Turns out, “Funding secured” was a lie, conceived in order to manipulate up the share price.
Tesla CEO Elon Musk has superseded the infamous August 8 tweet — “Am considering taking Tesla private at $420. Funding secured” — which had caused market capitalization to spike by about $6 billion, with a blog post late Friday in which he says that funding was never secured, but that instead it was his “belief” there was “more than enough funding,” and that the buyout isn’t going to happen at all.
We’ll get to some of the rigmarole in a moment, but deep down in his blog post, Musk says this:
After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.
So the mind-deal is off.
Here’s what he says about the advisors he hired after the “funding secured” tweet, and not before:
I worked with Silver Lake, Goldman Sachs and Morgan Stanley, who have world-class expertise in these matters, to consider the many factors that would come into play in taking Tesla private, and to process all the incoming interest that we received from investors to fund a go-private transaction.
And then there are the current shareholders to consider:
I also spent considerable time listening to current shareholders, large and small, to understand what they think would be in the best long-term interests of Tesla.
He did this after all hell had broken loose following his tweet, including a market reaction that indicated that there was a zero percent chance the buyout would happen at $420 a share, given that shares were trading as much as $120 below the buyout price.
And so, “based on all the discussions that have taken place over the last couple of weeks,” there are now – late Friday, August 24, not August 8 when he was tweeting-while-driving — “a few things” that are finally “clear” to him:
Given the feedback I’ve received, it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company.
Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company.
There is also no proven path for most retail investors to own shares if we were private.
Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was “please don’t do this.”
And the whole thing turned into a can of worms, or rather a can of Model 3’s:
I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated. This is a problem because we absolutely must stay focused on ramping Model 3 and becoming profitable. We will not achieve our mission of advancing sustainable energy unless we are also financially sustainable.
After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.
So this was decided on Thursday. Then Friday night, he discloses what everyone had known all along: No deal.
And that concludes one of the craziest chapters in automotive history that had commenced with tweeting-while-driving, which may be illegal in California. Well, it’s not quite over. There are now lawsuits to contend with, and the SEC is investigating his claim of “Secured funding” and other things, so this chapter will still drag on in its sordid manner.
Musk isn’t going to get fired over this, six members of the Board said in their own statement Friday night: “we fully support Elon as he continues to lead the company moving forward.”
But Musk was right. Tesla won’t be around unless its business becomes, as he says, “sustainable,” which it is not at the moment, given the gigantic losses, massive cash drain, and the Model 3 manufacturing chaos that still, or more than ever, afflicts the company.
And suppliers are already fretting: 18 of 22 suppliers believe Tesla is now a financial risk to their companies. Read… The Hype is No Longer with Tesla: Suppliers & Creditors Start to Fret
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Why, Must just burned off some money the other day … (didn’t help the air quality around here either).
So, wrist-slap fine coming up, perhaps accompanied by the dreaded STERNLY WORDED missive from the SEC? Or are the lawsuits from shorts who were torched by the manipulation the greater danger here?
Surely longs will now have cause to sue Tesla given Lone Skum’s lies?
The law suits are about three or even four orders of magnitude greater. The fine might be 75 K the lawsuit may net 75 million, or 750 million.
And the plaintiffs might ask for punitive damages. (In Canada, thank God, limited to triple actual damages but of course in lawyer- land, a lawyer sued a dry cleaner for a million for ruining his suit.)
The determination of wrongdoing by the SEC paves the way for the lawsuits.
And being a civil suit there is no right to silence and no requirement to prove beyond a reasonable doubt.
“lawyer-land” LOL that’s a good one
just tack an extra $420 onto the powerwall price, every system sold buy back a share. The powerwall is the real future of Tesla not the car. I want to ditch my power provider ASAP and go independent.
Powerwall or Powerball? Maybe Powerball can save Tesla…and there is a light at the end of the Tesla boring tunnel after all?
Is actually more about the fact that if the company goes private he won’t be in control of it anymore. Same reason he refused to sell it in 2017.
Musk refuses to accept the whole deal with Tesla was eventually selling it. Now he is stuck with the sinking ship.
