Is It Possible to Replace Elon Musk as CEO of Tesla?

[StatGuy2000]

Er, you actually agreed with me but did the analysis wrong and concluded incorrectly that you disagree. I'll re-arrange the discussion and start with the agreement, then explain why it is total agreement, not partial agreement:

Agreed.

And here's why our agreement is complete, not partial: "superior quality" and "cheaper" are the same thing. Here's where the error is:

The hidden assumption here should be that "starting price" cars are equivalent, but based on the previous quote, I don't think you believe that, and neither do I. You can't compare cars that are both different quality and at different price points - it doesn't tell you anything. You have to levelize one or the other (or both separately). For counter-example following your lead, I could say a $27,000 Chevy is a better car than a $22,000 Chevy. It's an obvious and therefore pointless statement. Well it's just as obvious and pointless to say a $27,000 Toyota is better than a $22,000 Chevy*. Of course it is!

The properly levelized real question is whether a $27,000 Toyota is better than a $27,000 Chevy. I think so and I'm reasonably certain you agree. In fact, I'm reasonably certain this levelization is a hidden assumption in your first statement: "Japanese vehicles were...known for their superior quality..." for equivalent priced vehicles.

The other side of the coin tells us why better = cheaper. If a $27,000 Toyota is better than a $27,000 Chevy then is is also true that a $27,000 Toyota is cheaper than an equivalent quality Chevy. Or, since Chevy's quality is inherently lower, you have to pay more to get the same quality.

How much exactly I don't know; "quality" is subjective. But per my previous post, if the difference is $2,000 (American), that's enough to drive GM to bankruptcy. And that's the point of all this. If $2,000 is the difference between profit and bankruptcy, for GM, what's a $7,500 price swing for Tesla going to do?

*Or for the Telsa buyer's perspective: a $47,500 Tesla isn't better than a $40,000 Tesla with $7,500 in incentives.

Asides:

Yes, this was a contributor too, and in particular it hurt GM and Crysler in 2008 because the one-two punch of higher gas prices and a weakening economy drove people toward smaller cars. As the article I linked in the previous post shows, the cost-competitiveness problem predated the recession and gas price spike, but that provided a 1-2 knockout punch that bankrupted both in the same year.

Incidentally, I used primarily this analysis to select to buy a Kia Optima instead of a Toyota or other. I set a price ceiling and bought the highest quality car I could get for that money.

Russ, I see what you are getting at here -- in essence our "disagreement" really hinged on the semantics on what we mean by "expensive" or "cheaper". You were comparing two vehicles by levelizing the quality or price and then comparing the two vehicles. In essence, I was levelizing by looking at fixed categories (aka classes of vehicles based on size) and then cross-checking the price. But you and I are in agreement on the broader points.

I suppose one thing neither of us knows (although my suspicions are the same as yours) is what would happen if a Tesla (pertinent to this thread) has a price increase from $40,000 to $47,500. One reaction is whether the Tesla consumer primarily looks to purchase the vehicle on price in comparison to other competitors. From the Tesla's buyer's perspective, you are right that a $47,500 Tesla isn't better than a $40,000 Tesla with $7,500 in incentives. But is a $47,500 Tesla better than a $47,500 competitor vehicle (whatever that competitor vehicle may be) -- in other words, is there more value coming from that Tesla than a similarly priced vehicle?

If the answer is "No" to the consumers that Tesla is targeting, then I'm afraid that this could very well push Tesla into bankruptcy as you suggested earlier.

 

[OmCheeto]

I'm pretty sure a company like Tesla could crater without him as the intellectual explorer and inspiration but 60% of TSLA's ownership is Institutional Investors. I would not be happy with the stock today.

http://www.dailymail.co.uk/news/art...-JOINT-live-Joe-Rogan-Experience-podcast.html
Like his 'Occupy Mars' shirt.
View attachment 230344

We seem to be straying from your initial question; "Can you fire Elon Musk as CEO?", so I thought I'd steer back to that, after doing some googling.

Yes, I'm sure they can fire him. It's apparently been discussed:

"On June 5, 2018, Tesla held a shareholders meeting and one of the topics discussed was Musk's role as chairmen of Tesla. Musk managed to convince his fellow shareholders to keep him on board."​

in the same article, they said this; "On March 21, 2018, shareholders of Tesla approved a performance-based stock option award to purchase 20.3 million shares for Musk."

From my googlings of the stock price that day, that's approximately 6.4 billion dollars.
I'm not really sure what "being awarded stock options" means. Does that mean they gave him a $6,400,000,000 bonus?
If so, it sounds like his institutional investors have A LOT of confidence in him.

