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Author Topic: Hydrocarbon Hellspawn Mens Rea Actus Reus  (Read 15429 times)

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Re: Hydrocarbon Hellspawn Mens Rea Actus Reus
« Reply #45 on: August 08, 2018, 07:58:48 pm »
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Saving Private Tesla: 7 Questions

August 8th, 2018 by Michael Barnard 

Michael Barnard Mike works with startups, existing businesses and investors to identify opportunities for significant bottom line growth in the transforming low-carbon economy. He regularly publishes analyses of low-carbon technology and policy in sites including Newsweek, Slate, Forbes, Huffington Post, Quartz, CleanTechnica and RenewEconomy, with some of his work included in textbooks. Third-party articles on his analyses and interviews have been published in dozens of news sites globally and have reached #1 on Reddit Science. Much of his work originates on Quora.com, where Mike has been a Top Writer annually since 2012. He's available for consultation, speaking engagements and Board positions.

On August 7, 2018, Elon Musk tweeted a game changer. He indicated that he was working toward taking Tesla private and had secured the funding to do so. Itís fairly easy to guess from this five-day view of Teslaís stock price when the tweet dropped.

TSLA trading was halted briefly with the significant rise in market capitalization and volume.

Which leads to a set of questions. Is Elon Musk serious? Is it a good idea? Is announcing it on Twitter legal? Who wins and who loses? How will individuals invest in Tesla after this? What could stop it? Whatís next? Letís take these one by one.

Is Elon Musk serious?

Yes, he is. At around the same time as he tweeted, an email was sent to all employees and then later posted to the corporate blog. It outlined the status, the reasons, and for IPO- and Silicon Valley-savvy employees, provided a great deal of reassurance that this was focused on moving the company forward.

Is it a good idea?

Yes, I think it is. Before seeing the email/blog post, I pointed out the four advantages I saw to going private.

First, itís good for current investors. If they own shares now, they can cash out at 20% above start of Aug 7, 2018 value. Furthermore, TSLA was already close to its historic maximum after the quarterly analyst call and Teslaís achievement of the key 5,000 cars per week target. Investors, whether they were recent or long-term holders of TSLA shares, will do very well by this. If they had bigger dreams, they can retain their shares in Tesla after it goes private.

Second, it eliminates the Tesla shorter nonsense. There will no longer be that subset of market-driven venality creating a churn of negative PR for Tesla. There will no longer be any short selling opportunity for shorters, so they will turn their sights to other targets and stop paying attention to Tesla. The negative press wonít stop, as shorters were well-aligned with organizations and individuals seeking to impede electrification of transportation and the inevitable shift to an electric economy. The Koch Brothers, the oil majors, and the Libertarian ďthinkĒ tank content providers will continue to fund and churn out various pieces of nonsense. But they wonít be aided and abetted by the shorters and the shorter-oriented press.

The third is that this would make Tesla a $70 billion private company, which is well under the largest. Both Cargill and Koch ó thereís that name again ó are well over $100 billion, and Koch is increasingly stuck with stranded assets, hence its ongoing, overlapping campaigns against global warming, renewables, and electric vehicles. Private funding that Koch has lined up is looking for exits in many cases, and shifting to a privately owned Tesla would make sense. Thatís part of the story of the $2 billion+ position the Saudi Arabian sovereign wealth fund has in Tesla. The size of the private company, in other words, wouldnít be a hindrance to raising capital or funding debt. It will increase the cost of acquiring capital and debt according to some analysts.

The fourth is that Musk has significant experience running a successful private corporation ó SpaceX. Private is arguably much simpler than public, and if you donít have to deal with public stock offering compliance, then a subset of your overhead diminishes. One report references a 10% saving there. Instead of quarterly analyst calls, a smaller number of institutional discussions and governance suffice.

These are reasonably well aligned with Muskís reasoning in the email/blog post. They are obvious in retrospect, bold in strategic execution.

Is announcing it on Twitter legal?

The consensus seems to be that it is. The question comes down to intent and accepted medium. If the intent was solely to pump and dump the stock, then itís illegal. If the intent was to clearly tell the markets and investors about the intent to take Tesla private, then it is legal assuming the medium is appropriate.

And while many aged former SEC officials are looking somewhat aghast at the choice of Twitter as a medium, the consensus appears to be that as Musk regularly imparts corporate strategy via Twitter, as his following is 22.9 million and as the press watches his Twitter feed like a hawk, this is an appropriate medium. The medium would have to be one that is provably intended to hide the information, not ensure its broad and rapid dissemination. No one can claim that they werenít given the opportunity as investors to know about this plan.

And given the other preparations that have been made, Teslaís legal team probably signed off on Twitter as the vehicle for this.

Who wins and who loses?

As stated, investors win. [Editorís note: However, some investors who wanted to hold the company for much longer but also wanted the high liquidity public stock ownership offers can lose, especially if they feel forced to sell at a lower price than they could have if they held onto the public stock. Shareholders of private Tesla will reportedly have the opportunity to sell shares once every six months or so, but details regarding this and how the company will be valued have not been disclosed.]

Employees of Tesla win as well, I think. The drumbeat of negative ďnewsĒ goes down while they continue to be equity holders in the company. Their personal wealth goes up just as much as any other investorís.

