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Tesla shares sink as pressure mounts on Musk to show the money

The stock slipped as much as 4% on Thursday.

Doubts about Elon Musk’s ability to take Tesla private mounted across Wall Street on Thursday, driving the stock down as much as 4% in what’s shaping up to be the worst rout in a month.

The stock slipped to $356.66 in late morning trading, well below the $420 at which Musk said shareholders would be bought out. It’s now dropped on back-to-back days after having jumped 11% on Tuesday, when Musk vowed that he had “funding secured” for a spectacular $82 billion deal.

Since that initial tweet, though, he has offered no evidence to back up the statement. Nor has anyone stepped forward publicly — or privately — to say they’re behind the plan. People with or close to 15 financial institutions and technology firms who spoke on the condition of anonymity said they weren’t aware of financing having been locked in before Musk’s tweet.

“I don’t really understand the idea of what was suggested in the potential for them to go private,” Dick Weil, CEO of Janus Henderson Group, said in an interview with Bloomberg Television. “That’s obviously an incredibly large valuation to somehow take into the private market.”

All of which could be problematic as the Securities and Exchange Commission starts investigating the matter. Regulators have asked the company if what Musk tweeted was factual and why such a disclosure was made via social media rather than in a filing, according to the Wall Street Journal, citing unidentified people familiar with the matter. Judith Burns, an SEC spokeswoman, declined to comment. Tesla also declined to comment.

“When Musk tweeted this, was he saying this was something that was definitely going to happen? Something that might happen?” said Ira Matetsky, a partner at Ganfer Shore Leeds & Zauderer in New York. “How would a reasonable investor interpret that and was it consistent with the facts as they existed at the time?”

‘I Wish’

The chief executive officer raised the go-private possibility with the board last week, according to a statement from six of Tesla’s nine directors. They said he had “addressed the funding for this to occur,” without providing details.

As for Tesla shareholders, Musk said in one of his Twitter posts that “investor support is confirmed” for his plan. The company’s largest shareholders have declined to comment. A spokeswoman for the California State Teachers’ Retirement System, which as of March owned about 213,000 shares, said there was no heads-up given.

“We have not been contacted by Tesla IR,” said Michelle Mussuto, the spokeswoman. “They didn’t reach out before the tweet either.”

Leaving the public marketplace isn’t a new vision for Musk. “I wish we could be private with Tesla,” he told Rolling Stone in an interview published in November. “It actually makes us less efficient to be a public company.”

In April 2017, when Musk held talks with Masayoshi Son about SoftBank Group Corp. investing in the electric carmaker, they touched on the possibility of fulfilling Musk’s wish, according to two people with knowledge of the discussions. The talks failed to progress due to disagreements over ownership and have not started up again.

Musk’s personal stake in Tesla is almost 20%, meaning he would need roughly $70 billion to take it out of the market. That kind of money may be accessible through sovereign wealth funds or other strategic investors, said Dwight Scott, president of Blackstone Group LP’s GSO Capital Partners. The money-losing and cash-burning company is an unlikely candidate for debt investors to be willing to help go private.

It’s possible Musk could persuade some large institutional and strategic investors to either newly become or remain shareholders in the private company, which could reduce his funding needs, said Toni Sacconaghi, an analyst at Bernstein who has long been bearish on Tesla shares.

But “if no firmer details emerge,” he wrote in a report to clients, “investors would likely increasingly debate Musk’s credibility and seemingly unhealthy focus on the shares’ price and volatility.”

It’s also possible Musk has some unconventional plan that would take Tesla private without using traditional sources. On Twitter, he alluded to the creation of a “special purpose fund enabling anyone to stay with Tesla.”

“What investors are waiting for is more details around what is meant when Elon Musk says funding is secured,” George Galliers, an analyst at Evercore ISI who rates Tesla the equivalent of a hold, said on Bloomberg Television. “They are raising a lot of sensible questions around who would be providing the funding and how exactly this might work.”

© 2018 Bloomberg L.P

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guys, don’t even try to understand.

Musk is waaaay ahead of us!

put ten people together, each with a IQ of 100, and they will come to a conclusion reflecting an IQ of 99.

put ten people together, each with a IQ of 180, and they will come to a conclusion reflecting an IQ of 181.

I dont live in Stellenbosch nor do I have an IQ of 200 plus but I know that Tesla has NEVER made a profit and has burned through billions without ever making its production targets. It also has serious competition from other established carmakers. Its market cap at one stage was larger then that of Ford which has made a profit before. Other issues include suppliers not being paid and resignations of senior staff.

So Musk, being a genius, has dealt the short-sellers a blow with these tweets about taking the business private. He continues to play such games with the shorts and defying market fundementals. But for how much longer?

You can fool some of the people some of the time, but not all of the people all of the time..

Even if you are a genius. And function at a level above us mere mortals. Much like someone else from Stellenbosch in my view..

Interestingly, the 420 LBO story, if it was not just another drug induced or dementia triggered event, would actually help shorts. It creates a known ceiling of what the share price can go to, versus theoretically unlimited losses on naked short position. If you shorted at 370 you had a potential loss of say 50 as the LBO price should logically not be exceeded. If the company falls apart to say $100 rescue you make $270.

For bankruptcy risks, people should first look to the levels of credit default swap insurance on Tesla longterm debt. These guys stand first in line and their insurance has rocketed…

As much as I like electric cars (own one), Musk’s executional failure in literally every single promise ever made will sink Tesla. They have no tech advantage over the big car boys that can carry EV losses and that know how to design and build cars. BM, Merc, Jaguar, VW, Nissan, Porsche, Hyundai etc will murder Tesla within 5 years.

Pride. Some people would not want to accept that they are struggling and need help or that they have hit their limits and cannot go on any further.

The best thing he can do is let someone else take charge and lead Tesla, the potential Apple of the motor-world.

Musk is an absolutely brilliant techie but that does not mean that he has what it takes to run a company – it just means he’s an absolutely brilliant techie.

Besides the fact that Tesla does not meet its deadlines and is not profitable (as well as his failures at Tesla’s “gigafactory”), there are other symptoms of his leadership failures, like the fact that he prefers to take the credit for the success of Falcon Heavy to himself instead of sharing it with the entire SpaceX team, his temper tantrum during the Thai cave rescue mission, the bizarre f/rting unicorn mug saga and now the rogue “go-private tweet”.

It’s not enough for a CEO to have an extraordinarily high IQ, passion and creative ability. Being a leader of the world’s most intelligent but obstinate and emotionally complex primate also requires the ability to make decisions based on logic and reason, not emotion (self-control: to remain calm when the amygdala delivers fight-or-flight impulses to the endocrine system). At the same time, he should be able to demonstrate enormous amounts of empathy and patience for human vulnerabilities, in order for the company to take maximum advantage of each individual’s talents and abilities (EQ).

There are not many people who have all of these abilities and, from what I’ve read and observed, Musk certainly does not. I think he would be better off taming his Ego and seeking shelter from the “front line” stress of managing a company. He should humble himself, admit that he’s not coping and allow himself to flourish in the development of new technologies, products and solutions, instead of trying to be something he is not (a CEO).

I hope he proves me wrong though!

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