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Taking Tesla Private
- edhu2017 8y agoI think it's a great move. Prevents short term greedy shareholder strategies.
- jonknee 8y agoBy paying a large premium to the all time high? If he's worried about the stock going down, paying more for it doesn't make a ton of sense. You should wait until the stock is down and then take it private.
- aembleton 8y agoBy paying a 20% premium he's ensuring that the short sellers will need to buy shares at the premium price guaranteeing that they've lost at least 20% of what they've gambled.
- jonknee 8y agoAh yes, overpay so you can stick it to the big mean short sellers. Might as well go for 50% premium with that logic!
- arcanus 8y ago(If this happens) What does this mean for owners (non-employees) of TSLA stock? Will you be able to maintain your holdings in the company after it is delisted from an exchange?
- cdkee 8y agoHis post says you can have private shares or accept the buyout at $420
- cure 8y agoI'm going to guess that that will require accredited investor status (https://en.wikipedia.org/wiki/Accredited_investor https://en.wikipedia.org/wiki/Accredited_investor).
- jjulius 8y agoIn the article you're discussing: >Either they can stay investors in a private Tesla or they can be bought out at $420 per share...
- avree 8y agoGuess Elon isn't too confident about being able to deliver the earnings he promised on.
- Diederich 8y agoCan you expand on that, please?
- eanzenberg 8y agoIt means he’d rather not be under the scrutiny of wall st investors. He thinks the volatility is off-putting to his employees. He thinks wall st isnt forecasting correctly or is short-term focused. These are his reasons.
- avree 8y agoWall Street investors and analysts focus heavily on the bottom line. Elon believes that the work Tesla is doing requires more time, sustained attention, and focus than public investors have tolerance for. Furthermore, he thinks the volatility demotivates employees. These are all completely true, and very reasonable, but do show (at least to me) that the near-term promises regarding profitability he made at the last earnings call are probably in jeopardy. Thank you for asking for a clarification rather than just knee-jerk down voting, though. :)
- jsight 8y agoI agree with your assessment. It seemed clear that Tesla was cutting back investment in new supercharger locations and maybe even service centers to reach profitability. I can't say that now felt like the best time for that kind of slowdown to me.
- jsight 8y agoEither that or he has realized that the focus on consistent profitability over the next 1-2 years will significantly impact the company's long term prospects.
- sounds 8y agoTSLA up 7% on announcement, high of $370.79 If you're a short seller, beware the "squeeze." If you're not a short seller, this article can be an amusing read: https://www.reuters.com/article/us-volkswagen/short-sellers-make-vw-the-worlds-priciest-firm-idUSTRE49R3I920081028 https://www.reuters.com/article/us-volkswagen/short-sellers-...
- belltaco 8y agoThat was the previous high it hit before it was halted for this news to come out. Trading is now scheduled to re-open in 6 minutes (3:45 PM EST). Going to be a very interesting 15 minutes before the market closes for the day.
- bspn 8y agoWow, look at it go on re-open
- dunpeal 8y agoIf you're a heavy TSLA short-seller, you're already in deep trouble, unless this falls through very quickly. There will be margin calls. Welcome to the losing side of short-selling.
- eanzenberg 8y agoIt only falls if Elon is bluffing. He’s guaranteed $420 / share.
- I_am_tiberius 8y agoNot sure when it was published exactly but the stock price impact was visible already 2 hours ago.
- shawn 8y agoSecond, 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. How does this work as a private company?
- Voloskaya 8y agoPrivate companies are still allowed to give share to employees. Employees are then allowed to sell their stock periodically (every 6 months in this case).
- shawn 8y agoRight, but with who?
- Voloskaya 8y agoDepends, the company could buy back, or during a founding round, some part of that founding can be reserved to buy employee shares. External investors are also allowed to buy from employees during this period.
- lccarrasco 8y agoCompanies have buyback programs or you could sell them directly to other shareholders.
- anthonybsd 8y agoOther private investors (typically institutional ones), or if the company has enough cash, the company itself.
- JumpCrisscross 8y ago> Employees are then allowed to share their stock periodically (every 6 months in this case) Some companies do periodic buybacks. Private shares can generally be sold at any time to accredited investors.
- S_A_P 8y agoI am a bit ignorant as to the mechanics of how this would work. Can anyone with the knowledge elaborate on what this means? Im thinking in terms of a few scenarios here: 1) I read this news and want to get on the Tesla train and throw all my liquidity into the current stock. 2) I already have x number of shares. What happens to them? 3) If I dissent, am I cut a check and told to hit the bricks? 4) is he going to need to raise capital to do this? 5) would the private company/person still be able to buy/sell "shares" on some off the stock market exchange?
