SEC sues Elon Musk
#16
Elon Musk's plan to take Tesla private isn't crazy. Just ask Henry Ford
Although Elon Musk's proposed idea of taking Tesla private seems like something totally unthinkable, there really is precedent for this in the auto industry — something that occurred nearly 100 years ago.
Henry Ford, who was to cantankerousness what Musk is to showmanship, was annoyed with minority shareholders who wanted things such as higher dividends to be paid out during the 1910s. The way they thought this could be accomplished was through raising the price of the Model T. Henry was completely outraged by having anyone tell him how to run his business.
Be that as it may, two of those shareholders, who happened to be John and Horace Dodge, sued Ford in 1917. Realize that the Dodge brothers had been associated with Ford since 1903, so this wasn't a casual relationship that the legendary automakers had. They held 10 percent of the company and were looking for some good returns.
In October 1917, the Michigan State Circuit Court ruled on behalf of the plaintiffs, and Henry was ordered to pay out. He appealed, but in 1919, the Michigan Superior Court upheld the lower court's ruling.
Henry was so angry that in March 1919, he announced that he would establish his own car company. Needless to say, it was understood by all involved that were Ford to start competing with, well, Ford, he would win. Arguably this was a clever ploy. He owned 58 percent of the Ford Motor stock, and maneuvers such as those caused shareholders to want to sell their stock — which he was more than glad to buy.
On July 11, 1919, the day after the court-ordered dividends were paid out, Henry, his wife, Clara, and their son Edsel purchased the company for some $106 million, the large part of which was borrowed.
But that put Henry in control.
This brings us back to Elon Musk. In his Aug. 7 email to employees, Musk wrote about his rationale:
"[T]he 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 ..."
"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."
"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."
All of which sounds exactly like something that Henry might have written.
Back in the early 20th century, Ford Motor wasn't the only car company going. But it was the most successful.
Today, Tesla isn't the only vehicle manufacturer going. But it is probably the least financially successful, yet the one that is valued far in excess of those other companies that actually make money along with cars, crossovers and trucks.
Let's face it: Most OEMs have lots of capacity in a world that has too much capacity. Most OEMs have margins on their vehicles so thin as to be nearly transparent.
A Bloomberg opinion columnist makes the argument that the people who really ought to make a run at taking the company they own 45 percent of private are the Quandts of BMW fame. Columnist Chris Bryant quotes analyst Max Warburton at Bernstein Research who says, "BMW is awash with cash, it's grossly undervalued ... Tesla has negative EBITDA, and couldn't pay the funding cost for more than a month or two."
Bryant acknowledges that this idea is likely to stay theoretical: "Of course, all of this is highly unlikely. Like most German family owners, the Quandts are famously conservative."
In this case, the opposite of conservative isn't liberal. It's passionate. Some people own and look at spreadsheets. Some people own and put their offices — or beds — in their factories as they create something.
I would suggest that there may be something else that needs to be considered: Henry Ford was a man who was committed to the point of the extreme. Elon Musk is of that same mold. In the cases of Ford Motor way back when and Tesla Inc. right now, the leaders thought or seem to be thinking about more than earnings. Passion is something this industry can use more of.
Henry Ford was probably looked at by more than one investor as being more than slightly askew. Is Elon Musk any different? Time has proved Henry right. What will it show about Musk?
Henry Ford, who was to cantankerousness what Musk is to showmanship, was annoyed with minority shareholders who wanted things such as higher dividends to be paid out during the 1910s. The way they thought this could be accomplished was through raising the price of the Model T. Henry was completely outraged by having anyone tell him how to run his business.
Be that as it may, two of those shareholders, who happened to be John and Horace Dodge, sued Ford in 1917. Realize that the Dodge brothers had been associated with Ford since 1903, so this wasn't a casual relationship that the legendary automakers had. They held 10 percent of the company and were looking for some good returns.
In October 1917, the Michigan State Circuit Court ruled on behalf of the plaintiffs, and Henry was ordered to pay out. He appealed, but in 1919, the Michigan Superior Court upheld the lower court's ruling.
