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Tesla may go Private at 420

Tesla may go Private at 420

Although I will do well I wish he wouldn't but it may be necessary with the dishonest shorters and character assassination. Don't forget Tesla is worldwide and Wall Street is not as big as the world capital markets.

ravisundaramam | August 7, 2018

Saudi fund is buying Tesla.

Hope it is not to shut it down. TSLA touched 370 today.

Mike83 | August 7, 2018

The issue is many worldwide investors want kto Tesla as it starts to make money. The shorts are screwed anyway but I Wall Street gives up a Golden Goose for some dirty oil. Pathetic. Why should Elon have to deal with such morons?
I don't blame him but I would like to keep invested.

hoffmannjames | August 7, 2018

Not sure what to make of this. Would Wall Street see it as a sign that Tesla is too weak to be a public company? Probably. Would Musk care if they thought that about Tesla? Nope. And, at $420/share, current shareholders would make them a tidy profit so I don't think they would object. Going private would cut Tesla off from the funding obtained from selling stock on the public exchange. However, going private would probably allow Tesla to focus more on their vision of sustainable transportation rather than meeting financial goals and pleasing investors which is probably why it is such a tempting option for Musk. I get the impression that Musk is an engineer at heart more than a CEO. He wants to create beautiful, innovative cars, and change the world, not do upper management work. The things you have to do as a CEO like earning calls bore him I think.

jordanrichard | August 7, 2018

I highly suspected, to event the point of telling friends, that this might happen. Elon for the longest time has hated "Wall Street". He has even said it would be much easier for Tesla to focus on making cars without all the BS. That Wall Street was a necessary evil. Well apparently, not anymore............

blktoptrvl | August 7, 2018

Personally, I see a LOT up upside potential in TESLA, that is why I have bought and held onto the stock for so long. I would fell that curring me out at $420 was a slap in the face for such patience and support. Is it a profit, yes. Is it the profit I think can be had in this stock. No, not by far.

Tropopause | August 7, 2018

Bummer for us. Great for Tesla.

rxlawdude | August 7, 2018

I'm wondering about the significance of 420. ;-) This whole idea may go up in smoke. Or go to pot.

Mike83 | August 7, 2018

Stock trading halted

Tropopause | August 7, 2018

Uh-oh.

Tesla-David | August 7, 2018

Wow, this looks serious!

Mike83 | August 7, 2018

Still. All shareholders will have to vote on it. Any clues if it would not pass?

rxlawdude | August 7, 2018

Halt is over. Now the short-bears are floating "did Musk violate SEC laws?"

Anything they can do to take Tesla and Musk down.

Sad.

Tesla-David | August 7, 2018

I would vote my shares to go private in a heartbeat!

barrykmd | August 7, 2018

Still halted

rxlawdude | August 7, 2018

@barry, you're right. Since 11am PT.

karenlyles1020 | August 7, 2018

I guess I don't totally understand what this all means.....

Tropopause | August 7, 2018

Tesla-David- I’m in too!!!

David N | August 7, 2018

What happens to us shareholders? Do we have the option of staying on board when privatized?

Sgwebb.us | August 7, 2018

But Musk continued to tweet, adding, “I don’t have a controlling vote now & wouldn’t expect any shareholder to have one if we go private. I won’t be selling in either scenario.” Musk also responded “yes” when a Twitter user suggested taking the company private would save “a lot of headaches.”

He tweeted that there would be “no change” to his role as chief executive and added that his “hope is *all* current investors remain with Tesla even if we’re private.” “Shareholders could either to sell at 420 or hold shares & go private,” he said.

David N | August 7, 2018

Stock shot up so fast, trading was halted.
Geeze Elon.

Festina Lente | August 7, 2018

https://www.tesla.com/blog/taking-tesla-private

The following email was sent to Tesla employees today:

Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.

I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve.

This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. This is not to say that it will make sense for Tesla to be private over the long-term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.

Here’s what I envision being private would mean for all shareholders, including all of our employees.

First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium.

Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.

Third, the intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. However, the structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months.

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.

This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.

Thanks,
Elon

Earl and Nagin ... | August 7, 2018

@DavidN,
See the blog at https://www.tesla.com/blog/taking-tesla-private?redirect=no
for some hints as to what might happen.

Sleepydoc1 | August 7, 2018

So is this a nightmare to the shorts? They don't "own" the shares, so they wouldn't vote, right? If it does go through, would they then have to pay possibly $400+/share to get out of their short position? Kind of giddy if that is the way it would work out.