- dunpeal 8y ago1. You can buy TSLA stock as soon as trading them resumes. Lots of people already have. 2. If this acquisition goes through, each one of your stocks will be worth $420. Congrats. 3. You can't really dissent to shareholder majority agreeing to this deal. 4. $70bn is a lot of mulla, so I would guess this will not be all Musk's personal funds. 5. Theoretically, through some sort of a private equity venue. Just like any other private company.
- toomuchtodo 8y ago> Theoretically, through some sort of a private equity venue. Just like any other private company. I'm curious how this will work if you hold TSLA in retirement accounts (all of my TSLA is in a Roth IRA).
- TrickyRick 8y agoOr an alternative to number 2, the acquisition does not go through and the stock plummets 20% from current price and you're now deeply in the red. I don't know enough about Tesla to predict which one is the mos likely but I have seen this happen in other companies.
- ChicagoDave 8y agoIf a majority votes to take the company private, you would have the option of selling or accepting private stock (some non-voting class I'd assume) that you can trade. Voting class stock would be only offered to investors with >X% current holdings, probably the 5% the Saudi's just purchased. Employees may have a third class stock. As an investor, you'd be given paperwork to sell or accept the new stock in exchange for your old stock. Rules for buying and selling private stock are pretty common and there are several organized indexes for private stock trades. All of the short-sellers would lose every penny they gambled.
- Camillo 8y agoIf Tesla announces this (causing the stock to rise, since the suggested price is much higher than the current price), and then doesn't go through with it, is it considered stock manipulation? I don't mean to accuse them, I'm sure they covered their bases, but I'd like to understand how it works.
- Keyframe 8y agoSEC has a rule for that: https://en.wikipedia.org/wiki/SEC_Rule_10b-5 https://en.wikipedia.org/wiki/SEC_Rule_10b-5 and https://www.investopedia.com/terms/r/rule10b5.asp#ixzz5NWNPZXqa https://www.investopedia.com/terms/r/rule10b5.asp#ixzz5NWNPZ... Examples of offenses that would violate rule 10b-5 would be: executives making false statements in order to drive up share prices ... interestingly, it's as serious as ... or a company hiding huge losses or low revenues with creative accounting practices.
- isseu 8y agoIs this common? Would shareholders accept this?
- raverbashing 8y agoWith that premium? I'd say it's a no brainer
- synaesthesisx 8y agoAs an investor since 2012 I think Tesla would be far more operationally efficient private. Also a bit of schadenfreude but I've personally enjoyed watching Wall Street shorts collectively lose hundreds of millions of dollars over this.
- joezydeco 8y agoMight be in the tens of billions before this is all said and done. (~34 million short shares outstanding * $420/share = ~14 billion dollars to cover. Is my math wrong?)
- coltonv 8y agoWouldn't that assume that every short seller would lose $420 per share? They probably purchased their shorts at like ~$350 per share, so they'd only stand to lose 420-350=$70 per share, correct?
- peeters 8y agoI'm a newbie when it comes to calls and puts, couldn't they just fill their shorts now (no pun intended, I seriously don't know the terminology) if they're worried about it? Tesla closed at $370.
- mikec3010 8y agoWhat happens when $14bn in short interest tries to buy simultaneously?
- whataboutism 8y agoIt sounds like everyone will be buying TSLA tomorrow. Even the little guy who wants to earn the difference between $379 and $420.
- jonknee 8y agoSure, but they didn't start from zero. If you sold short at $350 the amount to cover is $70. Options are also a common way to hedge, so it's really hard to say what the total loss would be.
- gtdawg 8y agoThere was a HN discussion a couple of days ago complaining about companies going public much later. Could the short term quarterly horizon of public investors, as pointed out here, be a big reason companies don't IPO sooner?
- nine_k 8y ago> 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. > SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. Something that I can very well understand.
- patrickaljord 8y agoIsn't SpaceX success due to the fact that most of its orders come from the US government while Tesla has to compete in the free market and isn't that successful there?
- mmanfrin 8y agoisn't that successful there? What?
- SheinhardtWigCo 8y ago“Hasn’t yet made any money there” would be more accurate.
- delinka 8y ago>...isn't all that successful in the free market? That's the intended question. Though I don't know what GP's definition of "success" is.
