appear to be clueless as well.
It’s easy to tweet. And for Musk, it’s easy to manipulate up the share price because Tesla investors are eager for him to manipulate up the share price. That’s why they own these shares. That’s how they’ve made money so far.
But actually manufacturing cars profitably in a market where you’re surrounded by pros who know what they’re doing is devilishly hard, and after ten years of trying, Tesla still hasn’t figured it out. Mass-producing cars and then successfully finishing and delivering these cars profitably is even harder to do, and Tesla is clueless about this particular end of the car industry.
And that still leaves the question unanswered: Why would anyone want to pay $72 billion for a permanently money-losing automaker that has only 0.2% of the global market?
Until all this take-private talk started, the only reason to own Tesla shares was Musk’s uncanny ability to manipulate up their price. How much cash Tesla was bleeding and how much money it was losing is irrelevant in this scenario because the bet was simple: Sell the shares later at an even higher price – Musk’s tweets would get you there. But once the shares are off the market, and selling to the greater fool is much more difficult, what would be the appeal of owning these ludicrously overvalued shares? That question is a tough nut to crack for rational minds.
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Gosh, I was assuming Italian, Spanish banks, and, yes, Turkish Banks would be salivating at this opportunity to mega-increase their loan losses.
Take THAT, ECB!
Erdogan will provide the money just as soon as he cancels all of Turkey’s other debts. Patience!
While you’re printing money print a few billion more and make your nation bulletproof. Do you think there would be sanctions against Iran if they owned 5% of Tesla?
‘That meeting took place on July 31st. … I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed.’
This looks like an attempt to walk back the announcement of ‘funding secured’ to escape at least criminal liability.
The problem is that ‘Could be closed” of course means not yet closed.
So how can you announce funding secured?
If Musk can convince the SEC that he thought he had a verbal deal, with apparently nothing in writing, AND that he is such a naive that he thought this was enough to announce ‘funding secured’ he may be off the main hook.
My guess is, the Saudis bait-and-switched Elon in order to humiliate him. It probably isn’t much more complicated than that.
At least Tesla hasn’t promised a car powered by “clean coal” – yet…
It appears that there’s a Tesla investor born every minute.
First I’m hearing on the radio that Musk is considering taking Tesla off of the stock market, making it private (I assume because there’s less oversight and he can bilk more people out of their money) and now he’s looking at selling it to the Saudis?
Because if there’s one thing that will benefit the Saudi economy/kingdom, it’s electric cars …
In other news, according to Reddit, Musk is selling Tesla-branded short-shorts. No, not stock advice, actual “Daisy Duke” style shorts.
“Taking Tesla private” at $420 a share means Musk has to come up with the money to fund this $72 billion deal. So this would be a buyout. The two big entities that were cited as source of these funds — the “secured funding” — were the PIF and SoftBank. Now both are off the table.
Wolf, it’s gotta be UBER!
Look how similar their business plans are, “Blow smoke and burn cash”.
It’s a no brainer.
LOL
Competition for attention in Twitterspace is fierce. Look at the positive side, at least we don’t hear about mission to Mars.
There are also stories around that some of the short sellars have filed suit against Musk saying he either needs to show this tweet is legitimate or else Musk is guilty of fraud in an attempt to illegally boost and manipulate the stock price.
Musk may have made an expensive mistake when he sent that tweet.
I’m glad somebody filed a civil suit, this will be the ultimate means of forcing Musk and Tesla’s hand at proving the claim otherwise they’ll face a judgement in court. We all know the SEC with its investigation since it never does. There are too many unpleasant “collateral consequences” that will result with them coming out with anything even remotely proving the fact that Musk got too overzealous and is now on the hook. I wouldn’t be surprised if they’re working with Tesla’s board to help find some way to make Musk’s stunt appear legal.
“The talks touched on taking Tesla private, but failed to progress due to disagreements over ownership. Musk proposed a structure that would have given him disproportionate control over the company through stock with supervoting rights, one person said.”
So, Musk is really good at pumping up the public stock price of his company. But Musk has been really bad at actually building cars and actually making a profit.
Therefore, why on earth would anyone want to invest a huge amount of money into a company to take it private AND with Musk keeping control of the company. His one actual skill becomes useless to the company in this deal, and the new investors would be betting a big giant pile of money that Musk can do the things he’s proven to be awful at … making cars and profit.
I can’t imagine any investor who can use a spreadsheet or even a calculator wanting to buy Tesla. It’s a turd circling the bowl. Perhaps Jordan Belfort (Wolf Of Wall Street) or his ilk could do a massive Pump And Dump, make a few billion, and go to a country without extradition treaties.
Elon does two things.
1. He does projects used to be done by governments. Electrical cars, Space exploration, Digging tunnels and he even twitter about cleaning up water for Flint or saving kids. Why these are projects done by government historically? Because it lose money, profit could be large but far away in the future and investment is huge.
2. Elon could make these project sexy enough that made people forgot about the nature of these projects in terms of financial gains. Elon built cool cars and rockets and people confuse good product with good companies making good profits.