Turns out, being an egomaniac is bad for business, who knew?
Isn’t egomania part and parcel with being a CEO nowadays?
When you start to believe your own lies, being an Egomaniac is bad for business.
As a private company he won’t be able to sell new stock to raise more money to survive. He may have a difficult time borrowing money too. His board probably simplified these ideas for him until he saw the light.
I don’t mean to imply that there is no one home upstairs or that the lights are out up there too. Geniuses like Tesla and Edison, who he has been compared to, had huge limitations in other fields. It was reported that Edison’s wife had to attach a strap to both sides of a tray of food and sneak up from behind and place it over his head so that he could not see his work and could only see the food and tray in front of his face. He didn’t have enough sense to stop and eat on his own. To get a handle on Tesla’s genius it is only necessary to read one paragraph penned by he himself who thought drinking rum was better for health than drinking tea or coffee that claimed the greatest number of victims:
“(Alcohol), it is in striking contrast in its medicinal and dietetic value to all other stimulants which, without exception, are injurious. Even smoking, snuffing or chewing tobacco will eventually impair the health, though not quite so much as chewing gum, which, by exhaustion of the salivary glands, puts many a foolish victim into an early grave.”
And a Sand Hill VC also, they seem to speak the same language.
Rich people don’t go to jail for stock manipulation. That’s the same game the Fed is playing.
The SEC won’t go after one of their own. They’d be jailing their vulture “capitalist” country-club cronies if they were serious.
Yes they Can. But No , They Won’t.
It’s great because if they do nothing, or a mere slap on the wrist, that gives open license to other CEOs, Chairman etc. to blatantly lie via social media – tweet, fb, linkedin etc.
This is going to be a crazy market coming up!
They used to jail Martha Stewart for something like 50K, and now they don’t jail Elizabeth Holms for 700million. Nobody went to jail after 2008. The only attempt they did was Steve Cohen, and yet it was wrist slap and Cohen is fine. The voters either don’t have stock market account to care about this or the FED has lifted all asset prices to make existence
of these crooks a
non-issue. In this exact sense, FED created the kinds of Elon and Holmes, by providing them funding to start fraud or money losing business as well as provide them immunity.
Holmes has been charged with criminal fraud. She will be going to jail.
Previous to being charged criminally, she paid a 500, 000 fine and was barred from being a CEO for ten years.
Stewart was jailed for obstruction of justice. The amount of money involved had nothing to do with it. (except to show how silly she was)
Maybe an example is useful to explain how seriously the courts take obstruction: one form is perjury. It doesn’t matter how minor the underlying charge: the sentence for perjury is always jail time.
In Canada it’s two years. A while back two guys were in a minor accident. The driver had been drinking so they swapped seats before the cops got there. But someone saw them.
The guy who had been driving got a DUI, buddy got two years.
The famous author (Lord) Jeffrey Archer in the UK got caught making up stuff about some relatively small matter. Two years.
Yes, it is rather pathetic, but I’m sure this will all bring back ratings for NBC Universal. As far as Musk–he hasn’t been an entrepreneur for years. He’s a financier masquerading as a CEO. I would be seriously considering all my Tesla stock first thing Monday before it crashes (pun intended).
I once filed a case with the SEC some years ago. I submitted a history of times for each trade to prove that other traders were put inline in front of me and got sell executions when I didn’t. The SEC ruled against me and in favor of the brokerage. I suddenly realized why the SEC was there and who they were there to protect.
Ya think the “Club Med” cushy prisons for “wrist-slap” millionaires should be called “Club Fed” instead ? You bet. Reader comment from Mish Shedlock’s site …
“Powell Praises the Fed”
“Reminds me of when Greenspan praised bankers for getting people into homes they otherwise could not afford. The reason Bankers were able to do that was because of massive mortgage fraud. To date, no bankers have been prosecuted for their crimes.
We are now in the midst of an even greater financial fraud.”
Musk is silly. But we live in silly times. A perfect match.
Tesla is going to zero.
QE gone. Obama picking his favorites gone. EV massive tax breaks gone.