- Johnny555 8y agoThat may be true, but the stability comes from it being privately held -- the SpaceX stock doesn't swing wildly every time some news about their competition with Boeing is released.
- gamblor956 8y ago
- danpalmer 8y agoWhile there's some good reasons here, I can't help but think this is more an emotional reaction on Elon's part, to the shorting and general negativity around the company.
- tntn 8y agoI think that would fall under "major distraction for everyone working at Tesla."
- dunpeal 8y agoI seriously doubt $70bn are changing hands because someone got "emotional". In my understanding, this is a great deal for Tesla, the key question is how Musk got the enormous amount of money to pull this through...
- floatingatoll 8y agoEmotions are a perfectly acceptable reason to initiate a $70 billion deal. It's important that the emotions line up with the logic and reason, but in this case, they do seem to align.
- THE_PUN_STOPS 8y agoI think it's uncharitable to call it purely an emotional reaction. While that is certainly a component, I think this is actually one of the best mission-oriented strategic decisions Elon has made in a while. The shorting and general negativity around the company are a morale drain on a scale that few companies have ever experienced before, let alone any companies that push their employees as hard as Tesla. I have friends who work very, VERY VERY hard at Tesla to help achieve their overall goal, and all of the hate really drags them down and makes them question why they work so hard, let alone the anxiety over the value of their shares. The cloud of negativity is a huge productivity sap and I suspect it is a contributor to the legendary rates of turnover at Tesla as well.
- danpalmer 8y ago> I think it's uncharitable to call it purely an emotional reaction. I agree. I didn't call it one.
- 11thEarlOfMar 8y agoTrue story: I was standing on my back porch, finishing my morning coffee. It was one of those January Silicon Valley mornings where it can't quite decide whether its raining or not. Between the clouds, a rainbow appeared. From my vantage in the hills in South Fremont, the end of that rainbow sat squarely on the Tesla factory. Being the sophisticated investor that I am, I know a 'buy' signal when I see one. Here's to Elon and any Tesla employee who ever broke a sweat to deliver the pot of gold at the end of that rainbow.
- Invictus0 8y agoIs this supposed to be a joke?
- Fuckyourself 8y agoI love you, thank you for writing this :)
- arvind3199 8y agoHe is bluffing trying to squeeze the shorts, no one rational can value it 82B unless it was waymo level tech.
- mythz 8y agoThis is no bluff: > Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote. https://twitter.com/elonmusk/status/1026914941004001280 https://twitter.com/elonmusk/status/1026914941004001280
- Kylekramer 8y agoYou are saying it isn't a bluff with evidence from the potential bluffer.
- mythz 8y agoHe would be liable for Market manipulation and securities fraud if this was not true.
- dragonwriter 8y agoX would be guilty of fraud if this isn't true is only proof of its truth if you treat it as axiomatic that X would never commit fraud.
- arvind3199 8y agoYes he is, Where do you get 66 billion $. Investor support dosen't mean he has the financing. Don't quote a tweet, get some real sources. "And yet it also left many questions unanswered, namely how Musk -- who owns almost 20 percent of the company -- would be able to come up with the $66 billion necessary to complete the transaction. At $420 a share, Tesla would have an enterprise value of about $82 billion including debt. To take it private, the billionaire would have to pull off the largest leveraged buyout in history, surpassing Texas electric utility TXU’s in 2007."
- yisymphony 8y agoInstead of taking it private, what's stopping Tesla as a company from buying back shares from public market when the price is low? It not only stabilize the price it is also have long term benefit if the company is confident for the future.
- athenot 8y agoThis would have a side-effect of making all the short-sellers lose, which would be quite satisfactory to Musk. Until Tesla's economics become obvious to all in the market, this is probably the best decision; this allows them to be more focused on the long run.
- imglorp 8y agoIt seems just the announcement, if nothing else happens, is twisting the knife on those shorts. The price is +25 today already.
- mikestew 8y agoPart of me wonders if it isn't a side-effect, but the goal: put the squeezin' on the shorts. But, man, if that tin-foil hat theory is true, Musk better have someone in the wings at least pretending to want to finance this lest the SEC come a-knockin'. Normally, I'd just pass that off as "haha, wouldn't that be funny!", but given some of Musk's tweets lately, there's still a little part of me that entertains the idea as plausible.
- Cthulhu_ 8y agoYeah I'm really wondering whether this was legal - I would've been on his ass if I were the SEC for illegal price manipulation. Even if he doesn't go through with it, it's still bumped the stocks up by a lot. Could've been a move to scare off the shorts?
