For Once They’re Not Drinking the Kool Aid

20
1040
Print Friendly

Maybe people are finally getting wise…

DETROIT/NEW YORK — Elon Musk is accustomed to shareholders snapping up whatever his Tesla Motors Inc. has to sell.

Now his plan to merge the electric-car maker with struggling SolarCity Corp. has him confronting a rare case of investor unrest.

“This is a high-risk proposition with my money,” said Ross Gerber, a self-described fan of Musk’s and CEO of Gerber Kawasaki, a money-management firm with more than 25,000 Tesla shares. “I don’t need Elon picking stocks for me. That’s my job.”

It’s a pivotal moment for Musk, the 44-year-old billionaire whose ability to continually raise money from faithful investors has kept unprofitable Tesla going for more than a decade. Tesla shares fell 10 percent Wednesday as the proposed $2.9 billion deal gave different investors something to dislike.

For some, it was the risk of distraction as the mass-market Model 3 sedan arrives next year; others perceived trouble in taking on more than $3 billion in debt carried by a company run by Musk’s cousins. And that’s all before the basic question of merging an automaker with an installer of solar panels.

The investor pushback and stock-price slide began as soon as Tesla disclosed its intention on Tuesday, including a downgrade on the shares that evening by Oppenheimer & Co. Musk recoiled, scheduling a second conference call with investors for Wednesday morning — to little avail.

SolarCity stock rose 0.5 percent on Thursday to $21.98, far below Tesla’s proposed range of $26.50 to $28.50 a share. Tesla shares fell 0.1 percent to $196.40.

Gerber took to Twitter to tell other Tesla investors to vote against the deal. “We are big supporters,” he wrote. “Not of this deal. Tesla shareholders are getting shafted.”

Even before the plan was disclosed, Musk was taking steps to avoid potential minefields in corporate governance. When Tesla’s board voted on June 20 to move forward with the offer, it used different advisers than it did on May 19, when it sold $1.4 billion in new stock. Investors in that offering weren’t told that Tesla soon would be using its equity to take on SolarCity, which had negative operating cash flow of $790 million last year.

Musk used his customary banks, Goldman Sachs and Morgan Stanley, as lead underwriters on the stock deal. He went to investment bank Evercore Partners Inc. for the SolarCity proposal, people familiar with the situation said.

On Thursday, Morgan Stanley’s own Tesla analyst weighed in, joining the ranks of those who have panned the potential deal. Adam Jonas, one of the most bullish analysts on the automaker, lowered his recommendation on the stock to equal-weight from overweight and reduced his target for the shares price to $245 from $333.

One-stop shop

Musk’s argument for the combination is that wealthy, environmentally minded consumers will get a one-stop shop for green, sustainable energy and mobility. They can buy their electric car and home storage battery from Tesla and keep them charged up with the sun’s rays, thanks to SolarCity’s panels.

“Anyone who is product-focused sent me sort of a congratulatory note and like why-didn’t-you-do-it-sooner sort of message,” Musk said. People more focused on finances were “a lot more worried about it.”

The proposed combination is problematic, Barclays analyst Brian Johnson said in a research note. Combining the two companies will simply compound negative cash flow to a combined $2.8 billion next year. That means Tesla would need accommodating equity markets, “which is far from certain,” he wrote.

It takes several years for consumers to get a payback on the solar panels, and electricity from power utilities is cheap, said David Whiston, an analyst at Morningstar Inc. in Chicago.

Leap of faith

“Tesla’s investors would now be taking on the risk of electric cars and solar power,” Whiston said. “As an investor, you’re really getting your patience tested with this deal. It’s a leap of faith.”

Musk’s announcement fired up short sellers, who were quick to criticize the bid because Musk is the largest shareholder in both companies and his cousins, SolarCity CEO Lyndon Rive and Chief Technical Officer Peter Rive, each own 2.3 percent of the solar company’s stock.

Doug Kass, whose Seabreeze Partners Management has a short position in Tesla, said the deal would help the solar provider at the expense of the car company.

“SolarCity’s proposed non-arms-length transaction with Tesla raises governance issues for both Musk and TSLA’s board,” Kass wrote in his RealMoneyPro column. “It also increases Tesla’s financial-risk profile and dilutes what TSLA shareholders previously thought they had: a pure play on electric cars and batteries.”

