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why can’t Elon just settle?

why can’t Elon just settle?

sschaem | September 29, 2018

I dont agree with the premise of the article.

Both Tesla and Elon are growing up together. And I think Elon as CEO and being on the board is crucial to Tesla future competitiveness.

For the SEC, its factual that Elon was thinking of taking Tesla private, that Elon was talking to large investor in July, and it he was right that no matter the situation it was ultimately in the hand of shareholders. Anyone that traded assuming the shareholders would vote yes made an assumption and gambled.

Anyways, that will be cleared up in court. And the reason Elon should not bow down is that Tesla need him, and diluting the board with 2 outsider seem arbitrary and dangerous. Specially when Elon would lose a vote.
The SEC demands would greatly hurt Tesla and in turn greatly hurt investors. Elon tweet was factual and did not hurt any investor, it only gave fuel to speculator to gamble on "would share holder approve"

Is Elon perfect ? cleanly not. But frankly I cant imagine a better CEO for Tesla at this time and for the next 5 years.
Tesla is still not yet at a point where its simply scaling up, Tesla is nothing like Toyota or WV. We cant have a CEO / Board that simply emulate a legacy car maker.

NOLEK SUM | September 29, 2018

I believe that Elon’s genius can still be tapped if he is not CEO/COO.

SUN 2 DRV | September 29, 2018

"Am considering taking Tesla private at $420,"

Anyone confused by this should take a closer look at the SECOND word in that quote. This whole thing is no big deal and the SEC was happy to settle with a modest fine but Elon stood by his principles, integrity and transparency. As the old saying goes, Elon wears his heart on his sleeve...

SUN 2 DRV | September 29, 2018

Elon's genius is in setting and committing to stretch goals. He needs to have not only the vision to pick a direction but also the authority to engage the resources.

Studentid | September 29, 2018

Funding was never secured in written format. He should just let go his ego and focus on generating profit for the company.

sschaem | September 29, 2018

That the funding was secured or not was irrelevant to "fraud" as the deal was contingent of shareholder approval.
Also Elon was only considering going private.

Elon should have zero problem winning this. and I'm 100% confidant Elon rejected the SEC offer after counsel advice.

The issue also goes beyond the SEC, you have an army of firm ready to pounce on Tesla/Elon. and this would set a precedent for an avalanche of lawsuits.

carlk | September 29, 2018

Why can't Elon just make ICE cars and sell through dealership? He only does what he thinks is the right thing to do.

mcdonalk | September 29, 2018

The linked article makes an issue of Musk's micromanagement. I have a long oring story to share.

About 15 years ago, I worked as a design engineer at a prominent satellite communications equipment manufacturer. I was called into work on Xmas day to solve a problem (not of my making, but of one of my subordinates who was not willing to give up his holiday) so that the president of our 2000-employee division could fly a product sample to a prospective customer the next day. When I reported for work, I was joined by the VP of my engineering division, and the aforementioned president of our division. I never once thought "they're micromanaging." Instead, I thought, "they are demonstrating that they would never ask me to make a sacrifice that they would never make themselves." Ultimately, they each provided as much technical support for me effort that they could, and they were ultimately quite helpful. Such "micromanagement" creates esprit d corps, not problems. I am now retired, and so is the president, but I have not forgotten that positive experience.

TeslaTap.com | September 29, 2018

Seems the SEC has cost shareholders far more in value that Elon. Can we sue the SEC for losses? Who are these SEC people- perhaps they should be investigated - likely owned by Wall Street and not providing any value to Tesla investors.

Shock | September 29, 2018

Good article.

It's obvious now that Musk will be removed as CEO, if not by the board then by the SEC. Fanboys, if you're reading this and think I'm wrong please remember me when it happens.

This is all because some of the qualities that have brought Musk to where he is--spearheading groundbreaking companies--are also qualities that are failing him as a leader.

"Anyone confused by this should take a closer look at the SECOND word in that quote."

Again, the level of disingenuity here is remarkable. You are forgetting about the "FUNDING SECURED". That was made the market go nuts and also it was the lie he's going to lose his chairmanship over.