Interestingly, Musk owns roughly twice more of Tesla stock than the highest investor.
\begin{matrix}
Shareholder & shares\\
Musk & 33,665,000\\
FMR LLC & 14,214,000
\end{matrix}
[ref]

As far as investors being "not happy" with the stock on that day, well, looking at the fluctuations in the stock price over the last few years, they're probably used to it.

 

[OmCheeto]

Hey,
My wife and I, as well as the rest of the family, think this is a terrible idea. I just wanted to see what you guys thought.

I've been a follower of the Oregon Electrical Vehicle Assn for about 10 years, even though I don't own an electrical vehicle, nor have plans to before I die.
I just went through the comments searching for "repair part" nightmares, and found only one comment.
It took the gentleman TWO MONTHS to get a new tail light cover.

I am a happy Tesla Model S owner since August, 2016.

In May, a pickup truck backed into the left rear part of my parked car at a 90 degree angle, breaking the taillight and causing a dent in the surrounding panel. Luckily for me the car was drivable.

I took the car to a Tesla-approved body shop. It took over a month for them to get the needed parts from Tesla and, once they started work, they needed a few more parts which they still don’t have. The body shop people roll their eyes when I ask about Tesla repairs and told me that 2-3 month waits for parts are common.

If your kid can afford to spend $50,000 on a car, and is willing to wait two years for it, I'm not really sure I understand why this is a terrible idea.
There are apparently half a million people willing to wait that long.
Which might explain the stock price trend disparity I just noticed:

GM might be big, but it doesn't look like investors have been very excited about the stock.
Just sayin'...

ps. Wondering if any GM fans would be willing to wait 2 years for one of their cars? hmmmm...

 

[Borg]

Neil deGrasse Tyson has an interesting take on the story.

 

[OmCheeto]

Neil deGrasse Tyson has an interesting take on the story.

I will have to re-think my disgust of Joe Rogan, just like my disgust of Howard Stern.
hmmmm...


Aug 22, 2018

Elon's video aired on Sept 6, 2018.

How could Neil have "an interesting take on the story", if it happened after that interview?

hmmmm...

Does "TMZ" stand for Time Machine Zone?

ps. Loving NdGT vs Musk vs Joe.
NdGT knows how to shut-up a stoner.

 

[Borg]

Does "TMZ" stand for Time Machine Zone?

Missed that. I just watched the interview outside.

 

[OmCheeto]

Missed that. I just watched the interview outside.

You "just" watched all 3.3 hours of Neil's interview?

ps. I am TOTALLY loving listening to NdGT's interview, and I'm less then half way through.
A thousand thanks, for bringing it up.
pss. Has ANYONE actually listened to either interview?

 

[OmCheeto]

You "just" watched all 3.3 hours of Neil's interview?
...

Doh!
@Borg , my bad.
Just finished watching the Joe Rogan - Tyson interview, and realized Neil's comments were not from that show.
Went back to your TMZ post and saw that my internet connection was a bit slow the first time I perused your link.

ps. Tyson dominated that stoner Joe.

 

[OmCheeto]

...
pss. Has ANYONE actually listened to either interview?

From my googling of the internet, no one has watched either show.

ps. From Tyson's comment; "Let the man get high if he wants to get high", he didn't watch the Musk show, either.

 

[CWatters]

in the same article, they said this; "On March 21, 2018, shareholders of Tesla approved a performance-based stock option award to purchase 20.3 million shares for Musk."

From my googlings of the stock price that day, that's approximately 6.4 billion dollars.
I'm not really sure what "being awarded stock options" means. Does that mean they gave him a $6,400,000,000 bonus?
If so, it sounds like his institutional investors have A LOT of confidence in him.

No. It means they gave him the right to purchase stock at a fixed price sometime in the future. He only makes money if the stock price is higher than the option price on the day he exercises his rights (eg by buying the shares at the option price and then selling the shares at the higher open market price).

But what was the option price?

 

[TeethWhitener]

But what was the option price?

Employee stock options are usually quite generous for the C-suite (as in: strike price can often be half the current market price of the underlying stock).

 

[OmCheeto]

No. It means they gave him the right to purchase stock at a fixed price sometime in the future. He only makes money if the stock price is higher than the option price on the day he exercises his rights (eg by buying the shares at the option price and then selling the shares at the higher open market price).
...

I will never get used to Wall Street terminology:

"...shareholders ... approved ... to purchase 20.3 million shares for Musk."​

Reminds me of my sisters...