Business wisdom

Tesla shareholders with long positions also may raise concerns about corporate governance and the business wisdom of the proposal, said Gary Hewitt, director of governance research at Amsterdam-based Sustainalytics, which provides research to investors.

“There are governance conflicts everywhere, with Musk being a major shareholder on both sides of this deal, and he and another director also on both boards, as well as a lot of familial relationships,” Hewitt said. “Those connections complicate decision making.”

To avoid conflicts of interest, Musk — who owns 21 percent of Tesla and 22.5 percent of SolarCity — recused himself from voting at the June 20 Tesla board meeting and when the SolarCity board votes. So also did Tesla lead director Antonio Gracias, who owns almost 40,000 shares of SolarCity.

That helps, but the companies still are very cozy.

JB Straubel is Tesla’s chief technical officer and sits on SolarCity’s board. Nancy Pfund, who is on the SolarCity board, was an early investor in Tesla and bought one of its first Model S cars. John N.H. Fisher from venture capital fund Draper Fisher Jurvetson is on SolarCity’s board, while DFJ partner Steve Jurvetson sits on Tesla’s.

“If the shareholders vote a resounding ‘no’ then it’s a new paradigm for Elon,” Morningstar’s Whiston said. “The shareholder vote will be the real test.”

Share Button
SHARE
Previous articleThe Government Made Me a Litterbug
Next articleWhat’s a Clover?
Author of "Automotive Atrocities" and "Road Hogs" (MBI). Currently living amongst the Edentulites in rural SW Virginia.

20 COMMENTS

  1. Every time you’re drinking carbonated water, think about Joseph Priestley, who invented it. Also consider that he is the first man to have discovered and isolated oxygen. Here he is in his own words, refusing to let loose of his own kool aid, despite his immensely brilliant mind.

    “The facts, as they stand, are these: every creature, when respiring, releases phlogiston. In fact, respiration is simply to be considered a form of combustion. Anything that can burn contains phlogiston. Substances, when burnt, release this weightless, invisible substance — an element of their being, their composition — the phlogiston.

    The phlogiston is always in need of somewhere to go. Such as, air is best for the phlogiston. Air can absorb it. Taking this mode of thinking to its furthest logical conclusion we can only state that the reason creatures “suffocate” is because there is nowhere for the phlogiston to go. When air was removed from around a living creature then there is nowhere for the phlogiston to go and so respiration would cease and the creature dies.”

    Dr. Phlogiston
    http://cdn.loc.gov/service/pnp/cph/3b00000/3b09000/3b09700/3b09769r.jpg

    Priestly’s Works. A Word of Comfort.
    https://upload.wikimedia.org/wikipedia/commons/f/f6/A_Word_of_Comfort2.jpg

  2. Orange is the New Yellow.
    http://www.fox.com/watch/690214979568/7684601088

    Marge gets 90 days for letting Bart go to the park unsupervised. Even cartoons are under strict orders. There is no escape even in art. Just the powerless cucks at least consoling themselves that they’re in on the con.

    I think their plans are just to let every city and state decay and whither a way. The people will learn to live on the internet and the media. They’ll make due with a fantasy, when reality is no longer even a possibility for them.

    • Simpsons is a parody, a satire, and sometimes a dark satire at that.
      Most people aren’t smart enough to understand that – they think it’s “just a cartoon” – IE, automatically for kids, and ONLY suitable for children, and also ONLY written to be understood one way.

      I’m not a huge fan of the Simpsons, but I DO understand…
      It’s not just humor, not just a flashy entertainment…
      It’s a work of art. Art isn’t always pretty.

      But the sheep shit on all art equally….

      • Shoot, Rocky & Bullwinkle was ‘only a cartoon,’ but it was definitely written on at least 2 and maybe more, levels.

        • They don’t generally do that any more.
          Not just because “Dragon Balls Z” (et al) can barely handle a single level, but also because the AUDIENCE is incapable of that….

          (Dragon Ball Z is just one of the more obnoxious things, but it’s all about the level of Barney the Purple Dinosaur.)

  3. Muskovite JB Straubel on glorious reimagining of the heroic homeland power grid
    https://www.youtube.com/watch?v=4D9erJtiwuU

    Muskovite Martin Eberhard on Two Minutes Love of Glorious Electric Eco Sex Wagon
    https://www.youtube.com/watch?v=pLo0Ji9pOMQ

    Muskovite Ian Wright On How Jet Power Garbage Trucks Make Glorious Revolutionary Eco World Transportation Salvation
    https://www.youtube.com/watch?v=F4H3FE0Z4QQ

    Got dam I loathe the word “founders.” Always it means unspeakable brain dead idiocy of the worst sort of prole categorical imperative programming.