Mel. | August 7, 2018

Thanks Festina
Elon wants all investors to stay investors ,I know I will choose to stay as an investor.. I love what this does to the shorts

Mike83 | August 7, 2018

I meant to post the following here as there are several threads ongoing

:Mike83 | August 7, 2018
The more I read about it the more happy I am. Elon has the perfect solution and is implementing it. I will vote for it wholeheartedly.
There is no other investment with this much appreciation built in. If I took the profits I don't see any other investment worth it now.

dmm1240 | August 7, 2018

"So is this a nightmare to the shorts? They don't "own" the shares, so they wouldn't vote, right? If it does go through, would they then have to pay possibly $400+/share to get out of their short position? Kind of giddy if that is the way it would work out."

The ultimate nightmare. They borrowed X shares at Y dollars and then promptly sold them. The game is to wait for the price of the target stock to fall, buy the number of shares originally borrowed on the open market, return those to the owner of record and pocket the difference from when they sold the shares at a high price and sold at a lower price.

Tesla going private blows that up completely. Let's say you borrowed 1,000 shares and sold those on the open market for $360 a share, reaping $360,000 on the sale. You have the money, but you still owe the original owner 360 shares of stock or the cash equivalent. Usually, a brokerage firm will insist that a short seller settle at some point, often by a set date.

So, Tesla goes private @ $420 a share. Since there are no longer any shares to buy, the short must return 1,000 shares or the cash equivalent to the original owner. They must give the original owner $420,000 meaning they're out $80,000. OTOH, if the short seller borrowed his/her Tesla shares at a lower entry price, assume $300 a share, they're out $120,000. There is no escape, no way to delay, they have to cough it up.

If you're a hedge fund manager, most of the funds on hand, meaning other peoples' money, is invested in various positions. To cover, the hedge fund manage must extricate the fund from several ongoing investments to pay off the Tesla stockholder. This would leave a whole lot of the fund's investors intensely unhappy. Einhorn admitted last week that some of his fund's investors, fed up with his Tesla obsession, had started to withdraw their funds. This in turn, creates the negative spiral that the shorts have been attempting to inflict on Tesla with FUD.

IOW, these guys wind up hanging from the same rope they intended for Elon Musk and Tesla. Talk about poetic justice.

John | August 7, 2018

I'm voting this through and hope all other shareholders do as well. As before, Tesla will continue to rise and all boats will float.

Not sure how to sell shares down the road... craigslist? Maybe trade shares for Solar and Powerwalls exchange program? I see that day in the future.

dmm1240 | August 7, 2018

Mike83:

I think Tesla is going to explode in earnings and growth. The disruption is underway already. Just got off the phone with my financial planner. One has to take into account:
1. How the buyout would be structured for Tesla stockholders that want to remain part of the investment pool:
a) how is the private stock structured
b) since you're now a private investor, what is the return on your investment, how much accrues to the stockholders as the company starts to make a ton of money.
c) how the private shares will be valued in case you decide to exit at some point
2. The short term versus the long term. Tesla is going to be spending a ton of money to grow over the next 2-5 years. Gigafactories will be built in Europe and Shanghai. The Model Y is coming, the Roadster is coming, the semi is coming, the pickup truck is coming, probably a cheaper car for those who can't afford to buy a vehicle in Tesla's current lineup. Expect a significant ramp up in Tesla's energy products (solar roofs, batteries). The potential is enormous, but enormous investment is also involved meaning profits over the next 5 years or so will be limited.
3. Once Tesla achieves all this, the inherent value of the company will also be enormous. I think Tesla will one day be as big as Apple.
4. One has to take one's age into account. If you're 35-40, jump on this with both feet. If you're 60+ you need to think about it some.

Also, one other thing to look for is access to capital to expand. If Tesla speeds everything up, which I think is Musk's goal, they will need more cash than can be generated by operations right now even if the company becomes profitable. Those wanting to stay need to look at whether the buyout also includes funding for faster expansion.

Funny thing is, looking at all the FUD and the volatility of the stock, the forces aligned to get Tesla at any cost to protect their nest eggs, I realized Tesla needs a white knight -- an investor that will fund expansion without giving Musk et al too much grief over short term results. I wrote a letter to Musk advocating that he approach Tim Cook at Apple to be the white knight. Apple is interested in developing self driving systems for cars, has a ton of world class programmers, there is opportunity for mutual benefit between the two companies such as offering Apple Play and Apple Music to Tesla vehicles, aid in designing better touchscreens with enhanced internet speed, etc. And Apple is sitting on a mountain of cash, around 1/4 of a trillion dollars and its values coincide with Musk and Tesla's.

Decided not to send the letter because I figured Musk was already 50 miles ahead of me in some fashion.