As long as Elon could keep telling stories and pool money from the “market” saturated with FED printed money, Elon thrives. Now, FED printer stopped and people started to ask where is the “money” as opposed to discussing “how cool telsla cars are or what’s future”.
But still remember, since he is doing government job by using public market funding, somebody in the .gov may point a gun at Saudi’s head and say “buy shares at 420$”.
For me, shorting Telsla means 70$ risk, 150$ potential gain with 50% probability and you don’t have to wait long to find out.
Elon’s tweet is smart. Since the sexiness of the car effect is gone, he needs to other attention distractor to direct people’s attention away from using calculator or spread sheet to compute the “value” since with a buy out is possible, what your calculator say does NOT matter so nobody would bother.
You had me until you said “Fed printer stopped”
So Musk could have got rid of Tesla the money sink about a year ago and didn’t because of his ego? Idiot.
The SEC has roused itself from its coma to launch an investigation. Expect slap on the wrist fines, but no actual consequences from this most worthless and co-opted of regulatory agencies.
No the FCA. In the UK are much worse believe me.
It took the courts to overturn the EPA on Roundup, and I expect this will play out the same way.
Are you sure that it wasn’t the recent decision by the U.S. 9th Circuit Court of Appeals ordering the EPA to remove chlorpyrifos from sale in the United States in 60 days?
This was published on November 9th, 2017
http://www.startribune.com/valued-by-farmers-risky-to-children-chlorpyrifos-gets-a-green-light/463081153/
And this was published on August 9th, 2018
http://www.startribune.com/appeals-court-tells-epa-to-stop-sales-of-harmful-pesticide/490527111/
Perhaps he should petition to join the EU… Mario said he’ll do whatever it takes. Now that would be some impressive QE!
/snark
Meh, I paid cash for my LEAPS so watching Elon wiggle on the line and sink the hook that much deeper is actually quite amusing. Anyone using margin for this roller-coaster deserves the (repeated) beating they’ve received.
Perhaps the goal of the tweets was to get himself relieved of command before the ship sinks. That would allow him to protect his fragile ego with a bit of “I could have saved it if they hadn’t mutinied” denial.
Could the estate of Nikolai Tesla, (the real genius) SUE Must for besmirchment of his “good” name? I mean, really…..this is the limit. or is it…..
*SUE Musk (!)
SUE Must
SUE Musk
Go on say it. You really wanted to say
SUE Mask…… because he truly hides behind one.
I’ve heard credible rumors about either one of these or both together buying out Tesla.
1. WolfStreet LLC.
2. The Federal Reserve.
WolfStreet LLC does not comment on unsubstantiated speculation.
:-]
I’d suggest that a certain Mr. Elon Musk would contend that WolfStreet LLC regularly engages in unsubstantiated speculation… :)
Maybe privatize the gains, publicize the losses is what is being applied here. The lack of oversight by the SEC is one thing, but if an investor(s) cannot be found and no charges are filed, the rule of law is well and truly gone. Musk is now up there with evagelical ministers begging for cash between flights on the gulf stream. “Hey guys, we’re going to Mars!”…LOL
Mars, Heaven, what’s the difference? Musk is about as likely to attain one as the other.
His preaching skills are up there with the best. The only thing he lacks is a glass cathedral for critics to throw stones (meteorites?) at.
Since when does “the rule of law” apply to wealthy aristocrats? The only time a wealthy con man gets punished is when he makes the mistake of ripping off other aristocrats (Bernie Madoff had a lot of wealthy investors as did Kenneth Lay – big mistake). Musk’s investors appear to be mostly prols, muppets and foreigners and as far as regulators and enforcement agencies are concerned Musk could murder any of those guys in broad daylight in the middle of Time Square and still skate. Well healed investors have likely steered clear of Tesla so who has been harmed? not anyone that matters. You think Buffet and Munger own TSLA – not a chance. The people victimized by this manipulation are of no importance and are not worth turning over apple carts to rescue.
Hey. The Piper’s tune is magic. Is mesmerising. Like rats the tailing crowd follow, dance to the tune, jumping here, jumping there, but not knowing where. And on they go. For sure the Piper will bring them there.
Sounds like Trsla would be a perfect takeover candidate for Amazon, since Amazon does not need to make a profit. Tesla will push up total sales and drive up Amazon’s share price. It’s a match made in heaven.
Elon Musk is the Lance Armstrong of the tech space. Does the media challenge Musk? No, not really? They didn’t challenge Armstrong, either. After all, didn’t he win 7 tours all illegitimately?
Elon Musk is a made man. This is not a crime like it would be for any of us.
With his now infamous Tesla “going private” series of tweets Elon Musk has created a huge dust-up. Questions are surfacing such as where or who is the bank and is the SEC going to push hard and demand Musk is not just jawing the stock higher. The type of questions being asked suggests Tesla could come under an enforcement investigation if regulators develop evidence that Musk’s tweet was misleading or false.
Its the Russians.
“But actually manufacturing cars profitably in a market where you’re surrounded by pros who know what they’re doing is devilishly hard, and after ten years of trying, Tesla still hasn’t figured it out”
Gee, you think Musk might take a billion or two and buy some auto executives with experience.