Henry was so angry that in March 1919, he announced that he would establish his own car company. Needless to say, it was understood by all involved that were Ford to start competing with, well, Ford, he would win. Arguably this was a clever ploy. He owned 58 percent of the Ford Motor stock, and maneuvers such as those caused shareholders to want to sell their stock — which he was more than glad to buy.
On July 11, 1919, the day after the court-ordered dividends were paid out, Henry, his wife, Clara, and their son Edsel purchased the company for some $106 million, the large part of which was borrowed.
But that put Henry in control.
This brings us back to Elon Musk. In his Aug. 7 email to employees, Musk wrote about his rationale:
"[T]he 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 ..."
"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."
"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."
All of which sounds exactly like something that Henry might have written.
Back in the early 20th century, Ford Motor wasn't the only car company going. But it was the most successful.
Today, Tesla isn't the only vehicle manufacturer going. But it is probably the least financially successful, yet the one that is valued far in excess of those other companies that actually make money along with cars, crossovers and trucks.
Let's face it: Most OEMs have lots of capacity in a world that has too much capacity. Most OEMs have margins on their vehicles so thin as to be nearly transparent.
A Bloomberg opinion columnist makes the argument that the people who really ought to make a run at taking the company they own 45 percent of private are the Quandts of BMW fame. Columnist Chris Bryant quotes analyst Max Warburton at Bernstein Research who says, "BMW is awash with cash, it's grossly undervalued ... Tesla has negative EBITDA, and couldn't pay the funding cost for more than a month or two."
Bryant acknowledges that this idea is likely to stay theoretical: "Of course, all of this is highly unlikely. Like most German family owners, the Quandts are famously conservative."
In this case, the opposite of conservative isn't liberal. It's passionate. Some people own and look at spreadsheets. Some people own and put their offices — or beds — in their factories as they create something.
I would suggest that there may be something else that needs to be considered: Henry Ford was a man who was committed to the point of the extreme. Elon Musk is of that same mold. In the cases of Ford Motor way back when and Tesla Inc. right now, the leaders thought or seem to be thinking about more than earnings. Passion is something this industry can use more of.
Henry Ford was probably looked at by more than one investor as being more than slightly askew. Is Elon Musk any different? Time has proved Henry right. What will it show about Musk?
#17
it didn't work out well for them, dell has accumulated so much debt since going private, without a way to raise cash in private and continue to lose money every year dell wants to go public again. it's funny as hell.
#18
The Saudi tie in continues to circulate. This should be of great concern to Musk.
Why? The answer is very simple.
What is the primary business the Saudi's are in? Their own oil product.
Making more money for a ginormous wealth fund is not the ultimate end game.
Tesla is becoming the most successful electric car company ever, and it's business model (and other OEM's getting into the electrification game) poses a threat to the oil industry.
At the end of the day, the target is on Tesla's back. If Saudis can run it into the ground within 5-10 years, the electric momentum may have stalled into a slow death spiral. Add it all up, Oil could triple when all the carnage is done.
You simply do not want Oil businesses disrupting or minimizing what Tesla can do. 80 billion is a bargain if the Oil fund can get oil back up over $100 and refilling their coffers in 5-10 years.
Just because the money is there doesnt mean it is the right move. The Tesla electrification pipeline of trucks and the model Y, plus 1 or 2 additional factories shows a lot more growth is on the table. Tesla has not even hit full stride as a global market emerging market mover of the car/transporation biz. The right owner would help nurture it to greater success and I just do not think the Saudi's are the right people to get involved with. The trade off from quarterly reports to setting the stage of a downward cycle in 4-8 years will make the Saudi kingdom rejoice by making big oil relevant again.
Staying public keeps the Tesla relevant and buys you free market exposure. If you wish you had bought Apple stock 4 years after the iPhone came out, you were rewarded handsomely with a dramatic stock increase and market valuation to a Trillion. Tesla reminds me of being in that early stage and firing on all cylinders puts them into an emerging 'electric fuel as a service' with their supercharger network. Do it right, the car business model is turned upside down by producing cars people want to buy versus making cars and hoping enough people buy them. Going private would mean the shorts have a hard ceiling on what their losses may be. Saudis and shorts winning the war long term is not a sound strategy. Both do not want Tesla to succeed. I'd take Apple getting involved with Tesla over Saudis any day even though it sounds an inconceivable idea. Apple gets the tech business, unlike the Saudis who get the oil biz and only want more oil profit 10 and 20 years down the road.
