Share Price $420
Shares Rise 6.5%
In response to those Tweets, Tesla Rose 6.5% in Afternoon Trading.
Shares are up but Musk does not have controlling interest. Where’s the funding?
Tesla’s stock was up 6.5% at $364.11 in early afternoon trading, meaning it would need to climb a further roughly 16% to reach $420. The Financial Times reported on Tuesday that Saudi Arabia’s sovereign-wealth fund has accumulated a roughly $2 billion stake in the company.
Tesla couldn’t immediately be reached for comment.
Publicity Stunt
My best guess is this is another publicity stunt hoping to squeeze the shorts. But if that is a success, who will be left to buy?
Mike “Mish” Shedlock
That LBO would have to be at least $75B. Who’s going to pay for that? There aren’t any megafunds with that type of capital.
Elon Musk: “Def not forced buy out”
Everyone who want to stay can stay in private Tesla and don’t need to be bought out. So less than $75B will be required.
I pity the fool who would lend him the funds to do this!
Why would anyone agree to pay $420 a share for Tesla? For that kind of money you could buy 100% of Ford and 100% of Nissan.
Or Volkswagon with the Porsche and Audi brands included. It’s ludicrous.
There is this thing called “future earnings expectations”. If you trade stock only on current P/E multiples you will be late in the game. Risky to trade stocks based on future earnings expectations? Of course – anything can go wrong!
However, assuming Tesla executes, then the the technology behind Tesla is ahead competition and that explains why Tesla stock is so expensive.
My model 3 in careful city driving is getting close to 400 miles per single 75kwh charge despite the rated 310 mile rating (can you get such efficiency in any other EV that you can dump your ICE car)?
Tesla battery storage will make Gas Peaker plants obsolete by arbitraging electricity prices throughout the day. Check the one they built in Australia. Or the distributed grid they are proposing.
Tesla solar roofs make it no brainer to go solar because you get solar for free (And CA is about to mandate that anyway). And it enables offgrid living without having to connect to utilities for 100K+. This tech is at prototype stage and I am considering it.
Only Waymo is ahead Tesla in self driving tech. Others are laggards. Uber killed Otto’s self driving truck tech that Mish used to write about in the past (It actually did turn out to be vaporware).
We are talking here Tesla getting market share like Shell, Chevron , BP and others. Don’t value it like Ford.
P.S. The information you have read in the Mish’s blog is mostly passed from Tesla short sellers like Mark B Spiegel that Mish reposts. Tesla is not losing money per-car. Check Munro&associate and German estimates on how thick are margins actually for Tesla Model 3.
Solarcity has already wound down operations despite the CA mandate. That means they’ve known for a while that it wasn’t viable, yet Musk had TSLA shareholders buy him out anyway. Tesla batteries are not a good bet either – lithium batteries are one of the least efficient energy storage mediums imaginable. Even if they were the infrastructure does not exist to power them all. Then there’s the environmental cost in their manufacture and eventual disposal. Musk is a con-artist and his marks are very gullible.
His stunt today just placed an artificial cap on the stock price. Do you realize it can’t go higher than 420 now if he’s telling the truth? If he’s not telling the truth it might finally kill the whole company. I wouldn’t be surprised if the first lawsuits are filed tomorrow. Just what TSLA needed.
If this was forced privatization deal, then I would agree with you that there is artifical ceiling price set at ~$420. But it is not forced privatization according to Musk’s tweets!
I already placed additional bets, because IMHO market reflects this the wrong way.
Nice post Wagner,
I agree in Tesla’s situation they need to think long term. The constant barage of “looses $ on every car” is absurd thinking for a rapidly expanding company in a competitive market. Tesla’s biggest enemy is not executing quickly enough. IMO, much of the media onslaught against the company is to limit financing enough to slow the pace of EV conversion to promote ICE interests. At the end of the day, it is obvious that the profit margins on EVs will make ICE vehicles niche market. Anyone who has rebuilt an ICE motor + transmission can see first hand how much cheaper it will be to manufacturer an electric motor version (which is also better by most measures).
Taking TESLA private reduces liquidity in the long run. People will NOT be able to sell with the click of a button once taken off the exchange. Any liquidity crunch is bad for an over-leveraged market.
Musk has made it very clear that shorting his stock is personally offensive to him, and everyone knows he does what he can to make trouble for the shorts, even though Tesla is the most shorted stock in the world. But talk is cheap, and Musk found a cheap way to put another big squeeze on the shorts. Pretty smart I’d say, but is it legal? How many more lawsuits is this going to bring TSLA?
“I a pair of Teets Musk proclaimed …”
Much more Shakespearean than “a pair of boobs named Musk said ‘I’”.
Was there some debt-to-stock conversion deadline that Tesla stock had to meet at a high enough price otherwise Tesla would have had to pay back debt in cash that Tesla does NOT have much left?
This is desperation move because even Saudis do not have that much stupid money to spend so this is a most likely a knowing lie by Musk to goose the stock price so owners of debt convert to stock instead of taking debt payment in cash.
Musk is a genius in marketing and PR and Tesla stock manipulation…
Seems pretty strange that the Saudi’s of all people would support an electric car company. Also, they usually like to make money with their investments.
Genius? Any fool CEO can intentionally lie about material events to boost his stock price. Musk belongs in prison for this.
Musk is boosting Tesla stock price so Tesla gets less debt on it’s balance sheet as investors use their option to convert debt to stock because the stock price is clearly higher than the conversion price:
Nasdaq:
“Tesla’s most recent 5-year convertible bonds, issued in March of 2017, paid a coupon rate of just 2.375% and offered a conversion ratio of 3.05 shares for every $1000 in debt which implies a strike price of $327.50/share – 25% above the $262 market price of the stock at the time of issuance.”
Tesla at 360 dollars means 10% profit for owners of convertible bonds if they convert and as a consequence Tesla has less debt on it’s balance sheet and can get more debt.
And that’s incredibly illegal. If the Tesla Board doesn’t take action then they are complicit in the crime too. I can’t believe people think this is OK, just shows how far we’ve fallen.
I think the real question here is – what premium over the $420 price short sellers will have to offer to convince at least ~27.6% of current Tesla share holders to sell their shares instead of particpiating in “Private Tesla”. Otherwise, it would be mathematically impossible for short sellers to cover. They MUST cover all the shares before Tesla goes private.
If Elon Musk offers current Tesla shareholders to stay in “private Tesla” then Elon does not have to “cough up” ~40B in cash to buy at $420. The amount of cash required could turn out to be significantly less.
Overall, this is smart move by Musk, because Tesla short sellers are working actively to damage Tesla brand. As an example, go to Twitter and look at Mark B. Spiegel’s, latrilife, skabooshka’s and other short seller tweets where they found a wreck of Model 3 that burnt due to house fire and then presented that as a fire that possibly started from Tesla Model 3 instead. They won’t have incentive to post stuff like that anymore.
The only concern is if some government regulatory body prevents takeover. But since Michael Dell was able to take Dell private, then why Musk could not do the same thing? Of course, he still has to convince current investors that see the vision and expected Tesla stock to go to $1000/share.
This is so wrong how he goes about this. He’s driving share prices so insiders or market gurus (whoever they are, wherever they are), can sell shares, then buy back again. I just can’t believe the SEC allows this kind of behavior.
How is this legal? There are all sorts of disclosure laws that I would guess are violated with his tweets/