- mikestew 8y agoBy the time you had made your post, Tesla had already issued a press release saying the same, and news had come out that Musk had been talking to the board about it for the past week. So, yeah, he was serious and not being manipulative, and AFAICT completely legal.
- eastendguy 8y agoCan someone please ELI5 this for me? Why is a private Tesla better? As long as Elon and employees own more than 51% of the stock (do they?), can't they not just ignore the stock price swings?
- belltaco 8y agoYou still have to publicly reveal all the quarterly numbers, estimates for next few quarters, do all the GAAP accounting etc. which puts a lot of toll on a company that's going through wild swings in capital spending and production. If they don't keep their promises, the stock will crash, so everyone goes on a production death march close to the end of the quarter under extreme stress, instead of just growing organically at a steady pace. Good estimates are hard, just like in IT. That's why many companies delay going public, for example Uber.
- eastendguy 8y agoYeah, but why not just ignore a stock price crash if you don't need to sell and believe in the long term plan?
- Scarblac 8y agoEvery employee holds stock. I don't think every employee is in the position of never needing to sell. A price crash is bad for morale.
- deleted 8y ago[deleted]
- cam3ham 8y agoread the article?
- eastendguy 8y agoYou mean the email? "...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," => what difference does private or public make for this?
- h4b4n3r0 8y agoBallsy. And nukes short sellers from the orbit as well even if it doesn't go through. It's the only way to be sure.
- mikeryan 8y agoIn the Tesla case I feel that the shareholder concerns are pretty valid and provide an interesting counter pressure to Musk's "This is fine" attitude. Not saying either is right, but the friction is likely valuable. I'd not want to be an investor in a private Tesla. It would seem way to volatile.
- Fuckyourself 8y agoI am a shareholder. I will not be selling after going private. This is really good for me because we can finally stick it to the shorts and the only people who we lose are "traders" - I don't care about what they think. Long term investors only is a good motto :)
- gamblor956 8y agoIf Elon's tweet is motivated by a desire to stick it to the shorts, and he does not in fact have funding lined up to take Tesla public, he could (probably would) face a massive stock manipulation lawsuit that would bankrupt him, in addition to any SEC settlements which would likely result in him being banned from holding an executive or board position in any publicly traded company.
- shafyy 8y agoHow do you know he doesn't have funding lined up? Usually, if Musk says something like this it's true. (And don't start with he has a history of underestimating deadlines etc., this is totally different)
- TazeTSchnitzel 8y agoblaze it
- solarkraft 8y agoValuable comment. But ... maybe Elon's a Nazi?
- jonknee 8y agoHe tweeted that he had funding and in the email mentions no funding. This is a really weird announcement that feels like an empty pump of the stock. He could have chosen any number...
- belltaco 8y agoI don't think it was an intentional pump, I think he needs someone to change his Twitter password, not tell him the new one and post on his behalf, just like Trump also needs.
- Karishma1234 8y agoAs a thumb rule I do not like to work for private companies especially when around 40% of my renumeration comes from RSUs.
- eizo 8y agoFirst anounced a couple of hours by Elon on twitter: https://mobile.twitter.com/elonmusk/status/1026872652290379776 https://mobile.twitter.com/elonmusk/status/10268726522903797... Which lead to comments if it being a scam.. It is impressive to see the power of twitter news!
- peeters 8y agoThe main question I have is about financing. If Elon owns 20% of the company now, and he doesn't intend for that to change, and he is giving the option of public shareholders to sell at $420, then who is financing this? Usually a private takeover requires a partnership with a huge private equity firm. Wouldn't releasing this without having (or identifying) that partner be premature? And wouldn't the resulting stability be dependent on that partner's exit strategy?
- ISL 8y agoHe wouldn't make such an announcement without having backers lined up.
- mehblahwhatevs 8y agoHave you seen his tweets in just the past month or two? He's called a rescue diver a pedo and cried "fake news" when journalists have questioned Tesla's financials.
- rory096 8y agoOriginal tweet said "Funding secured." https://twitter.com/elonmusk/status/1026872652290379776?s=19 https://twitter.com/elonmusk/status/1026872652290379776?s=19
- take4 8y ago> CNBC reports that none of the Wall Street banks it contacted were aware of any transaction or had committed to funding a leveraged buyout of Tesla.
- peeters 8y agoSo there's the real story. Who is this financer (or group) with ~40 billion in capital that is willing to bet long on Tesla? That's really interesting to me, if Musk is being truthful here.
