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Comment by F_r_k | Hacker News Reader

Curious question: what's wrong with 420$/share ?

As indirectly explained by others, 420 is a drug reference about getting high on cannabis. The thinking here is Musk deliberately lied in public and/or was joking in public about the financials of his publicly listed company - potentially out of malice to disrupt the day traders that he frequently criticises on twitter and in quarterly report conference calls. Unless he has evidence that some kind of deal existed that could be construed of as "secured", then he broke the law and there will be lots of short sellers with standing to sue for compensation.

Reid Hasting lawsuit did hold that you can make announcements via socials (facebook in his case) and while you’re correct im not sure what the burden of proof for “secured” is. He could take Solar City private or potentially a piece of the company private. An IOI/LOI the Saudis or SoftBank could suffice but im not a lawyer of course. I suspect this wont count as a crime and given Musks position in the company he holds the cards. If he stepped down those investors would take a beating atleast for the foreseeable future.

This misses the point I think. The issue is less that he used Twitter, and more that it's illegal for a CEO to manipulate the stock price by (potentially in this case) making misleading and/or false claims.

If Musk e.g. didn't actually have funding secured (may or may not be true), it seems to me like a lawsuit might be appropriate.

For all the doubters here thinking that there's nothing wrong with Musk making some jokes on twitter, go read Matt Levine's Money Stuff column on Bloomberg this week.

Not only it explains in detail what's wrong, but it's also high entertainment value (as all his columns.

Also the follow-up yesterday [2] is a good summary of the possible solutions for Musk. TL;DR:

> If I were Musk’s lawyer, and if he doesn’t actually have $80 billion of financing locked up, I’d be working on a termsheet for the board that (1) offers Tesla shareholders the choice between (A) $420 in cash or (B) shares in a new special-purpose-vehicle that will hold shares in a private Tesla (or whatever your plan is to let people hold on to their shares); (2) limits the cash consideration to, like, $5 billion, or whatever Musk can actually raise; and (3) has some sort of proration mechanism in case more people choose the cash than he can afford.

> Does this fit with the spirit of the going-private transaction that Musk tweeted about? No, absolutely not, not even a little bit. But it is … something. And then let the special committee reject it, and then quietly walk away and say “well no we were serious about the buyout proposal but it just didn’t work out.” Which is a much better position to be in than walking away saying “oh yeah sorry we were kidding about that.”

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

[2] https://www.bloomberg.com/view/articles/2018-08-10/tesla-doe...

Well he was going to sell for $69 a share but then he tried $666 a share but that was too high so they settled on $420.

The point is Musk is looking increasingly like a joke, which is not what you really want in a massive company that is hemorrhaging money and could actually collapse if Model 3 demand doesn't pick up.

I agree. He's a talented guy, but a victim of his own grandiose imagination. I think he'll probably pull through, but he might have had more success as a respected, humble, private company, rather than trying to take public stage with his boastful showmanship at every occasion. Also the under-delivering (while still delivering a lot in actual terms) is starting to grow tiresome. Maybe it's the introvert in me talking, but I would certainly respect him a lot more if he made smaller claims and let his results speak for themselves.

I agree with you, but I wonder how much of (imo tiresome) antics are part of an intentional strategy. Deserved or not, Musk has an enormous fanbase because of his showmanship/public persona/whatever. My hunch is that this is net positive among Tesla's potential customers and probably has been net positive in terms of attracting capital as well.

The latter is becoming somewhat more debatable lately though given Musk's somewhat erratic behavior I think. Personally as an investor, Musk's behavior looks uncomfortably to me like how Enron's CEO was behaving near the end (though I would object to any other serious comparisons between Enron and Tesla as businesses).

Or maybe he has fans because he has pushed the almost dead rocket industry and space into a new age.

I never particularly liked him as a person, but I like him because of what he actually does.

The backlog of Model 3 reservations is rumored to be over 400,000. Of course I’ve never seen the split out of reservations for $35k variant versus the currently available $50k+ variety. (Yes it would be possible for Tesla to calculate the demand signal even though people waiting for a $35k variety look like customers that haven’t use the configurator) My hypothesis is that his financial model needs more customers of the $50k variety, isn’t seeing the demand, and needs to quickly go private before the cash flow becomes problematic again. The evidence I have to support this hypothesis is the lead time for recent dual motor Model 3. It’s very short. Once that demand dries up, all that’s left is a horde of angry masses waiting for their $35k car that they were expecting to arrive with a $7500 tax credit. Of course my hypothesis is ignoring international sales, which may provide a large enough buffer of premium model demand to keep this ship afloat.

The recent push to get Model 3's out with hand labor is going to wreck them in about six months as the recalls and repairs start to roll in.

Tesla had all sorts of tolerance problems early and moving to hand assembly in a tent won't improve it.

As someone who doesn't follow Tesla development very closely I am curious is "hand labor" still how Teslas are being produced?

I remember hearing this a while back but thought maybe some of the delays in ramping up production might have been due to switching to an automated/robotic process. Is this not the case?

To hit the 5000 in one week (technically took them 8 days), they setup additional assembly lines in tents, and additional hand labor.

Hand labor, working extra shifts, is how they hit their mark.

They continue to use it while they address the automation challenges

Oh wow. That doesn't sound sustainable. Is there any concern about quality and consistency of cars produced by "hand labor" in tents? Or is that a non-issue?

Definitely. Robots aren't used in factories for speed, primarily. They're used for consistency and quality control.

Stop spreading FUD.

The Model 3 is not produce with 'hand labor', in fact pretty much every single thing you said is baseless crap.

They did take out robots of some parts of the assembly line, but substantial parts of the overall production is still highly automated, more so then many manufacturers.

The tend actually contains a new assembly line where they use many of the robots they took out to build a new line.

One line is a bit more labor then the other and they are experimenting.

From pretty much later reviews and the companies own statements you can see that the fit and finish has massively improved and the quality of the mass produced car is competitive.

That's a pretty wild assumptions. The best most reliable teardown and analysis of the Model 3 said it was profitable at 35$ even potentially extremely profitable (30% margin).

Given their production numbers are now quite stable at a high level and continue to grow I see absolutely reason for most of your assumptions.

Producing higher value models in the initial production is highly sensible because higher margins at low production give you better cash flow. Essentially this means they can produce a profit on every car, rather then starting with per car loses and then moving to profits.

“We assume the base version at $35,000 would lose about $5,900 per car.“

https://markets.businessinsider.com/news/stocks/tesla-model-...

Is this UBS analysis more reliable than the one indicating a 30% margin for the base model?

Another one of these vastly overstated statement. 420$ was maybe selected over 419 or 421 as a price for a joke, but if you actually believe he just made up a number to make a joke your are misinformed. This was in discussions with the board before the tweet.

As for him looking like a joke, you just list more blatant lies.

The Tesla Model 3 is the most pre-order car in history and they have insane amounts of demand. It will take 1-2 years to do the orders they already have.

As for hemorrhaging money, guess what, most of that was investment and now the Tesla Model 3 is rolling in quite a bit of money, and with very little further investment, they can produce a highly profitable car for the next 2-3 years.

Isn’t the entire production capacity pre-ordered at least a year out? I mean, how much more “demand” for a $45k car can there be?

So how big is your short?

My only financial stake is the $2k in reservations currently in Tesla’s bank account. I’m a raving fan, but skeptical that corporate CEOs are going to divulge the true financial state of their companies. What data exists to refute my hypothesis?

I'm joking - you could just google those numbers.

But maybe Musk was too.

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