They have never made a profit and burn billions every year.
How else do you think it will end?
Musk is in cahoots with the FED to “burn” up as much cash as possible that has been freely cast into the system since the GFC. He’s just doing his American duty!
social media has become the determinate of stock prices. The shorts do not have a chance.
Twitter should put him on ”waiting for moderation” status, as it seems to work :) anyhow hope the reader/contributor to WS, who bet the farm short selling, made it out of his trafe. 2014 I wanted to short Tesla, but decided DDD (3d printer) was better. Anyhow, hope you came out the other end with profits in hand.
Do you think there is a chance they will add some C-level adult supervision to navigate this shitstorm? Make Musk the Honorary Visionary Chairman of Tesla or whatever, and actually give the reins to someone with any aptitude?
Well that’s what they did with Jobs in the ’80s…didn’t work out too well. Apple did…OK by all accounts when he came back.
I guess ‘believers’ equate Musk with Jobs as a ‘visionary’ – and he probably is; it’s the only reason you’d hold faith with a tech company losing unprecedented amounts cash.
This may be a time that short positions don’t set a price support for this stock.
Must. maintain. narrative.
Tesla isn’t a car company, it’s a money-raising, cash-burning scam.
I’m rolling the dice with a couple of January 2020 put options.
That’s what I’m thinking. The market is such a casino, and yet some cheap way out of the money options on TSLA is surely a better bet than anything in Vegas.
I have 25 Jan 2020 option put contracts on my conviction that there is a very high probability that TSLA will seek Chapter 11 protection sometimes during 2019. If that happens, I am looking at a six digit return on a ten-bagger investment.
Counting returns on deep out of money puts when market is hitting all time highs, I love it. Good luck with that 6 figure profit.
The people participating live a good scam. And there is a path for public to own privately but not with the IRS and others meddling so that Agee private humans can own. The world is a rig game. Sucks.
The real money is made in selling the options- the unborrow status means crazy premiums for the options. Sell a covered call, then buy a cheaper put, guaranteed money.
Lather, rinse repeat. Every month….
TSLA are a ClusterFrack about to ClusterFail.
Any Group with enough Funding and Talent to fix them or their situation are far better off Starting from Scratch.
There is a better group already out there:
The Fisker EMotion is a fantastic machine.
Fisherinc also looks like another “fantasy company”.
The established petrol car manufacturers like VAG (VW-Audi), Mercedes and Toyota and GM will take the electric / hydrogen market away from these start ups.
And u have to believe that the top engineering talent is very likely to be(being) poached from traditional / established manufacturers.
No doubt the pull on employees of equity/stock options at Tesla is really strong, but once that’s over…
Seems to me (as an old retired CFO), the best con-job (albeit the “victims” were greedy & infinitely willing) was to convince “investors” who couldn’t even read financial statements, much less comprehend a modern corporation, to make the jump all the way to “junior wanna-be” venture capitalists who can pick technology winners.
This laughably ill-equipped crowd trashes around using chicken bones, astrology, Ouija boards and their precious feelings to divine which dot.com/unicorn/bitcoin is going to make them rich.
Most (but not quite all) lose lots of money, then run around complaining the entire system is rigged, all CEO are psychopaths, all business is crooked and why even try because some unknown “they” keep screwing you.
This is a pure example of uneducated, inexperienced, unqualified, greedy fools literally throwing their money away and then failing to accept personal responsibility for being uneducated, inexperienced, unqualified and greedy fools.
I expect the stock price to rocket up to 420 on Monday just because.
I expect the stock price to gap down below 300 on Monday morning and close the week around 250.
+100 points. +200 if Musk resigns.
This is like Overstock on steroids. The shorting method is proven unwieldy, but is left over from the changeover to electronic trading. (You used to mail certificates back and forth). If you want to squeeze the shorts you call in the shares loaned out. Put option sellers have no real choice but to enter the market to cover the positions they write. Full service brokers make short sellers borrow the shares, (takes a couple days) online brokers do it on the fly and some online brokers never do it, and they call them phantom shorts. Leveraged ETFs use exotic financial instruments but its the same game. On that matter so many of these bear market ETFs that were written during the financial crash have lost ten times their value, if the market finally turns down will they be allowed to run them back up, or was that just a scam?