- 8y ago
- martinald 8y agoPretty enormous amount of money required. Say half of TSLA shareholders take the $420, that's approx ~$40bn required. Then there's another $10bnish of debt refinancing required, and probably many more billion for future product development and new assembly lines. I don't think Softbank could finance this, it would be well over half their entire fund. Saudi maybe - but still quite a chunk of change for them.
- qaq 8y agoI would imagine he talked to his institutional investors it could be far less than half.
- martinald 8y agoLooking at ownership summary, loads are held by ETFs, which I assume would have to divest as most track only public shares.
- martin_bech 8y agoOr Apple, Google, maybe even Jeff from Amazon. Musk changes the rules of the game on a regular basis.
- Element_ 8y agoJust because those companies have massive market caps and cash reserves doesn't mean they can cut a check for 40B+ to buy a company that is burning cash. Hard to imagine any board signing off on that deal.
- dragonwriter 8y ago> Just because those companies have massive market caps and cash reserves doesn't mean they can cut a check for 40B+ to buy a company that is burning cash. Cash reserves mean they can. > Hard to imagine any board signing off on that deal. Right, conservative (appropriately so!) corporate decision making means they likely won't, not can't.
- phoenix1326 8y agoSeems like a good decision for Tesla. They have been pushing way to hard to satisfy the public opinion. The product and the company will continue to do well without being a public company.
- nostromo 8y agoThis feels like a rushed announcement. First you throw out a tweet, later in the day you halt trading, then you make an announcement that you're "considering" something major, but that you haven't decided yet. Not only that, but Musk seems a tad bit paranoid. He's regularly talking about all those evil greedy short-term traders that attack the company -- which is a little silly since traders have given Tesla a larger market cap than GM and Ford.
- gameswithgo 8y agoI think he is more concerned about actual espionage, sabotage, manufactured bad press etc, than the stock price manipulation. That maybe indeed be paranoia or maybe he has seen it happening enough.
- fpoling 8y agoHuge shorts positions give strong insensitive to pay for sabotage or other real harm to the company.
- takeda 8y agoFrom the beginning that I got interest in Tesla there were scary stories that they will fail, their cars are crap etc. Now as I think of it, most likely authors of these stories did it to cause stock to dip so they can purchase at lower price and once it recovers sell. The traders that are actually help the company purchased stock a while ago and are just keeping it. The get-rich-quick traders are the ones that are ones that are hurting the company. His announcement mentions that they are thinking to leave option to hold private stock or purchase at $420/share. I think the idea is basically to get rid of those bad investors, since if you would opt to the private stock you wouldn't be able to sell it easily.
- codeulike 8y agoIts a done deal apart from the shareholder vote apparently "Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote." https://twitter.com/elonmusk/status/1026914941004001280 https://twitter.com/elonmusk/status/1026914941004001280
- panchicore3 8y agoI can see the cannabis industry investors and other stoner dudes purchasing for that specific amount.
- deleted 8y ago[deleted]
- FabioFleitas 8y agoIf Elon is guaranteeing a $420/share buyout - are there any downsides to buying as much stock as possible right now? Would the only risk be that this whole plan falls through or that Elon ultimately decides against that price?
- bklyn11201 8y agoAs shares are not close to $420 right now, that indicates healthy skepticism that Elon is capable of getting this done. Do you have reason to believe that he is capable of raising $50-80 billion to complete the transaction? If yes, then you have a great arbitrage opportunity.
- vasco 8y agoThat's not a negligible risk. It's analogous to thinking bonds have no risk because the issuing company guarantees it (forgetting it might well go bankrupt).
- maaaats 8y agoYeah, I think the price now will end up reflecting what people think is the odds of this happening. If you are 100% sure this will happen, you would be willing to buy shares for $419. If you are 90% sure you may stop at $400 etc.
- stale2002 8y agoThats correct. Which is why you see that the current stock price is currently spiking, as people rush to get the "good" deal for free money.... Which means that as the stock gets closer to 420$, the amount of "free" money quickly goes away.
- donald123 8y agoThere are many factors that could affect this. There is no words of the source of the fund, although people believe he already has that secured. And all shareholders have to vote. The last and most important is when this would actually happen.
- the_narrator 8y ago> Would the only risk be that this whole plan falls through or that Elon ultimately decides against that price? That is pretty big risk; if this plan isn't real or falls through, the stock is going down hard.
- whatok 8y agoNothing on financing and an FT reporter said bankers close to Tesla knew nothing about it.