    The Categorical Imperative is supposed to provide a way for us to evaluate moral actions and to make moral judgments.

    It is not a command to perform specific actions — it does not say, “follow the 10 commandments”, or “respect your elders”. It is essentially “empty” — it is simply formal procedure by which to evaluate any action about which might be morally relevant.

    Since by nature (according to Kant) the moral law is universal and impartial and rational, the categorical is a way of formulating the criteria by which any action can pass the test of universality, impartiality, and rationality.

    It has several forms or expressions and you need to know the first two . Kant believes that these two forms of the CI are, ultimately, equivalent, and that what one forbids the other forbids also.

    You might say that they are two ways of looking at the same “moral reality.” How are these two forms related? How are they equivalent? Well, they are equivalent because that which makes human beings intrinsically valuable (this is the focus of the second expression of the CI) is reason and freedom, and it is precisely the demands of rationality (which is the precondition of freedom) that provide the criteria for evaluating moral actions in the first expression of the CI.

    In other words, it is because other people have universal reason and freedom that you should never treat them as merely means to your own ends, and it is that rationality which provides the criterion for evaluation found in the first expression of the CI.

    Both forms of the CI are intended to be expressions of the common, ordinary moral sense that we (most of us, anyway) have that there are some actions that are simply wrong.

    What is the relationship between the two forms of the Categorical Imperative?

    An imperative is a command. “Close the door!” “Brush your teeth!” “Study hard!” “Don’t forget to button your shirt.” According to Kant, however, these commands are abbreviations.

    “Close the door, so that your father can hear the game.”
    “Brush your teeth, so you don’t get cavities.”
    “Study hard, so you can get a good job, and give your poor parents some peace.”
    “Don’t forget to button your shirt, so your date doesn’t think you’re an idiot.”

    Perfect Duty is that which we are all obliged to do all of the time.

    e.g., no killing, no physically harming others, no lies, no theft, no breaking promises

    Imperfect Duties are those which we should do as often as possible but can not be expected to do always. e.g., be charitable, loving,

    These ridiculously narrow duties. That is the whole of their argument. That is why they must regiment us. Rape us. Rob us. At every opportunity. At every moment. Ad infinitum. For ever and ever. Even for a thousand generations and a million turnings Amen.

  4. Millennials are frightening. But worse is on its way. Generation Z. The Homeland Generation. Truly they are frightening. They have an eagle eye for the smoker in the next car. They’ll even put down their smart device and stop taking selfies and recording vine videos to bird dog an undesirable for your edification and approval of their valued youth services.

    Depressing, but there it is. Childhood’s end and alien overlord dependence.

    Homeland Generation(Gen Z)
    https://en.wikipedia.org/wiki/Generation_Z

    • Homeland Generation

      The Homeland Generation (Artist, born 2005- ?) comprise the oldest Americans who will never recall any year of prosperity before the catastrophic global financial meltdown of 2008—nor any national leader before the election of America’s first African-American President. As post-9/11 infants growing up in the shadow of the America’s Asian wars and the new U.S. Department of Homeland Security, they mostly believe that the purpose of government is to “keep us safe.” Carefully raised by hands-on Gen-X parents, who don’t dare let their own kids take the same risks they themselves took, Homelanders literally spend more time “at home” (with their multiple digital platforms) than any earlier child generation in history. Elementary schools are introducing new behavioral regimens to forge these kids into sensitive, helpful, rule-playing youngsters.

      Homelands – Our Youngest Generation
      http://afterthemillennials.com/2013/05/14/homelanders-our-youngest-generation/

      Generations Archetypes Turnings
      http://afterthemillennials.com/generations-archetype-turnings/

      Yes its all pointless blather. But this is what passes for mainstream “thought” and philosophy. It’s a brutal slog. But there’s a lot more of them, than there are of us. Makes my stomach want to do about a dozen turnings, truth be told. But somehow I kept it all down after swallowing it all and verifying there’s little if any nutritive, energetic, or proteianic value to any of their pablums.