"Funding was never secured in written format."

True. It was also never secured in verbal.

"Elon should have zero problem winning this."

lol. so delusional. This will be a cakewalk for the SEC. There are already other lawsuits by shorts to try and reover money lost after his tweet.

"Seems the SEC has cost shareholders far more in value that Elon. Can we sue the SEC for losses? Who are these SEC people- perhaps they should be investigated - likely owned by Wall Street and not providing any value to Tesla investors."

Good soldier. Keep the faith. It's never Musk's fault.

Xerogas | September 29, 2018

@Studentid: looks like he just did settle.

Studentid | September 29, 2018

Yes I just saw the news. I think it’s better off this way. Too much distraction for the company.

SamO | September 29, 2018

Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
Tesla will appoint a total of two new independent directors to its board;
Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations.

greg | September 29, 2018

And @Shock is wrong again.

mos6507 | September 29, 2018

[so that the president of our 2000-employee division could fly a product sample to a prospective customer the next day.]

The decision to show a sample to a prospective customer on a given day was made by the same upper-management that insisted on a death-march marathon session to be able to pull it off. That is perfectly okay in an early-stage startup, but once you are well armed with billions of dollars of other people's money, execution should be a more stately affair. When these sorts of problems arise when you're at full strength like that, then it merely points to gross incompetence.

Pelicans | September 29, 2018

@ Greg, "Shocker" Maybe he'll go away now.. We can only hope (and ignore him in the future)

SUN 2 DRV | September 30, 2018

"if you're reading this and think I'm wrong please remember me when it happens."

OK Shock we remembered... How does that crow taste, again?

SUN 2 DRV | September 30, 2018

mos6507

Tesla is still virtually a very large startup. They are no where near "stately" steady state mode yet. So they NEED and SHOULD act like a very hungry and aggressive startup.

SamO | September 30, 2018

Short burn of the century begins Tuesday.

SO | September 30, 2018

“Short burn of the century begins Tuesday.”

I wouldn’t count on that. The shorts will just move the goal posts yet again. They can still easily say that the profits are unsustainable, that the demand will fall after the tax credit ends, could still be in trouble with the DOJ, etc.

The good news is that the short thesis list (for the most part) continues to get shorter and shorter over time unless Elon tweets something dumb. Let’s hopr Elon has learned by this and will stop giving ammo to the shorts. Focus on results and when those are good, the shorts wither.

ravisundaramam | September 30, 2018

The short position had dropped to 25%, coming down from 31-32 % range, early last week. Already some shorts have started covering.

Those who had the sense and knew Tesla has turned the corner would have closed their position when it plunged on Friday[*]. But short positions increased as the stock was falling. All those who shorted it when it was below 275, are probably in trouble. These are the dumb shorts.

[*] It is possible it was orchestrated. Reportedly Tesla asked for time, did not reject it outright on Thursday, and they hastily filed the law suite. Giving the opportunity to close for smart shorts. If any in the decision to file law suite leave SEC soon and become a "consultant" to some hedge fund or something they should be seriously investigated.

SamO | September 30, 2018

@ravi,

Nope. Shorted shares down from 35 to 33 million.

https://twitter.com/ihors3/status/1045719853104017408

$TSLA short interest $10.19 billion, 33.13 million shares shorted, 25.98% of float. #Tesla retakes most shorted U.S. stock just ahead of Musk/SEC lawsuit announcement.

mos6507 | September 30, 2018

[Tesla is still virtually a very large startup.]

Not to the point where they shouldn't know how to run a paint-shop or require Musk to figure out WTF is going on with a flufferbot. The chaos on the production line points to incompetence and only incompetence.

Mike83 | September 30, 2018

swat

Al1 | September 30, 2018

mos,

You are confused. The sound you hear is not from chaos on the production line, but the one of a margin call.

carlk | September 30, 2018

Tesla is doing just fine in terms of production.

https://www.bloomberg.com/news/articles/2018-09-30/at-hopping-tesla-outl...

ravisundaramam | September 30, 2018

@SamO Thanks for the link.