- agumonkey 8y agowho is gonna finance that 420USD buy-back ?
- ckastner 8y agoI don't like the guy (and it's obvious from my comments), but this move is brilliant on so many levels. The short sellers just got taken to the cleaners, badly. By taking the company private, he's under less public and regulatory scrutiny. It's probably easier for him to raise money privately, and there seems to be sufficient interest. Tesla's employees, who are probably pretty much worn out, got a nice pay day. And, of course... he's the hero again. Edit Pure speculation, but could it be that this announcement might actually backfire on the $420 price? Tesla's is one of the most shorted stocks, ever. The short sellers stand to lose immensely, so they'll try to close their short position as quickly as possible, thereby driving the price up higher -- possibly higher than the $420.
- gameswithgo 8y agoJust go ahead and like the guy!
- orcdork 8y agoHe's smart, and also a monumental dickwad. I'd expect people that dislike him to do so for the latter, not the former. (i'm on that boat too)
- deleted 8y ago[deleted]
- ryanx435 8y agoif he didn't have name recognition but talked in the same dickwad style he would be banned from commenting here
- gameswithgo 8y agodo you know him?
- gknoy 8y ago> also a monumental dickwad I admit that I've never scrutinized his actions very closely, but I've never gotten that impression. Would you be willing to elaborate on why you feel that way?
- tomphoolery 8y agoThe difficulty to predict TSLA, especially early on, was one of the main reasons I sold it. It's now about double its value, but that's a recent phenomenon and it was pretty volatile before that.
- belltaco 8y agoI made the mistake of trying to trade the highs and lows on other stocks, got burnt out by the unpredictability. After that I just put my money on stocks I trust will grow over the long term(2+ years) and I don't even check their prices daily or even weekly.
- inevitable2 8y agoI don't know if I buy his reasoning. I think more than anything he doesn't want to have to provide investors insights on a quarterly basis or have to explain when they don't hit the marks.
- bearcobra 8y agoI'm surprised given their burn rates that they don't want continued access to public capital markets.
- cs702 8y agoNo external financing might be necessary, because virtually all Tesla shareholders today (i.e., people who are net-long the stock) are true long-term believers in Musk's vision unconcerned with the company's short-term financial issues. (People who are concerned with financial issues are either avoiding the stock or shorting it.) These true-believer shareholders will want to hang on to their shares as the company goes private and shares start trading "by appointment" on less liquid, secondary private equity markets. If I'm right and Musk pulls this off, short sellers are in for a world of pain. They will likely have to scramble to cover their short positions in the face of a limited supply of shares before delisting.
- qaq 8y agoThat might be how this is actually gets financed :). The shorts borrowed from institutional investors who have 0 reason to make them whole and can now take them to the cleaners.
- nopriorarrests 8y agoI need to double check it, but some of the largest institutional shareholders, like Vanguard Group, could only hold positions in public companies, so they will have to sell. Retail investors can decide to go private, but tesla free float is very small, so they don't matter much in a grand scheme of things.
- cs702 8y agoYes, that's true for Vanguard. But others, like Fidelity, can and will allow shareholders to hold private shares in their brokerage acccounts, sometimes through special purpose vehicles created for the purpose.
- glbrew 8y agoI would like to make a prediction: the Saudi Royal Family is the funding source. There are very few banks that could back this financially, and they have all said they are not behind it. The only source of this much money and secrecy is the House of Saud. They apparently also snapped up to 5% of public shares, and have expressed lots of interest in investing in the "new" economy.
- Symmetry 8y agoGood way for them to hedge against a threat to their primary source of income.
- trhway 8y ago> as the most shorted stock in the history of the stock market does this squeeze beats the VW one? >First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or ... given the potential number of shareholders wouldn't there still be pretty tough information disclosure requirements - isn't such required disclosure is among the major factors pushing companies into public market?
- dogma1138 8y agoWould an Apple buyout be considered them going private if they are kept as a separate entity? It’s the only one with enough money to buy them that I can think off.
- martin_bech 8y agoApple could do it with cash, but a lot of others could do it with some form of financing. A leveraged buyout.
- dogma1138 8y agoFinancing on this scale would require a massive and likely quite lengthy undertaking if this is not a stop gap bluff it looks like they already have a buyer and it looks like all the usual suspects as far as financing goes are not involved.
