Update on Taking Tesla Private
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He has a waaaaaayyy different definition of "secured" than I (and I think the SEC) do. That tweet is going to cost Tesla and Musk big time.
However, a handshake agreement could be valid between individuals depending on the context.
In the US, the general law is that verbal contracts are worth the paper they are written on, which is to say, not at all unless other facts/circumstances support the existence of the verbal agreement and its specific terms. Otherwise anyone could claim to have a contract with anyone else.
For example, I claim to have had a verbal agreement with Mark Z for the development of a social networking site owned by me but built by him. In the absence of any other facts, no court would agree that such a contract exists. However, maybe I show copies of emails where we discussed the idea for a social networking site before it launched. That's some evidence that a verbal agreement might have existed, but not as to what the terms were. Most likely, the parties would settle without going to trial, simply because Mark wants to proceed with the IPO without the sword of litigation hanging over his head--even though he would very likely win. The marginal cost of winning at trial is not worth the much larger cost of the harm to the IPO. (This is very loosely based on the Winklevoss saga.)
Specific types of transaction and certain value thresholds require memorializing.
Facts and circumstances are required to support verbal contracts, but in general verbal contracts very much are enforceable.
There's a reason I brought up the falling apple example. Verbal contracts are enforceable--if they satisfy the same requirements as written contracts. On top of that, the terms of a verbal agreement must be corroborated by other evidence outside of the verbal agreement itself in order to survive litigation--and the trend in the US legal system is to require more supporting evidence.
However in this case all I'm saying is that a handshake agreement among reputable parties is enough to use the word "secured", whether enforceable or otherwise. It is common parlance to say that you've "secured an investment round" once a major investor has verbally agreed, presuming the final contract looks like what they discussed.
[0] For example, if a major investor said they would invest in a Series B at price $X so long as the terms matched at least the same terms as the Series A, other than price, I might then decline investments from others before there is ink on paper. If the investor then pulls out and I'm unable to get a funding round because I've already flip-flopped on other investors, the bankruptcy of my startup might attempt to take the first investor to court for violation of a handshake agreement. If the details could be proven, and especially if there was ill intent (e.g. they never intended to invest, just to torpedo the deal), they could be found in violation of a handshake agreement. The example of fraud is not required, legally speaking, but is typical of the cases you actually see.
It sounds like exactly what I'm saying...other (nonverbal) evidence supports the existence of the verbal agreement.
Saying that a verbal agreement is a contract is like describing gravity as an apple falling from a tree. It's technically true but ignores the complexities that go into what can make a verbal contract enforceable.
(And I say this based on actual practice litigating contracts...)
If you are a contracts lawyer, then you are doing a serious injustice to the profession by saying contracts do not include verbal agreements.
(And I say this based on actual practice litigating contracts...)
But a verbal contract you can prove is enforceable just like a written contract (with some important exceptions covered by a state's statute of frauds). Even in the case of conflicting stories, a jury can believe one side's testimony over the other.
Elon's problem here is that "I left thinking we could get a deal done if we did some other stuff that could get a deal done" is not a statement about an agreement. The Saudis don't have to honor his private prediction.
Other issue is what kind of owner PIM is. In principle it's long term patient investor.
KSA has a new active prince/ruler that is self assured and proud. He is really sovereign and relationship to him must be well managed. We all know that Musk not a diplomat in his public or private communications.
Saudis have had little bit of cash flow problems because they have constant budget deficit is typically 10-15 percent of their GDP or ~$50B/year and it probably just grows in the future . On paper PIM has $2 trillion in assets, but most of it is Saudi Aramco. Aramco IPO would generate cash flow but it's delayed, probably because there is fair amount of air in the valuation. Saudi Arabia has previously inflated it's oil reserves as a political decision to match some OPEC agreements and real production capacity potential is top secret.
If KSA continues to have cash flow problems and Tesla is disappoints somehow, Tesla may end up at the hands of corporate raiders like Carl Icahn.
Imo, this looks like a stage to liquidate shorters (which Musk hates). Musk could have mentioned here that S.A. had "committed" in some way to a private deal. He didn't. They are still negotiating.
There is literally 0 reasons why the stock will trade below $420 if the funding was "secured" let alone trade 15% below that.
Certainly the market doubts whether this deal will go through, but it's not clear to me that it's all about Tesla's access to capital.
I take his words lightly at best.
I think it's rather Freudian about his world view and behavior. He seems to have an opinion on everything and disregard experts left and right.
I certainly wouldn't be comfortable with this personality running a company this size. Some CTO/engineering role, sure, CEO and board member with everything that entails is a time bomb.
Interesting to see countries most dependent economically on fossil fuels heavily investing in their energy nemesis.
