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Author Topic: Electric Vehicles  (Read 9090 times)

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AGelbert

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    • Agelbert Truth AND Consequences
Re: Electric Vehicles
« Reply #435 on: August 09, 2018, 07:48:05 pm »
Is Elon Musk Taking Tesla Private❓ ???

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Two Bit da Vinci

Published on Aug 7, 2018

At 12:28 PM on August 7th Tesla issued a bombshell announcement via Twitter, that they are thinking about taking the company private. This has some very significant implications, and we thought we’d take a moment to talk about their reasons, and what this means for Tesla believers, and shareholders alike.

As of August 7th, Tesla shares were trading at around $379, and at a price of $420, would put Tesla’s market cap at $71.3 Billion dollars. He revealed all this information on twitter and you’re probably wondering if that’s somehow illegal, and well, it’s certainly unprecedented! The argument Musk and Tesla will make is that he has 22M twitter followers, his tweet was seen by many, and simultaneously broadcast over the financial news within the hour. So it isn’t like he’s secretly told a select few in private, offering some kind of insider information. But this should prove interesting, to say the least. Also, this would be the ultimate nail in the coffin of all the Tesla short sellers, who’ve lost billions since their Q2 earnings were released, and would never give them a chance to win any of it back.

So naturally after trading for the stock resumed after a brief pause, it has begun to surge closer to what investors are thinking is a buy out price of $420. It is important to note, that nothing has happened yet. Elon made it clear a final decision would hinge upon the votes of the shareholders. Be sure to subscribe, we’ll keep you updated on the news at it happens.

So why would they do this, why take a publicly traded company private? Let’s break down these reasons into a few categories.

The first category has to address the high volatility, speculation, quarterly focused earnings, and threat of short sellers. A publicly traded company is subject to quarterly earnings reports, which can send stock prices soaring or crashing. Q2 Earnings of Facebook, though pretty good, missed some analyst expectations, especially around new active users, and this sent their stock price crashing by 20%. That was a record for the most value a company has every lost on a single day. This is troubling for Tesla, especially when their vision looks far into the horizon, to years, and decades, not month to month. If you’ve followed Elon on Twitter, you know how vocal he’s been about the fear mongers spreading Fear uncertainty and doubt, and taking Tesla private, would insulate them from all that bad publicity.

This makes a lot of sense for Elon, because he’s already proved this model once, with Space X. Space X manages a private fund for their shareholders, and is also a employee owned company. Space X needs to spend millions in R&D, and can’t really expect to turn profits on a quarterly scale. This is the same reason NASA is a government agency, and not a publicly traded company. It’s important to note that Space X and Tesla will still be two completely different companies, with different management structures and funding.

The greatest risk public companies face, is the need to meet expectations in the short term. This drives decisions around the innovation of a product, vs. quickness to market. It facilitates mass hirings and firings, rather than slow and steady growth. It also explains why some well established brands seem complacent and unwilling to take on risk. It works for some companies like Apple, who are officially a Trillion Dollar Company as of August 2018. But Apple has a very simple product line, a phone or a watch, and spends very little on R&D, compared to the scale of something like Tesla. Tesla is building Gigafactories, and doing things that many believed impossible just 10 years ago.

Musk fears the obsession of quarterly profits will deter them from the very long term vision which was and will always be to “Accelerate the world’s transition to sustainable energy.” Quarterly profits are a big reason why established car manufacturers aren’t chasing Electric vehicles. Because to do so would require quarter after quarter of losses, due to increases in R&D spending. Daimler AG, the parent company of Mercedes Benz, knows this all to well, as their stock has been on the decline in 2018, due to their larger investment in the EV future.

For Musk, it’s incredibly simple, he wants to change the world. That clarity actually makes this monumental decision incredibly easy. He wants to do what’s right, and doesn’t want to answer to investors every few months. This moonshot approach is sure to be risky, because now private investors aren’t required to get quarterly earnings reports. The investors who follow Tesla into being a private company, will be the true die hard fans, and those who truly believe in the company. The road has been long for Tesla, and there is now a glimmer of light at the end of the tunnel. They’re making thousands of cars a week, and are already outselling other luxury car makers.

Leges         Sine    Moribus     Vanae   
Faith,
if it has not works, is dead, being alone.

 

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