- deleted 8y ago[deleted]
- dangjc 8y agoIt's a sign public equity markets aren't structured well that companies aren't encouraged to think long term. The most successful companies in today's markets don't even allow common shareholders to control the company, ie Google and Facebook with their special classes of controlling shares. We might need to reconsider changing laws around choosing board seats or requiring shareholders to have minimum holding times in order to align incentives better for the long term. If public equity markets don't work, the alternative is more and more of wealth creation happening privately, in startups funded by VCs, private equity, or family owned businesses. The public won't get to participate.
- stcredzero 8y agoThe public won't get to participate. It's already partly to this point. The general public can participate in a meaningful way, so long as they start to scrimp and save directly out of school.
- gimmeThaBeet 8y ago>If public equity markets don't work, the alternative is more and more of wealth creation happening privately I say that's a fair point, for the reasons you describe, that there's less oversight, and more mammoth capital sources that have an appetite for VC at nearly any stage. The "aren't encouraged to think long term" is an odd bit. You are right but at the same time it seems to be at least imo that we (the market) want these ownership structures. We want Page and Bezos and Zuckerberg and Musk, but we want to own it too. Snapchat and its S&P denial would be the battleground there. So I think to paraphrase you latter idea "we might to formalize a public equity model that is more flexible around a founder/visionary, or we might need to be more explicit about who controls a company, and what can be done to change that control." I suppose the balance to me is between making the burden of public markets lighter on companies with longer term vision, and exposing retail markets to a wild frontier that is imo only appropriate for more sophisticated parties.
- bitxbit 8y agoMy take is he needs to do this in order to keep and attract the talent Tesla needs. Stock was way too volatile while rest of the tech industry has been going hockey stick.
- swalsh 8y agoI'd like to think that back in the day Elon, and Clarence Saunders would have been great friends.
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- maddyboo 8y agoI couldn't be more supportive of this idea. I am so tired of seeing Tesla scramble to meet shareholder expectations which are almost always short-sighted.
- annamargot 8y agoHow will Tesla get around the shareholder limit? There is a limit to the number of shareholders a privately held company can have. It's apparently 2,000. http://blog.gust.com/limiting-the-number-of-shareholders-in-private-companies/ http://blog.gust.com/limiting-the-number-of-shareholders-in-... https://www.investopedia.com/terms/5/500-shareholder-threshold.asp https://www.investopedia.com/terms/5/500-shareholder-thresho...
- toomuchtodo 8y agoYou would own shares in a private fund that would own Tesla shares.
- myth_buster 8y agoCached: https://webcache.googleusercontent.com/search?q=cache:xcMrThoRYRgJ:https://www.tesla.com/blog/taking-tesla-private+&cd=36&hl=en&ct=clnk&gl=us https://webcache.googleusercontent.com/search?q=cache:xcMrTh... As the page is erroring out.
- takeda 8y agoLOL at $420/share I think he wants investors to chill out. Anyway, since I own some shares will miss their stock, since I truly believe in them, but I guess this is better for the company.
- explorigin 8y agoElon fashions himself a super hero: Batteries to Australia and Puerto Rico, A pledge to fix Flint's water quality and a submarine to rescue the boys in the cave. Super heroes rock when they really do super things, but Elon flew off the handle with the last one when he called the master diver a pedophile all because his idea wasn't the one they used. Having someone at the helm that is volatile like this is bad for a public company, but a private company would be able to shrug off embarrassing events such as these much easier. Elon might be doing it to save his job.
- mehblahwhatevs 8y agoI was thinking the same thing. Usually his tweets send stock down, this one sent it up but may be in violation of SEC rules. I imagine shareholders must be getting pissed whenever he goes off on a Trump like tirade on Twitter.
- Keyframe 8y agoInteresting. Bloomberg's Sebastian Boyd said: Incidentally, Tesla has a free-float of 127.5 million shares. At $420 a share, that would cost you $53.6 billion. The company already has net debt of of $8.8 billion and an adjusted net leverage ratio of 13 times. Were it to be bought in a management-led LBO, a back-of-the envelope calculation would give it a leverage ratio of over 90 times, worse on a trailing 12-month basis. You can't run a company on math like that. So, either it's happening based on persuasion and belief (with Saudis as rumoured) or it's an attack against shorts and a bluff in which case SEC's rule 10b-5 might come into play and then... In any case, interesting.
- swalsh 8y agoAn interesting perspective on why Elon might be pulling this move: https://www.barrons.com/articles/tesla-stocks-surge-puts-convertible-bonds-in-the-money-1533667505 https://www.barrons.com/articles/tesla-stocks-surge-puts-con...