Which implies he already did, and then fired them after they gave him practical answers he didn’t like
or
He hasn’t hired any and is completely nuts.
Either way, it suggests no adults are running this company and investment in the stock (at these prices) is nuts. Just as we looked back in horror at pets.com
->It’s easy to tweet.
What happens on twitter stays on twitter, unless it escapes through a hole in the fabric of space-time.
->”even Hitler was shorting Tesla stock.”
Hitler has never shorted Tesla stock. His assets went into a trust fund when he retired in Argentina.
->Now some folks, including those at the SEC’s San Francisco office, are wanting to know where exactly this money is going to come from
Baloney is free speech. Has been for months now. Everybody knows that.
->Why would anyone want to pay $72 billion for a permanently money-losing automaker that has only 0.2% of the global market?
Tax write-offs. Big ones. Not everybody made it to Panama.
Regardless of how inept the SEC has been these past 20 years, this Musk grandstanding may be too much even for them. We could be witnessing the genesis of another corporate flame-out like Enron/MCI. One assumes that the SEC does not want to be asleep at the switch if that is a possibility because if it does go that way the SEC would be torn to pieces by Congress, investors and bond holders.
I will assume you are being sarcastic.
Congress – they don’t care (in fact Musk contributes to campaigns)
Investors – Investors have no power or sway with SEC and besides investors like stock manipulation.
Bond Holders – They get to pick up the scraps in BK court. The Tesla brand will still have value and someone will pay good money for it (I think Tata would be interested in buying up assets in BK).
My guess is that the glamour is gone, and Tesla will be bankrupt within a year. Here’s Tesla’s memo to its employees – it sounds like what the captain of the Titanic might have told the crew:
“If the process ends the way I EXPECT IT WILL, a private Tesla would ultimately be an enormous opportunity for all of us.”
Well that seems to be a pretty firm statement, not quite like ‘financing secured’, but definitely an expression of expectation of a plan fulfilled.
Maybe he could do the privatization like the old Lloyd’s of London model: call the shareholders ‘names’, or ‘partners’, and require them to pony up contributions to cover any losses in any years. Employee shareholder-partners could take a reduction in wages or work for free if they don’t have the cash. In the good years, when lots of profit is made, they get to share the windfall gravy train.
As far as the required 50 Billion, or whatever, he just needs to redeem shares from willing sellers by issuing payment in bonds with a convertibility feature and maybe pay interest in shares. Gives a whole new meaning to the word ‘bond’, and it would be an interesting calculation to determine what the shares are worth. A nice round figure of a thousand dollars comes to mind. And the plan would include returning as a public company with perhaps 60 or 70 Billion in debt!
We live in interesting times, where capitalism has been almost completely replaced by financial engineering in the last couple of generations, so anything’s on the menu, and anything can be possible and even believed.
Careful now Wolf, because Bloomberg is now reporting that the Saudis are in fact interested.
Even if they’re now talking about a potential investment, it still doesn’t constitute “Funding secured.”
It’s becoming abundantly clear – to be a Tesla bull requires faith over logic. As in claiming that some ongoing discussions are relavent to the “secured” issue. Same for lots of darling stocks in bubbles. Eventually the end is similar. Fortunes made on hype and lies and lots of bag holders.
I bet you he has funding secured for a buyout at 240. He just got the “details” wrong.
Stating funds are secured prior to the interest is where the crime of such stock manipulation rises. I could be interested, you could be interested. But that wouldn’t hold up as “secured”, secured would be documented and signed off.
There are also a number of forms you have to fill out that are still missing.
I think Elon Musk has secured financing from ….. Solar City!!!!
Since the state of California is giving Tesla subsidies perhaps Calpers can take it private to seal the deal.
Looks like the Saudis are going to have to find a new bank to work with them on this if the choose to pursue.
https://www.bloomberg.com/news/articles/2018-08-12/softbank-is-said-to-shun-tesla-deal-amid-focus-on-other-car-bets
Softbank isn’t interested.
https://www.bloomberg.com/news/articles/2018-08-12/softbank-is-said-to-shun-tesla-deal-amid-focus-on-other-car-bets
They could flip flop 20 more times. Funding not secured.
Musk confirmed it is the Saudi PIF
https://www.cnbc.com/2018/08/13/musk-offers-details-on-claims-of-funding-secured-tweet-in-taking-tes.html
So much for Reuters sources.
Actually that sounds more like Musk’s bluff got called out and he is now trying to cover his A$$ since the Saudi said they have no interest in taking the company private…especially now the lawsuits are coming…
https://finance.yahoo.com/m/d7b05a77-29eb-34b5-91a9-5fb789db7b77/ss_elon-musk-blog-post-reveals.html
Yep, time to get all charged up!
No mention of all the (newer, cheaper, better) competitor EVs coming out this model year from luxury marques. Mene, Mene Tequila Upharsin:
https://www.greencarreports.com/news/1117536_2019-is-the-year-of-the-electric-suv