Sisters; "We've decided your furniture is too old, and we are going shopping, and buying you all new furniture."
Brother; "Ok."
Sisters; "BTW, you're paying for it all."
Brother; ""​

But your comment did make me wonder how Elon could afford such a purchase.
A bit of googling suggests his current net worth is 21 billion dollars. [ref]
His share of Tesla is only worth 10 billion.
But his share of Space X is worth 11 billion, so I guess they are expecting him to sell part of his 54% equity in that company. [ref: $21 billion] [ref: 54%]
Unless, as TeethWhitener has stated:

Employee stock options are usually quite generous for the C-suite (as in: strike price can often be half the current market price of the underlying stock).

Which indicates he could sell some of his Tesla stocks, and purchase the options at half price?
Perhaps we should go back to whether or not Musk has gone completely mad, as this is making me a bit crazy.

 

[CWatters]

But your comment did make me wonder how Elon could afford such a purchase

That's easy.

Suppose someone gave you an option to buy 1000 shares at $1 each and they are currently trading at $2 each. You would need to pay $1000 to get shares worth $2000. If you didn't have $1000 there several way to proceed...

You could exercse the option in stages, eg buy $250 worth, sell them for $500 and repeat.

You could sell your rights/options to a third party for say $900 and let them buy and sell the shares. You would make almost as much money ($900 instead of $1000). They would end up paying $1900 for shares worth $2000 so they make $100 on the deal.

You could borrow the $1000 for the few days needed to buy and sell the shares. You might have to pay some interest.

You could speak to the company share registrar and see if they will exercise the options and sell the shares for you without you having to put up any money. You just get a cheque in the post for the $1000 profit less some dealing charges.

You might be even be able to sell the shares before you get them. Although that's not always possible.

If you are Musk your options will come with a lot of strings, such as limits on the number that can be sold and possibly other restrictions. I mean if he sold all his shares at once the market would be spooked.Edit: I've simplified things a lot. There would be some charges associated with many of the above methods but the point is it's not really a problem.

 

[Vanadium 50]

A letter from the board of directors of Tesla said in effect that Elon's statement was true.

They said no such thing. They agreed that funding was not secured.

The best possible position Musk can take is that he made an oopsie in not checking his facts before he spoke, and made a materially false statement. This oopsie happened to have cost short-sellers money, and it was entirely coincidence that Musk had previously said "sheer magnitude of the short carnage will be unreal" and (in June), short-sellers had "about three weeks before their short position explodes." Oopsie.

 

[CWatters]

Please can you both quote sources. For example...

http://ir.tesla.com/node/18951/pdf

Statement from the following members of Tesla’s Board of Directors: Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch

August 8, 2018

PALO ALTO, Calif., Aug. 08, 2018 (GLOBE NEWSWIRE) -- Last week, Elon opened a discussion with the board about taking the company private. This included discussion as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur. The board has met several times over the last week and is taking the appropriate next steps to evaluate this.

 

[Vanadium 50]

Are you asking if Musk actually said "funding secured"? That was well covered in the media. Are you asking if it in fact was not secured? That also seems well-covered, plus there is the fact that the transaction didn't happen. Or are you asking about the quotes? Type 'em into Google and you'll get over a million hits each.

 

[CWatters]

I mean if you are going to quote someone it's best to cite your source (simply because we can't tell which of the million hits you are referring to).

On funding Musk added...

https://mobile.twitter.com/elonmusk/status/1026914941004001280?lang=en

"Only reason why this is not certain is that it's contingent on a shareholder vote"

 

[Vanadium 50]

"On funding Musk added...Only reason why this is not certain is that it's contingent on a shareholder vote"

The full quote is "Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote." We now know that investor support was not confirmed, and that there was more than a shareholder vote standing in the way.

 

[OmCheeto]

...We now know that investor support was not confirmed...

I guess this is kind of true. I don't see Elon saying "the support" was signed, sealed, delivered, and notarized.

Elon Musk; "... I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to “funding secured” in the August 7th announcement. ..." [ref Aug 13, 2018]​

But from the previous comments he made in that announcement, that the Saudis had approached him to take the company private for over a year at that point, I can see how he would say that.

In any event, it's an interesting conundrum, taking a company private:

Tell the stockholders beforehand: Everyone gets charged with insider trading
Tell the whole world: Musk gets charged with market manipulation​

I'm guessing that Elon has a few lawyers on staff, and gave him the best advice.

hmmmm...
Anyone else know how to take a public company private, without incurring the litigious wrath of "the shorters"?