Is Elon Musk even his real name, or are they trying to dress up a Bill Johnson to make the story more compelling? I haven’t seen anything extraordinary come out of him so far. Can anyone point me to some material he has written? I wouldn’t even know where to look.
Oh my Lawd, what a bunch of nonsense coming out of the Elon-hole. Obviously seriously discussing going private with the board and the Wallstreet banks could have (and should have) happened prior to the “considering taking private” and “funding secured” pronouncement. On the face of it, this looks like blatant stock manipulation. Someone should go to jail.
This will make a great case study at Harvard University…for the psychology program, not the business school.
If we’re honest, Elon Musk is probably a saint compared to some of the jokers in China. The article below is one example of how corrupt the people in China has become.
While Elon can boast and manipulate via Twitter, he doesn’t quite stack up losses like others. In fact, he’s probably in the JV when it comes to losing money.
Before too long, TSLA will look like a great investment compared to what else is out there. That’s probably one of the main reasons why the US equity market hasn’t come down despite record highs. Everything else just looks worse.
I like how you use one company in China to show how corrupt Chinese “people” have become. Should we use the 2008 mortgage fraud (where NO ONE was arrested because they are “insert skin color” here) to imply that all Western people are corrupt?
Money is blind. It corrupts everyone.
Money is blind, hypocrisy blinds.
I have the feeling that Elon Musk was drunk/on drugs when he made those irrational tweets of making the company private.
I think most investment companies would have grabbed the US$420 per share for their shares and not invested at that price.
Is this going to be another Delorean of the 70’s?
The survival time of Tesla is about 12 month. Than hits the Porsche Taycan the market. According to the specs it is the better and more affordable car, with all the dealer network and service of Porsche behind it.
Normally, the Tesla articles have a lot more comments than this. But what can a fanboi say when the object of his affection is forced to admit one of his lies on record? I think Musk jumped the shark on this one.
On the ground, it’s hoary old Chevy that’s busy building a loyal mid-30’s electric car customer base, with Nissan-Renault’s look-at-my-quirky-glasses chubby girl car playing second fiddle.
Meanwhile, Honda just dropped a mid-30s plug-in hybrid that charges overnight using the standard outlets already in your garage. Honda is the opposite of hype. They never attempt to buy market share and their cars always perform better in the real world than on government tests.
Tesla’s Model 3 is a day late and a dollar short. They had a window of opportunity to establish market dominance. But it has passed. Had they begun building in volume in 2016, most people would know of someone who owns one by now (much like the Bolt has quietly accomplished).
I do believe the 3 will do well as Tesla’s version of BMW’s 3 series or Mercedes’ C class. But that’s not what they were going for. They were aiming to be the Olds Cutlass of electrics — a mid-priced car that every middle class suburbanite aspired to.
The problem is, the modern version of the Cutlass can’t have a sedan silhouette. The “proper” shape is the 2-box CUV. And, oh gee, the Bolt has that already, ironically made by the company that sold millions of Cutlass sedans back in the day.
Tesla is still in expansion mode, with several gigafactories either in planning or under construction around the world. — of course, China is the future for the renewable market…not the USA. The future looks bright, but the global market is clearly large enough for many players.
With all the competition at the low price levels, it makes you wonder why Tesla made a decision to allow other companies to use its patents for free. With Tesla near death from a financial perspective, wouldn’t royalties be valuable at this point? But maybe the patents are not viewed as valuable in the first place. I can’t say.
Here is the truly crazy part: Each Tesla board director makes about $1.5 million on average, or about five times the compensation a Ford director gets.
It’d be one thing if stockholders got some kind of world champion brain trust board for that sort of money. Instead, they appear to be a bunch of incompetent morons who can’t keep their CEO under control.
There was never any deal to take it private. So there can’t be any refusal or retraction or reversal of the deal. It’s just more BS.
The solution is obvious, Musk should contact Google and have naysayers banned from posting anywhere on the internets.