It says, "Tesla’s stock price is down 13% in mid-morning trading as some long shareholders begin closing out their positions to lock in whatever long term gains are left in their trades while short sellers are adding to their positions in anticipation of further price weakness."

So the drop from 35 million shares shorted to 33 million must have happened before Friday. On Friday some short positions increased. Looks like they had some 650 million loss before Friday and they flipped to 650 million profit year to day. This is the gross profit. The shorts were also paying 600K a day as borrowal fees, their rate is seven times larger than other shorted shares. Also they have collateral locked up to maintain the position. Probably about a billion locked up.

Elon settling on the weekend would be quite unsettling to those who were expecting further weakness. Institutions might come back again, now that Elon will do less avoidable mistakes.

mos6507 | September 30, 2018

They have yet to maintain 5,000 a week. So it's yet another case of them underperforming against Musk's own guidance whether you want to concede it or not.

brealist123 | October 1, 2018

I think this is too much distraction for the elon's tesla company.
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ravisundaramam | October 1, 2018

Most car company executives set modest goal and fall short of them. Most car companies claim the maximum MPG allowed under the law and hide behind (*) your mileage might vary fine prints...

But Tesla could advertise the 3 as 335 mile range car, thats what EPA testing showed. But it only claims 310 miles. The value of trustable range estimate on a battery car is far more valuable than the spec pissing contest and hiding behind fine print. Tesla knows that. Nissan did not.

The glass was 90% empty in first quarter, it was half empty last quarter, it is 15% empty this quarter. On extremely admittedly ambitious goals. Shorts will keep looking at the goals and whistle in the dark.

Is the valuation justified?

When was the last time you saw a car company reach fifth best selling car by number of units and highest in revenue in its rookie year?

When was the last time you saw a car model north of 50K thrash competition and outsell 18K elantras/kias and 20K sentras?

When was the last time you saw consumers who could afford 50+K cars, who got panel gappy, paint mismatchy, glass roof cracky cars line up to volunteer to help the company sacrificing their free time on weekends? Yeah, fanbois, sure. Now put a valuation of having fanbois who can drop 50+K on their cars. Wall Street would pay an arm and a leg for a company with that level of customer satisfaction, brand loyalty on that affluent demographic, on such an essential sector as personal transportation.

But for the self inflicted wounds by the twitchy twitter fingers of Elon, this stock would be north of 400 today.

ravisundaramam | October 1, 2018

Ferrari is valued at 25 billion. It pays a dividend of about half a percent. It has saturated its target demographic and can not grow any faster. If it floods the market with more cars, its valuation will drop. Why is it valued at 25 billion? For a measly 0.5% dividend? Nah, it has a lock on the super affluent demographic and has the brand loyalty, or so the market assumes.

Now go for the demographic of merely affluent, not super affluent, and compare the brand loyalty, (or fanboism, if you want to) of Tesla. That market segment is 10 to 25 times bigger than Ferrari demographic. And Tesla is eating marketshare away from established players. And it is just twice the price of Ferrari stock. A steal, one could conclude.

Al1 | October 1, 2018

Whatever they have to maintain is between them and their investors. Let executives focus on that.

SamO | October 1, 2018

TSLA up 15% Pre-market

ravisundaramam | October 1, 2018

Shorts who did not close their positions on the Friday dip are back in the red now. May be about 0.5 billion. That is the gross number.

To get net number, you need to add the trading costs of selling 330,000 contracts, capital locked in collateral, borrowal fees of 600K a day. (According to S3 article provided by SamO, these fees rates are about 7 times higher than other stocks.) So some 200 million in borrowal fees, YTD.

People who deal with that kind of money do not depend on seekingalpha or streetinsider for information. They have professional operations, with ear to the ground and they know the actual gross margin, waiting list, build to stock issue resulting in 2000 to 4000 cars without matched orders, etc. They have started unwinding. So looks like Tesla has weathered the storm.

TeslaTap.com | February 7, 2019

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