I'll be interested to see what the source of the buyout funding is if Tesla going private takes place. Folks say Google, maybe, maybe not.

SO | August 7, 2018

I vote yes.

Perhaps Buffett?

SO | August 7, 2018

Or the Saudis.

Mike83 | August 7, 2018

Thanks dmm1240. I plan to live a long time and will like more capital in the future, maybe I'll make it to Mars. In any case this is happening so fast. Right now I celebrate Good Times, Oh yeah. We'll be taking a trip in our Tesla next week perhaps after we get some routine chores done. AH stock is at 381.88 and climbing. Gamblers usually lose and they seem to lose big, but thats life.

Sgwebb.us | August 7, 2018

I also plan to hold, though from personal experience it is not fun holding private stock, there is limits on what you can sell and the company sets the price.

sosmerc | August 7, 2018

If a public company gets into financial difficulty, shareholders can get out fairly quickly and easily if they so choose. What happens to shareholders in a private company when things "go south" ? You can't just sell your shares anytime you want. And how do you even know what the share price is at any given time?

Mike83 | August 7, 2018

There are other possibilities BTW. What if another entity wants in and they bid it up like to 520/share. Don't know the big players but I have seen this in a desirable stock. This is just a thought and I have no knowledge of the big wigs involved. I don't think this will happen though as the price seems right.

rxlawdude | August 7, 2018

I can point to the public/private dichotomy in the Electronic Health Records industry.

The biggest vendor today (after coming out of almost nowhere till 2001) is Epic. They are the "Cadillac" EHR vendor with increasing numbers of customers escaping other EHR vendors' systems.
The publicly traded EMR vendor that has the second largest deployment is Cerner Corporation. That stock has traded in the high 50s-low 70s for years and pays no dividend.
Other publicly traded EMR vendors include Athena and Allscripts. The latter is losing market share in the hospital market to Epic (and to a lesser extent, Cerner).

Privately held companies, as Elon points out, don't deal with the distractions and noise of Wall Street. They churn out quality, keep customers happy, and stay under the radar.

I'm all in favor of going private.

sosmerc | August 7, 2018

I assume, that current shareholders HAVE to approve going public before anything can happen.

ravisundaramam | August 7, 2018

Bloomberg is sad. Elon is skipping the middleman in the news business and goes straight to people.

All those traders who buy on rumor and sell on news are sad. The normal protocol is have all this tied up nice using an army of bean counters and shysters. And all be filed properly and seek a trading stop or announce it after trading hours. In the mean time someone who knows someone who knows someone will leak the information to the rumor mill. They will make a tidy profit.

Now announce it, without giving a chance for the traders to make a profit is a cardinal sin. Further all these shortie air force and smear army were generating tons of clicks for bloomberg. Now it is all gone. They are sad, they are furiously sad.

[1] https://www.bloomberg.com/view/articles/2018-08-07/elon-musk-tweets-show...

Ross1 | August 7, 2018

Apple/
I am invested in Apple and Tesla AAPL, TSLA.
Sure, AAPL is the biggest in the world, but they sell phones and computers.
TSLA has half the world for sale. Disrupter in every field (incl surfboards and notflamethrowers)
Why should they stay smaller than AAPL?
TSLA is the most desirable asset for anyone PROVIDED controls are built in.

ravisundaramam | August 7, 2018

@dmm1240: "The ultimate nightmare. They borrowed X shares at Y dollars and then promptly sold them."

My understanding is, it is far worse for them.

They did not collect the market price, 360$ in your example. They collected just 20 or 25$ for selling the option. From this they pay fees to their broker to borrow enough shares to cover their options, and leave enough collateral to buy it at market price should a margin call come through.

Now they need to pay the difference between strike price, 300, 270, 250, whatever and 420 the market price. So they are looking at losses several times the money they have "invested".

rxlawdude | August 7, 2018

"TSLA is the most desirable asset for anyone PROVIDED controls are built in."

Whaddayawant? It's got a steering wheel, brake, accelerator, and shifter. :-)

Tesla-David | August 7, 2018

I am totally on board and love what EM is proposing and would enthusiastically stay invested.

ravisundaramam | August 7, 2018

sosmerc : "What happens to shareholders in a private company when things "go south" ?

Private companies are governed by the by-laws that corporation has in its articles of incorporation. It will have provisions like how the company is valued, how and when shareholders can sell, to whom they can sell, right of first refusal etc etc. Very risky and usually not a good investment for your bread-and-butter widows-and-orphans part of the portfolio for most people.