Disclaimer: I do not own any Tesla stock. I am not shorting Tesla stock. I do not own any Oil Company stock. I do own about $220 in Ford stock, as it's value has gone up since 2009, when I bought some for $96. Yay money!

 

[Stavros Kiri]

$220 in Ford stock, as it's value has gone up since 2009, when I bought some for $96. Yay money!

Anyone else know how to take a public company private, without incurring the litigious wrath of "the shorters"?

Which company are you planning to buy and then take it private? ...

 

[Vanadium 50]

I'm guessing that Elon has a few lawyers on staff, and gave him the best advice.

Given that he's facing a $1.2B lawsuit and an SEC investigation, I'm not sure I would characterize this advice (assuming he got any) this way.

 

[Stavros Kiri]

May be the best advice wasn't good enough or perhaps was forgotten to be mentioned that the lawyers may be weren't good enough (or at all) ...

 

[OmCheeto]

Given that he's facing a $1.2B lawsuit...

"lawsuit"? As in singular?

Ah! Hahahhaaha!

Short sellers:

Sept 6, 2018

Short seller Andrew Left sues Tesla and Elon Musk, claiming stock manipulation [ref]​

Long holders:

Aug 11, 2018

One of the lawsuits, filed by shareholder Kalman Isaacs, seeks class action status on behalf of investors who bought Tesla stock on August 7 and August 8. Another, filed by William Chamberlain, seeks class action for those who bought or sold Tesla stock between August 7 and 10. [ref]​

Customers:

Sept 6, 2018

Elon; "People still sue us, for a crash at 60 mph, because of a twisted ankle. They'd be dead in another car." [paraphrased]
[ref: Joe & Elon show @1:33:00]​

When you're at the top of the game, all the rats will come and try and push you off.

 

[Vanadium 50]

When you're at the top of the game, all the rats will come and try and push you off.

I would call it "pure genius".

So, let me repeat my last question: " So is it your position that it is a good thing when a corporation's CEO (and a major shareholder) manipulates stock prices by making materially false statements? Or is it that it's only OK when Elon does it?"

Do the same rules apply for Elon Musk as they do for, say Bernie Madoff, Jeff Skilling, Martin Shkreli and Bernie Ebbers? Or is it different because Musk is a visionary and the others are scumbags?

 

[OmCheeto]

So, let me repeat my last question: " So is it your position that it is a good thing when a corporation's CEO (and a major shareholder) manipulates stock prices by making materially false statements? ...

You still haven't proven to me that he made a materially false statement.

 

[Vanadium 50]

He said funding was secured. Funding was not secured.

And you haven't answered my question - is it OK if he did?

 

[Vanadium 50]

Let me elaborate. Here are the logical options:

1. Musk never tweeted these things. The media made it all up.
2. Musk tweeted "funding secured" knowing it wasn't.
3. Musk tweeted "funding secured" because he thought it was, even though it wasn't.
A. He did this with legal advice.
B. He did this without legal advice.

In case 2, it's pretty much securities fraud. In case 3A, he got very bad legal advice because there was no disclaimer that this was a "forward looking statement". If there were, there would be no investigation and no lawsuit. As CEO, he is ultimately responsible for the quality of the lawyers involved. In Case 3B, making a statement that launched an SEC investigation and apparently multiple lawsuits without checking with the lawyers seems pretty much the definition of erratic behavior.

Cases 1 and 3 cannot be considered "pure genius", which leaves Case 2. Hence the question - is it OK if Elon Musk (or Mother Theresa) does it, but not if some scumbag does it?

 

[OmCheeto]

He said funding was secured. Funding was not secured.

And you haven't answered my question - is it OK if he did?

It would not be OK if he broke the law.

But, as Jill Fisch, a business law professor at Univ Penn Law School stated in a Bloomberg podcast on August 17th, 2018;

4:30 ... "I don't think his $420 tweet was necessarily problematic."
...
"The market isn't used to CEO's using Twitter, but they are going to have to get used to it."​

Paraphrased for brevity, as lawyers seem to talk, a lot, IMHO.

 

[nsaspook]

Tesla Inc. is under investigation by the Justice Department over public statements made by the company and Chief Executive Officer Elon Musk, according to two people familiar with the matter. The criminal probe is running alongside a previously reported civil inquiry by securities regulators.

https://www.bloomberg.com/news/arti...-face-u-s-criminal-probe-over-musk-statements

 

[OmCheeto]

https://www.bloomberg.com/news/arti...-face-u-s-criminal-probe-over-musk-statements

I'm suing the Justice Department! They made the stock go down!



ps. Sorry, not sorry...
pps. No change in my investment positions, at the moment.