Curious about the ramifications that might emanate out of partly giving away control of a large American automobile manufacturer to a foreign entity -- a potentially hostile one no less -- given how sensitive Tesla vehicles' proprietary technologies are from a safety/security standpoint.
Saudi Arabia and Kuwait have been hedging against fossil fuels massively for many decades. It's been a driving force behind major regional conflicts with global participation, so it's kind of one of those things that people should generally be aware of.
> Curious about the ramifications that might emanate out of partly giving away control of a large American automobile manufacturer to a foreign entity
You mean like when Chrysler got taken over by Fiat?
Sovereign funds are direct emanations of nation-states, which is different. When they buy a somewhat-strategic industrial asset, it is significant. The question is whether the US (and particularly this fossil-fuel-friendly administration) actually see Tesla as strategic at all - my guess is that the guys currently in charge wouldn't care one bit.
Or do you mean that a "foreign power" will gain knowledge of all the Tesla bugs, and therefore be able to unleash carnage on American roads, etc?
None of this makes a lick of sense.
[1] https://blog.gust.com/limiting-the-number-of-shareholders-in...
You would no longer get quarterly reports, but propably various updates, and a yearly report (my best guess).
Revise "all current shareholders" to "all current material shareholders" and Elon's tweets make more sense.
> Isn't there a limit on the number of investors a private company can have?
Not technically. But you have to do all the expensive things a public company does if your "securities are 'held of record' by either 2,000 persons, or 500 persons who are not accredited investors" [1]. Practically speaking, those are the limits.
[1] https://www.sec.gov/info/smallbus/secg/jobs-act-section-12g-...}
Still doesn't really make sense to me though. Not sure how that would work.
Elon expressed a hope, not a goal.
Fidelity's SpaceX SPV is restricted to a small number of accredited investors. Goldman tried the "put investors in a box, put the box on the cap table, and call the box 1 investor" schtick when Facebook was private [1]. While Facebook went public before they fell afoul of the law, the authorities clearly expressed their views on such structures [2].
[1] https://dealbook.nytimes.com/2011/01/03/facebook-and-the-500...
[2] https://www.wsj.com/articles/SB10001424052748704723104576062...
Tesla Investors then holds all those shares that the individual shareholders once held --> one shareholder, plus some big shareholders in Tesla.
And the many small shareholders aren't technically shareholders in Tesla anymore, but in Tesla Investors, which distributes its Tesla dividends among the small investors.
Matt Levine highly doubts that this obvious circumvention of securities law can fly, and so do I.
Elon Musk is basically dreaming up cool "hacks" in his mind, but he has no clue about the law. It is improbably that he can pull something like this off.
Elon, go back to what you're best at: inventing, being in the lab, running the factory, making the world better with your mind. Stop trying to be famous because it does you more harm than good.
The biggest danger to Tesla today is an over-inflated ego.
[0](I wonder if any politicians have figured this out?)
He spends a few seconds tweeting and suddenly his name and Tesla is plastered over the next news cycle. Great ROI.
Tesla gets a pat on the back for trying to be new/different. The quality of Tesla is nothing like established companies. You cant even blame Tesla, they dont have data like a company thats been around for decades.
Barely available outside the US. There's the Opel Ampera, which is mostly a GM Volt, but it's weirdly expensive so no-one buys it. The Leaf is the world's best-selling electric car, for now (especially if you include its very close relatives like the Renault Zoe; I don't think that's precisely the same platform, but it's close).
But isnt that the same problem with the Tesla?
Isn't the Leaf about to stop being the world's best-selling electric car?
Claiming Tesla quality is not as good as established players is wrong in most regards. Maybe GM built a better frame and maybe the fit and finish is a bit better but thats about it. In terms of battery, electronics, electrical, interial design, software integration, suspention, safty, surounding infrastructure and most other things Tesla is lightyears ahead of the Bolt.
Literllay every single Bolt produced loses about 7000$-10000$. It will not be produced in large not be produced in large numbers for many years at best.
The Bolt is probably better then other compliance cars because they can see the future as well. Also who would buy those even lower range cars now that there is more competition.
This does more harm than good.
Just because the current 'compliance car' and the Bolt are not the same does not mean its not for many of the same reasons.
They did built the Bolt to be able to comply with regulation EVEN while the Bolt itself is losing money per car.
https://www.cnbc.com/2018/04/06/the-steadily-disappearing-am...
They are in the process of diversifying their investments, investing more in infrastructure and education, etc. Basically, they are betting against oil within 10-20 years.
I doubt Wall Street or private equity firms will be interested because the big payoff won't come as fast as they want.