Given the liquidity and performance of index funds, sector index funds, ETFs etc, I seriously doubt it is worth it.

ravisundaramam | August 7, 2018

@rxlawdude: "Whaddayawant? It's got a steering wheel, brake, accelerator, and shifter. :-)"

And a gorgeous touchscreen too!

kyle | August 7, 2018

There are several places that have the letter Musk sent to SpaceX employees years ago (posted below), it shows more as to why being private helps the company, it also explains a bit as to why Tesla had to go public. I think it is best for it to go private also. I believe a lot of the negative news around Tesla is spread from those that need the stock to go down low. This negative news is hurting the company. I don't think it will all go away for what they are doing but, it should help some of it go away. When a company is building products that competes with the norm, there are going to be negative articles.

I do have some concerns:
1) Are the small shareholders going to be forced to sell, AKA do we need to have more than just a single share of tesla?
2) Is pricing going to be set when we can enter / exit? will this be set similarly to the way the $420 was set?

With that said, I'm still planning to vote to approve it, depending on the answers to those questions.

--------------------------------------------------------------------

Date: June 7, 2013, 12:43:06 AM PDT

To: All All@spacex.com

Subject: Going Public

Per my recent comments, I am increasingly concerned about SpaceX going public before the Mars transport system is in place. Creating the technology needed to establish life on Mars is and always has been the fundamental goal of SpaceX. If being a public company diminishes that likelihood, then we should not do so until Mars is secure. This is something that I am open to reconsidering, but, given my experiences with Tesla and SolarCity, I am hesitant to foist being public on SpaceX, especially given the long term nature of our mission.

Some at SpaceX who have not been through a public company experience may think that being public is desirable. This is not so.Public company stocks, particularly if big step changes in technology are involved, go through extreme volatility, both for reasons of internal execution and for reasons that have nothing to do with anything except the economy. This causes people to be distracted by the manic-depressive nature of the stock instead of creating great products.

It is important to emphasize that Tesla and SolarCity are public because they didn’t have any choice. Their private capital structure was becoming unwieldy and they needed to raise a lot of equity capital. SolarCity also needed to raise a huge amount of debt at the lowest possible interest rate to fund solar leases. The banks who provide that debt wanted SolarCity to have the additional painful scrutiny that comes with being public. Those rules, referred to as Sarbanes-Oxley, essentially result in a tax being levied on company execution by requiring detailed reporting right down to how your meal is expensed during travel and you can be penalized even for minor mistakes.

YES, BUT I COULD MAKE MORE MONEY IF WE WERE PUBLIC

For those who are under the impression that they are so clever that they can outsmart public market investors and would sell SpaceX stock at the “right time,” let me relieve you of any such notion. If you really are better than most hedge fund managers, then there is no need to worry about the value of your SpaceX stock, as you can just invest in other public stocks and make billions of dollars in the market.

If you think: “Ah, but I know what’s really going on at SpaceX and that will give me an edge,” you are also wrong. Selling public company stock with insider knowledge is illegal. As a result, selling public stock is restricted to narrow time windows a few times per year. Even then, you can be prosecuted for insider trading. At Tesla, we had both an employee and an investor go through a grand jury investigation for selling stock over a year ago, despite them doing everything right in both the letter and the spirit of the law. Not fun.

Another thing that happens to public companies is that you become a target of the trial lawyers who create a class action lawsuit by getting someone to buy a few hundred shares and then pretending to sue the company on behalf of all investors for any drop in the stock price. Tesla is going through that right now even though the stock price is relatively high, because the drop in question occurred last year.

It is also not correct to think that because Tesla and SolarCity share prices are on the lofty side right now, that SpaceX would be too. Public companies are judged on quarterly performance. Just because some companies are doing well, doesn’t mean that all would. Both of those companies (Tesla in particular) had great first quarter results. SpaceX did not. In fact, financially speaking, we had an awful first quarter. If we were public, the short sellers would be hitting us over the head with a large stick.

We would also get beaten up every time there was an anomaly on the rocket or spacecraft, as occurred on flight 4 with the engine failure and flight 5 with the Dragon prevalves. Delaying launch of V1.1, which is now over a year behind schedule, would result in particularly severe punishment, as that is our primary revenue driver. Even something as minor as pushing a launch back a few weeks from one quarter to the next gets you a spanking. Tesla vehicle production in Q4 last year was literally only three weeks behind and yet the market response was brutal.

BEST OF BOTH WORLDS

My goal at SpaceX is to give you the best aspects of a public and private company. When we do a financing round, the stock price is keyed off of approximately what we would be worth if publicly traded, excluding irrational exuberance or depression, but without the pressure and distraction of being under a hot public spotlight. Rather than have the stock up during one liquidity window and down during another, the goal is a steady upward trend and never to let the share price go below the last round. The end result for you (or an investor in SpaceX) financially will be the same as if we were public and you sold a steady amount of stock every year.