Why? The answer is very simple.
What is the primary business the Saudi's are in? Their own oil product.
Making more money for a ginormous wealth fund is not the ultimate end game.
Tesla is becoming the most successful electric car company ever, and it's business model (and other OEM's getting into the electrification game) poses a threat to the oil industry.
At the end of the day, the target is on Tesla's back. If Saudis can run it into the ground within 5-10 years, the electric momentum may have stalled into a slow death spiral. Add it all up, Oil could triple when all the carnage is done.
You simply do not want Oil businesses disrupting or minimizing what Tesla can do. 80 billion is a bargain if the Oil fund can get oil back up over $100 and refilling their coffers in 5-10 years.
Just because the money is there doesnt mean it is the right move. The Tesla electrification pipeline of trucks and the model Y, plus 1 or 2 additional factories shows a lot more growth is on the table. Tesla has not even hit full stride as a global market emerging market mover of the car/transporation biz. The right owner would help nurture it to greater success and I just do not think the Saudi's are the right people to get involved with. The trade off from quarterly reports to setting the stage of a downward cycle in 4-8 years will make the Saudi kingdom rejoice by making big oil relevant again.
Staying public keeps the Tesla relevant and buys you free market exposure. If you wish you had bought Apple stock 4 years after the iPhone came out, you were rewarded handsomely with a dramatic stock increase and market valuation to a Trillion. Tesla reminds me of being in that early stage and firing on all cylinders puts them into an emerging 'electric fuel as a service' with their supercharger network. Do it right, the car business model is turned upside down by producing cars people want to buy versus making cars and hoping enough people buy them. Going private would mean the shorts have a hard ceiling on what their losses may be. Saudis and shorts winning the war long term is not a sound strategy. Both do not want Tesla to succeed. I'd take Apple getting involved with Tesla over Saudis any day even though it sounds an inconceivable idea. Apple gets the tech business, unlike the Saudis who get the oil biz and only want more oil profit 10 and 20 years down the road.
#20
Lead Lap
#21
Lexus Fanatic
Thread Starter
Well...........he's changed his mind. Now they are going to stay public.
https://www.washingtonpost.com/techn...=.042b3f1b7cc9
https://www.washingtonpost.com/techn...=.042b3f1b7cc9
#22
Tesla seems questionable whether private or public. Quality issues with the model 3 and still very expensive. Probably wanted to take it private to hide how poorly they were doing.
#23
more volatility incoming as musk did a mit romey and flip floped, sec is going after him for his "funding secured" tweet and class action lawsuit is in bound after people lost money with that tweet. so hold on to your pants it's gonna be a wild ride.
#24
Lexus Fanatic
Thread Starter
Just FYI, if you are not aware of it, Mitt Romney's late father George Romney, besides being a potential Republican candidate for President in the 1960s, was also, like Musk, the head of an automaker......American Motors.
#25
that's pretty cool that mitt came from a very historical background, nice.
#26
Lexus Champion
Volkswagen Reportedly Stepped Up To Take Tesla Private
Electric car maker Tesla will remain a public company after two weeks of rollercoaster speculation. However, the details behind alleged suitors have trickled out. Among them was German automaker Volkswagen.
The Wall Street Journal reported Monday VW stepped up to help take Tesla private, per the company’s CEO Elon Musk’s direction. Musk delivered his intention to take Tesla private via a Tweet nearly three weeks ago and said funding was secured to make the deal happen once shares reached $420.
Previous rumors pegged the sovereign Saudi Arabian wealth fund as the main funder for Tesla, but both Musk and the fund reportedly cooled talks. Musk was rumored to be skeptical of an oil state holding stake in the electric-car maker. No formal offer was ever proposed, according to the report.
VW was then allegedly on deck, along with Silver Lake, a private-equity firm. Both entities were said to propose $30-billion combined to take Tesla private, according to the report’s sources. However, Musk again dwelled on relinquishing some control of the company to its latest investors. Additionally, he was wary of other automakers eager to capitalize on the “Tesla halo.”