      • Besides organized, after-school sports, you will not find any 8-15 year olds playing outside anymore. At least I don’t see any.

        • Hi Brandon,

          Yup. Same here. The only time I see kids playing is when it’s some organized/group thing – and held at a “designated” place (such as as school). Can’t have kids doing things on their own. It fosters unwanted habits …

          • It’s the very young one I worry over. They’re being drugged so young they don’t even know life straight. ADHD is everywhere, can’t get away from it. Even though it’s bullshit, it’s quite literally forced down their throats not only by any organization with authority but with parents blessings and that group is one who is either going along to get along or has seen through the entire bullshit state.

      • Tor, I speak with these kids as often as I can. I’m exposed to a lot of them(depending on what you consider their birth date). For the most part, they’re much more aware of the hypocrisy they try to live in. They don’t want to be cops or soldiers, lawyers, judges nor much of anything establishment. They have their eye on the future and work the best paying jobs they can find. Of course there’s a disconnect between the have’s and have not’s and that’s probably wider than ever before.

        Like every generation there are the ones who go along to get along and those who work the system and those who work to not be more part of the system than necessary.

        They are too sanguine in some aspects(for my taste)but that may be because they grew up seeing the hypocrisy. They take getting arrested and incarcerated as something that can’t be avoided which worries me.

        They seem to have little regard for authority though since every encounter they have with it makes them poorer and more of a social outcast. Seems like their parents don’t equate law-breaking as something to use to shun or shame either. When I have a phone problem, can’t bring this or that up I’ll just tell the handiest one my problem and they’ll fix it in about 10 seconds or less. How do I send this Google earth image in a text? Like this boss, see? Yes, thanks a bunch. In the world I live in they mostly refer to me as boss or “uncle” if they’re a cohort and friend. Nobody calls me jefe thankfully since it has more of a authoritarian meaning to it than “boss’.

        They’ll jump up on the side of the truck and say “hey boss, can you back under that crane over there where the load’s going to be so we can move in here?” Sure, thanks. No problem. Pretty good kids for the most part……out here.

  5. Turnings
    4.1.1 High
    4.1.2 Awakening
    4.1.3 Unraveling
    4.1.4 Crisis

    4.3 Archetypes
    4.3.1 Prophet
    4.3.2 Nomad
    4.3.3 Hero
    4.3.4 Artist

    Generation
    A social generation is the aggregate of all people born over a span of roughly twenty years or about the length of one phase of life: childhood, young adulthood, midlife, and old age.

    Generations are identified from first birthyear to last by looking for cohort groups of this length that share three criteria. First, members of a generation share what the authors call an age location in history: they encounter key historical events and social trends while occupying the same phase of life.

    In this view, members of a generation are shaped in lasting ways by the eras they encounter as children and young adults and they share certain common beliefs and behaviors. Aware of the experiences and traits that they share with their peers, members of a generation would also share a sense of common perceived membership in that generation.

    Timing of American Generations and Turnings
    https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory#Timing_of_generations_and_turnings

  6. If you put “powerwall” into googuhl, you’ll be bombarded by a fusillade of orgasmic fanboy right ups on his futuristic battery

    you plug into the side of your house like a flashlight battery to power your home.

    But then, you find an article with only absolute substance and no marketing bejizzle and see how many actual sales he’s generated for his $1 billion in investment…

    2500 powerwalls and 100 powerpacks in Q1 2016. That’s fucking it.
    http://insideevs.com/tesla-energy-reports-q1-results-2500-powerwalls-and-100-powerpacks-delivered/

    And that he’s such a visionary genius, he’s cancelling one of the models of home batteries, the 10 kW version.
    http://www.autoblog.com/2016/03/21/tesla-cancels-10-kw-powerwall/

    Paying a $193 price per share of (TSLA)Tesla for the privilege of enduring a $7.80 loss per share. What a deal. Where can I fucking buy these losses at. I’m in love.
    http://www.marketwatch.com/investing/stock/tsla

  7. “the mass-market Model 3” – mass market? What have these folks been smoking? Must be some goooooood shit.

  8. Never gotten that the idea of merging two failing companies will some how make things right.

    All that happens in reality, the dysfunction of both companies gets combined.

    • It could happen in some cases, if for example the 2 had complementary product lines or used similar raw materials and could therefore increase their efficiency. But in most cases, I would agree w/you richb.

LEAVE A REPLY