People who are focussed, as I am, on the transformation of our economy from technologies causing pollution and global warming to much more benign technologies are winners as well. Muskís blog lays out the reasons why this is good for the management and future of Tesla, and Tesla is leading the electrification of transportation disruption, which is sweeping the automotive industry. Itís part of his master plan, and this assists with that master plan.

Shorters lose. Bigly. They have already lost billions on Tesla, but shorting has wins and losses and itís a matter of timing. The biggest shorters with the longest positions have lost the worst, and the shorters who bet on the most recent quarterly analysts call lost large as well. But Tesla is a volatile stock, and there were undoubtedly many counter-investors who did just fine taking short positions at the right time for the right duration. And as has been shown, many of them have excellent communications channels with the Tesla-focussed press to gain the knowledge of when to make their bets. Thatís all gone now.

The subsets of the media which received a ton of eyeballs from a steady stream of anti-Tesla news and posts ó Seeking Alpha and Business Insider are the most obvious examples ó will lose as well. With shorters and day traders no longer obsessing second by second over TSLA, eyeballs for those sites will diminish. (Editorís note: That could also mean that eyeballs on CleanTechnica will drop. We are not stressed about that, since our core aim is to help society help itself, however that may be as it relates to cleantech news, analysis, and commentary. We only cover Tesla because of its important role in the cleantech transition. You can also support us via a monthly subscription if you are concerned about our revenue dropping. 😉 😀 )

Arguably, stock market analysts, especially the ones on the quarterly calls, lose. Tesla is a halo stock. Being on their calls is a status symbol. Tesla is sexy. If those calls go away, itís back to a mind-numbing round of discussions of various less interesting company details. But thatís their job. Small loss for them really.

How will individuals invest in Tesla after this?
It will still be possible via a private investment vehicle that Tesla will set up. They need to do this for their employees. Musk asserts that retail investors will have a choice to be bought out or stay in the private investment vehicle. There are various mechanisms for this, but the specific one used is a matter of speculation at this point.

What could stop it?


Okay, that requires some explanation. In 1985, Revlon was sold with the aid of a junk bond king and saddled with $2.9 billion in debt. This caused Revlon grief for years, but what is relevant is that it is a case which has established fiduciary duty for Boards of Directors which require competitive auctions in situations like Teslaís.

In other words, the Tesla Board of Directors has a legal obligation to ensure that taking Tesla private with the funding Musk has lined up is in the best interests of the shareholders. Thatís not Teslaís best interest. Thatís not Elon Muskís best interest. Thatís the shareholdersí best interest.

Now, tweets like Muskís donít appear magically without a lot of planning and preparation. Heís on the wrong coast of the USA for that. This has undoubtedly been a subject of strategic discussion with the Board for months and possibly years. Equally possibly, the Board could have already discharged its fiduciary duty prior to the tweet coming out.

If not, then they will be required to basically auction the company off to the highest bidder, regardless of any structures and funding Musk has established today. Watch this space.

Whatís next?

This isnít approved. This has to go to stakeholders for their approval. That will take a bit of time to set up, as voting for shareholders isnít electronic and formal mechanisms for this are specified under SEC regulations.

And if the Board hasnít already performed its fiduciary duty and ensured that competitive funding alternatives lead to something in the best interest of the shareholders, that will take a while as well.

In the meantime, the shorters will undoubtedly be attempting to find ways to spin this and short Tesla stock until it disappears entirely.


Maarten Vinkhuyzen

The problem with the Revlon case is that the courts likely view what is best for stockholders as the highest bid now. The option that Elon offers, to stay on as stockholders in a private company will likely not be valued.

Another question is, what is the value of Tesla without Musk?
I doubt there can be a competing bid without Musk underwriting it.

And no (group of) business adversaries is going to spend that much money just to liquidate Tesla.

OK, Revlon is scary, it will delay the process, but it is unlikely to alter the outcome.

Martin Lacey > Maarten Vinkhuyzen

If big oil is intent on killing the EV they have more money than anyone and can buy Tesla and moth ball their technology. Highly unlikely, I know.

Amazon and Apple might well be interested in buying Tesla, incorporating it into their companies and will offer Musk a lead designer/engineer role and a big buy out. Both Amazon and Apple can make their own autonomous vehicles and use whichever autonomous suite is ready first.

agelbertMartin Lacey

I am certain big oil wants to kill Tesla by hook or by crook. That said, I think they will bankrupt themselves trying. Yes, they have a lot of money and almost unlimited government backing in the U.S. Petro-State under Trump, but I am convinced the EV train has already left the station.

It's just too late to stop the Renewable Revolution in general and EVs in particular. The Chinese alone are making a lot more EVs than Tesla ever will, so no matter how much skullduggery is aimed at Tesla, even Tesla will come out like Rocky in the movie series. Tesla will get punched around but will come out of this smelling like a rose. 

Betting against EVs is a losing bet that big oil has decided to push to the limit. It will help sink them faster. WHY? Because their happy talk propaganda has always been based on being our "loyal servant".

That is what got them so much public support. Now big oil is being exposed as the greedy, government bribing, welfare queen subsidized bullies they have always been.

Those crooks will not be able to counter the truth. The public will turn its back on big oil permanently.

He that loveth father or mother more than me is not worthy of me: and he that loveth son or daughter more than me is not worthy of me. Matt 10:37


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