In case you are wondering about a specific number, I can say that I’m confident that our long term stock price will be over $100 if we execute well on Falcon 9 and Dragon. For this to be the case, we must have a steady and rapid cadence of launch that is far better than what we have achieved in the past. We have more work ahead of us than you probably realize. Let me give you a sense of where things stand financially: SpaceX expenses this year will be roughly $800 to $900 million (which blows my mind btw). Since we get revenue of $60M for every F9 flight or double that for a FH or F9-Dragon flight, we must have about twelve flights per year where four of those flights are either Dragon or Heavy merely in order to achieve 10% profitability!

For the next few years, we have NASA commercial crew funding that helps supplement those numbers, but, after that, we are on our own. That is not much time to finish F9, FH, Dragon V2 and achieve an average launch rate of at least one per month. And bear in mind that is an average, so if we take an extra three weeks to launch a rocket for any reason (could even be due to the satellite), we have only one week to do the follow-on-flight.

MY RECOMMENDATION

Below is my advice about regarding selling SpaceX stock or options. No complicated analysis is required, as the rules of thumb are pretty simple. If you believe that SpaceX will execute better than the average public company, then our stock price will continue to appreciate at a rate greater than that of the stock market, which would be the next highest return place to invest money over the long term. Therefore, you should sell only the amount that you need to improve your standard of living in the short to medium term. I do actually recommend selling some amount of stock, even if you are certain it will appreciate, as life is short and a bit more cash can increase fun and reduce stress at home (so long as you don’t ratchet up your ongoing personal expenditures proportionately).

To maximize your post tax return, you are probably best off exercising your options to convert them to stock (if you can afford to do this) and then holding the stock for a year before selling it at our roughly biannual liquidity events. This allows you to pay the capital gains tax rate, instead of the income tax rate.

On a final note, we are planning to do a liquidity event as soon as Falcon 9 qualification is complete in one to two months. I don’t know exactly what the share price will be yet, but, based on initial conversations with investors, I would estimate probably between $30 and $35. This places the value of SpaceX at $4 to $5 billion, which is about what it would be if we were public right now and, frankly, an excellent number considering that the new F9, FH and Dragon V2 have yet to launch.

Elon

blue adept | August 7, 2018

From a logical, practical and logistical point of view, this is the most sensible move Tesla/Musk could make for ensured long term growth and stability. Plus, it would alleviate alot of needless, spurious and wasteful stress...

You can't build a future with an eye forcibly fixated on the short term margins/goals susceptible to the specious speculations of outliers interested only in the pursuit of their own individual agendas.

I approve!

Amped | August 7, 2018

YES! YES! YES!

blue adept | August 7, 2018

@kyle

Yes, there are alot of correlations between Musk's letter to SpaceX employees and the likely motivations behind his suggested move with Tesla Motors today and they all made just as much sense then as they do now.

Again, I fully support the transition.

ravisundaramam | August 7, 2018

Wondering what happens to the options if the company is no longer public ? There are options to sell TSLA at 275$ in Dec 2018. What happens to those options?

ravisundaramam | August 7, 2018

"A call option gives the holder the right to purchase the underlying security at a set price at anytime before the expiration date,"

So ALL the Call options, all the way till end of 2019 or whatever will have to be settled at market price of 420. Many of those out in the waazoo options were at very low prices like 180$ or 225$. The option seller collected the money. Now they have to pay the difference.

S3 reported short interest to be 35 million shares in Aug 2. That mark-to-market loss was 1.7 billion. That is 350$ - strikeprice added up to 1.7 billion. It also said there was not much of short covering. 35 million shares, 70$ more in price is 2.1 billion. So if Tesla goes private at 420$, they are in the hole for 3.8 billion. This comes on top 4.6 billion they had already lost since 2016.

ravisundaramam | August 7, 2018

And if Tesla were to go private at $420 a share, shareholders could see losses balloon to $4.4 billion for the year, according to S3 Partners, a financial technology and analytics firm. [1]

Tesla short-sellers have now lost the equivalent of more than $2 billion so far this year. Shares spiked in recent days after the company reiterated guidance that it would become profitable by the end of 2018, even as the company burns through cash in its bid to meet production benchmarks for its flagship Model 3 sedan. [2]

--------------------------
[1] https://www.bloomberg.com/news/articles/2018-08-07/afternoon-of-terror-f...

[2] https://www.foxbusiness.com/business-leaders/tesla-short-sellers-pounded...

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