Last Thursday, Musk reportedly had doubts about funding for taking Tesla private. On Friday, he announced the company would remain public. And the issue brings the Tesla chief back to trying to solve the company’s major issue at hand: it needs cash, and it needs it quickly.
The Wall Street Journal reported Monday VW stepped up to help take Tesla private, per the company’s CEO Elon Musk’s direction. Musk delivered his intention to take Tesla private via a Tweet nearly three weeks ago and said funding was secured to make the deal happen once shares reached $420.
Previous rumors pegged the sovereign Saudi Arabian wealth fund as the main funder for Tesla, but both Musk and the fund reportedly cooled talks. Musk was rumored to be skeptical of an oil state holding stake in the electric-car maker. No formal offer was ever proposed, according to the report.
VW was then allegedly on deck, along with Silver Lake, a private-equity firm. Both entities were said to propose $30-billion combined to take Tesla private, according to the report’s sources. However, Musk again dwelled on relinquishing some control of the company to its latest investors. Additionally, he was wary of other automakers eager to capitalize on the “Tesla halo.”
Last Thursday, Musk reportedly had doubts about funding for taking Tesla private. On Friday, he announced the company would remain public. And the issue brings the Tesla chief back to trying to solve the company’s major issue at hand: it needs cash, and it needs it quickly.
#28
SEC sues Elon Musk
Accuses him of fraud, and Tesla stock drops
Says Musk 'knew or was reckless in not knowing' he was misleading investors
NEW YORK — The U.S. Securities and Exchange Commission on Thursday sued Tesla Chief Executive Elon Musk, accusing him of securities fraud for making a series of "false and misleading" tweets about potentially taking the electric car company private.
In a complaint filed in Manhattan federal court, the SEC said Musk "knew or was reckless in not knowing" that he was misleading investors on Aug. 7 by telling his more than 22 million Twitter followers that he might take Tesla private at $420 per share, and that there was "funding secured."
The complaint also faults subsequent tweets in which Musk said "investor support is confirmed," and that a "special purpose fund" might be created for investors who stick with the Palo Alto, California-based company.
"In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the SEC said in the complaint.
Musk in a statement said, "This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."
Tesla shares fell 10 percent in after-hours trading.
Thursday's lawsuit makes Musk one of the highest-profile executives to be accused by the SEC of securities fraud.
It also seeks to bar him from running public companies as either an officer or director, which would include Tesla, as well as an unspecified civil fine.
The SEC does not have criminal enforcement power.
Musk has long used Twitter to criticize short-sellers betting against his company, and several investor lawsuits have been filed against him and Tesla over the tweets.
On Aug. 24, after news of the SEC probe had become known, Musk blogged that Tesla would remain public, citing investor resistance.
In a complaint filed in Manhattan federal court, the SEC said Musk "knew or was reckless in not knowing" that he was misleading investors on Aug. 7 by telling his more than 22 million Twitter followers that he might take Tesla private at $420 per share, and that there was "funding secured."
The complaint also faults subsequent tweets in which Musk said "investor support is confirmed," and that a "special purpose fund" might be created for investors who stick with the Palo Alto, California-based company.
"In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the SEC said in the complaint.
Musk in a statement said, "This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."
Tesla shares fell 10 percent in after-hours trading.
Thursday's lawsuit makes Musk one of the highest-profile executives to be accused by the SEC of securities fraud.
It also seeks to bar him from running public companies as either an officer or director, which would include Tesla, as well as an unspecified civil fine.
The SEC does not have criminal enforcement power.
Musk has long used Twitter to criticize short-sellers betting against his company, and several investor lawsuits have been filed against him and Tesla over the tweets.
On Aug. 24, after news of the SEC probe had become known, Musk blogged that Tesla would remain public, citing investor resistance.
#29
Lexus Fanatic
Thread Starter
Beat me to it, Hoovey.....I was just getting ready to post it. But, since you're a moderator, you might want to consider combining it with this earlier thread, which deals with why he got sued in the first place:
https://www.clublexus.com/forums/car...ownership.html
https://www.clublexus.com/forums/car...ownership.html