But nation states that need to diversify away from fossil fuels have deep pools of patient capital and different reward functions than Wall Street.
Sounds like FUD. Citation needed.
I hope you don't fill your car with gasoline - chances are, even in 2018, it came from Saudi Arabia.
I hope your security is not supported by American military technology - once again surpluses of which are commonly sold to Saudi Arabia.
HN really needs to follow through with action behind the pompous grandstanding. Start your finger wagging with the man in the mirror.
HN has become a constant barrage of tirades against Google, China, Facebook, Tesla...any government not Canada or Norway etc etc. Yet following-through is always left to everyone-else. HN is children. Thirty year-old children.
Because it is more convincing, and will have a wider reach. By stating your initial points, you already make people think, but without triggering their emotional defences.
Arguing "A, B, C, and by the way you're a bad person" is less effective than arguing "A, B, C, think about it." If you want to "be the change", you should see the benefit of effective communication, no?
"Activism" in the form of posting a comment to HN or sending a tweet to Elon is hugely more likely to have real-world effects. And actual activism - driving a car around and talking to people, perhaps - is still more effective than a 0.000000014% drop (1 in 7 billion) in their budget sheets.
I'm uneasy with Saudi Arabia having a large interest in Tesla. It seems like a national security issue. On the other hand, Tesla's stated goal is to transition the world to sustainable energy. Getting Saudi Arabia out of the oil business would be a big step.
I say all this as a Canadian in the middle of our un-diplomatic spat with Saudi Arabia.
I don’t prefer one over the other, they each have their pros and cons.
We can only continue to engage them and prod them in the right direction. Part of that involves doing business with them and with companies they invest in.
On a personal note, where do we draw the line? China for some is reprehensible as well. Do we just try to lock these people out of world trade to they uphold "our" values. We cannot reasonably expect every country to hold all our values equally. This is not to say some values are negotiable on a world stage but we must set our expectations properly as for the pace of which positive change occurs.
Tesla will still be Tesla regardless of who owns them. I won't be cancelling my order anytime soon or not support their product unless their corporate culture and response to others goes negative
approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.
Musk needs to find 23 friends willing to put $1b into a retirement-fund. The fund takes over the existing shares and buys whoever wants to exit at $420.
Does anyone know to whom this refers?
that's what "PIF managing director" on google gives me.
Other strategic investors and sovereign wealth funds that will not want to see Tesla controlled by a competitor for 10% over today's price.
Norway, China and Abu Dhabi each have SWFs larger than Saudi Arabia [1], and the energy implications of letting Tesla go would be strategic for each of them.
Tesla's market cap is only 6% of Apple's, and Apple isn't geopolitically strategic. We may see a bidding war for Tesla before they go private.
[1] https://en.wikipedia.org/wiki/Sovereign_wealth_fund#Largest_...
Elon Musk sent an e-mail to all his employees on August 7th, and published the e-mail to the world. In the e-mail he made a number of quite worrying statements as the CEO of the company and some outlandish claims. One week later on August 13th, Elon Musk rips off his mask and cackles manically: Behold! It was me all along! Not the mild mannered CEO of your heart, but I have been secretly talking as a potential bidder for your company! Moohahaha.
Is it part of the oil conspiracy to kill electric vehicles?
Given how GM, Nissan, and others have electric vehicles, I dont think this could stop the new wave of buyers.
Anyone want to take a stab at why this is happening?
They believe it to be a good investment and think (a) Tesla's management will do better without the public market's constant scrutiny and/or (b) their own books could benefit from less apparent volatility.
> Is it part of the oil conspiracy to kill electric vehicles?
Probably not. The Saudi sovereign wealth fund has been set up as a hedge against their oil-based economy.
That was one of their own oil ministers. They can see the writing on the wall.
Only recently have EVs become viable, thanks to decades of improvement in battery technology.
As for Arab countries depending on oil, they are not entirely governed by morons. They know very well that they can't depend on oil eternally. Their easily accessible reserves will dry out, making extraction more and more expensive, and most of the world is trying to move away from it, for environmental and strategic reasons.
So they are doing the smart thing: use their easy money to invest into the future. Dubai is building a resort-like city to attract investors, Qatar is buying everything related to sports, and the Saudi invest in EVs. How well their investments will turn out remain to be seen but it is clear that they have a plan to diversify themselves.
Saudi Arabia’s crown prince, Mohammed Bin Salman, has signed a memorandum of understanding with Japanese multinational Softbank to build 200 GW of solar power by 2030 at a cost of $200 billion.
https://qz.com/1240862/what-saudi-arabias-200-gw-solar-power...
... especially in context of how successful they've been at lowering oil prices to hurt their rivals.