- djanogo 8y ago"...which would effectively let the electric-auto maker pay off that obligation in stock instead of cash." How does paying off the obligation with stock work?, whose shares would Tesla assign the bond holder?, if it assigns shares after market closes and when market opens if it's below $360, won't the bond holders sue?
- brohee 8y agoThe shares are created. As the debt are not repaid it's as if the bond holder bought shares in a round of recapitalization instead.
- maaaats 8y agoNot sure I agree with the dupe-flag. The other post was about the Saudi deal and then got changed. So the discussion there is fragmented.
- dang 8y agoYou're right that it's not a precise dupe, but the topics are almost identical and we shouldn't have two of these on the front page at the same time. So we have to decide which one. The other article is more substantive, since it's based on at least some facts, and the thread is correspondingly better. This one, by contrast, is really just an announcement of a possible future announcement. So it seems clear the first URL should win. If and when they actually take steps to go private, there will certainly be much discussion on HN.
- maaaats 8y agoThat's fair. Thanks for explaining.
- bitCromwell 8y agowould make a hell of a utility coin
- jefe_ 8y agoI know Twitter is powerful, but its wild to imagine you're Elon Musk or Kylie Jenner or Donald Trump, you know that when you push send, the 280 characters you typed will cause millions of people to either smile or frown, lead to significant financial gains or losses, and set the course of news for the morning, day or week. That level of influence is crazy to think about.
- pstadler 8y agoWhy has the been banned from the homepage and marked as dupe?
- goshx 8y agoI'm wondering about that as well. I don't see any other post about it and this is the official post from Tesla.
- derriz 8y agoNot directly related to the thread, but I'm surpised by the extreme anti-short seller sentiment? Why is it important that they suffer? Short-selling is what makes almost zero expense mutual/index funds available to mom n' pop investors. Fidelity are about to offer ZERO TER funds on the basis that short-sellers pay heavily to borrow stock from them. It seems analogous to expressing hatred for umbrella sellers because you don't like rain. When I lived in Ireland before the GFC banking collapse, I remember bank executives whipping up public support for a government ban on short-selling bank stocks on the basis of "protecting decent companies from shady speculators and evil gamblers". In terms of cost to society, it was the bank executives who inflicted massive damage and bankrupted the country, not short-sellers of bank stock. Since then, I've been quite skeptical when people blame speculators and short-sellers for the behavior of markets. There's usually some basis for shorting.
- spadros 8y agoI think people here aren't saying they hate shorting in general, but that Musk hates people shorting his company. So it's Musk enjoying twisting the knife in the shorters, not these guys on Hacker News.
- spadros 8y agoAlso if you're a long term investor you probably hate shorters and traders.
- RhysU 8y agoUnless you want to buy more shares from the shorters or liquidity from the traders. Markets need sellers and market makers.
- pmart123 8y agoI think it depends. I think long-term investors should still look at short interest and read short thesis to understand counter-arguments. Regarding manipulation and herding, I think it depends. Someone could short Apple on merits of valuation. In this instance, due to the company's strong balance sheet, its a matter of debate and opinion among longs/shorts as a short report will not death spiral the company. In situations where a company has a significant among of debt or a cash flow issue or is a financial company, the company generally has to access capital markets at some point in the near future. This is the danger of leverage, or even proving a business model as a public company. In the middle ground, you have a company like NFLX where some investors like Bill Nygren are long and advocate the position due to his belief the company has room to raise prices in the future from say $12/month to $15/month, shifting the PE ratio from 150 to 20. My assumption would be that a short thesis would have much less impact on scaring the market to instigate a death spiral for NFLX. So with Telsa, it is in a vulnerable position due to being in a highly capital-intensive business, negative cash flow, and significant liabilities. But, it also is the only car company ever to presell hundreds of thousands of cars and a CEO who has delivered on big visions and promises before. I have no personal investment in Tesla, but I hope Elon succeeds as I appreciate his ambition.
- isseu 8y agoWhy this post was flagged?
- madrox 8y agoOn the one hand, the challenges of being a public company cited here are the same ones facing all public companies, and they do quite well. On the other hand, there's a ton of negative attention on the street that's probably a huge distraction. I do think Tesla will be better served as a private company as long as Musk is CEO. He isn't public CEO material.
- AlexSGabor 8y ago#ElonMusk is listening https://www.linkedin.com/pulse/trillionaire-ups-bid-tesla-tells-trump-alex-s-gabor/ https://www.linkedin.com/pulse/trillionaire-ups-bid-tesla-te...