Tesla ShitStorm

A scant 24 hours into the ShitsStorm set off by Elon Musk’s 420 tweet and I’ve rather had a change of heart on the whole matter.

My two personal heroes in this season of life are Donald J. Trump and Elon Musk. And it is striking how similar the national disconnect is on both men. Both are truly disruptive agents of change and dramatic change causes deeply agonizing controversy in the oft bovine mass of humanity. In this season and of these men, this goes beyond restlessness of the herd and moves into near stampede at a whisper from either. The rolling eyes, the bawling and braying, and the fevered milling offer ample evidence the herd is about to bolt and head straight for the cliff.

From the lofty heights of sentience, it’s a little hard to picture what all the fuss is about. The changes offered in both cases should be heralded and welcomed by all, and I’m confident that the prevailing light of historical review will laud both men beyond all reason. Washington and Edison never had it so good. These two men, each in their own way, offer entre into literally a guilded new age of breathtaking beneficence.

And so it should be of no surprise that their every utterance renders a reaction not so much of opposition, but deranged and agonized psychosis rising to the level of their vision. But it is.

And so you have alt-left libtards suffering Trump Derangement Syndrome, and mystified Trump supporters who cannot fathom who would oppose the worldwide imposition of peace and prosperity by the U.S. The TDS elite do not appear even to oppose what Trump offers or even HAVE a policy issue to talk about. They oppose TRUMP HIMSELF and by extension, anyone who supports him and are raging in apoplectic FURY in their reaction. I mean they are literally physically attacking people violently in restaurants and gas stations across the land in kind of a pathetically inept attempt at civil war.

And the Trump supporters, while genuinely offended, are relatively sanguine about it offering little resistance. More mystified. You want civil war? You DO know which side owns the 300 million guns you want to ban, don’t you? I mean…REALLY???? You can’t be serious. Candace Owens seemed more fascinated by the display than personally fearful. A bunch of white people screeching insanely – literally foaming at the mouth – about racism and cops to a black woman with black and latino policemen standing calmly by? It was a surreal scene.

The confrontation between the shorts and traditional professional analysts, and Tesla fervent supporters and believers, is for the moment more genteel – but barely. It was escalating daily and threatening to go out of control. I initially thought Musk’s maneuver to take the company private very clever. It would essentially rain on the battle and subsequently retire both armies from the field allowing him to get back to the business at hand – saving the world. http://evtv.me/2018/08/tds2-free-tesla-model-3-performance-model/ But a brief televised confrontation between the two sides has led me to a change of heart less than 24 hours later. I think Musk may have made a grave miscalculation and one that “beyond these waters there lie beasties.” I would offer him the following advice: Re-evaluate this entire matter with EXTREME care.

The scene bite that caught my eye was a badly moderated “debate” between Mark Spiegel and Galileo Russell. Mr. Spiegel is the managing member of Stanphyl Capital. He was smooth, debonaire and represented a seven figure short position on Tesla stock – mostly long PUTS. Galileo Russell hosts a YouTube channel titled Hyperchange and sports a long position in Tesla stock – 60 shares to be precise.

If you recall, during the Q1 earnings call Musk kind of had an exploding spleen over a probably idiotic analyst questioning the number of reservations – basically implying waning demand for a car that has never been advertised, is not available in Tesla show rooms, which no one has ever had a test drive in, but enjoys 455,000 $1000 deposits for a SLOT to buy the car. Musk had had six months of trying to answer how they were EVER going to actually make enough cars for this group already onboard to own one, and here was a guy implying that demand for the product was drying up. So he simply said he had had enough of stupid questions and went to a YouTuber for the next several questions. I think that was Galileo Russell who then had fifteen minutes of fame.

This scene turned the financial analyst community dramatically against Musk and Tesla. And Musk subsequently apologized for the moment during the Q2 earnings call.

The purported debate between the two was a fizzle of course. Poor Galileo came across as a starry eyed do gooder woefully out of his league in talking financials and Spiegel of course represented a hard-eyed bet that rising revenues with rising losses is not a sustainable business model and surely at some point reason would prevail and the bigger the bubble the bigger the burst. Tesla would actually go up in flames and shorts would win massively.

It struck me both were way out of league, but it kind of framed the basic disconnect in a new way for me.

To a Mark Spiegel, the road to Teslas current moment is wildly implausible. It makes no sense to him. None of it. The numbers just don’t work. He doesn’t really understand why it got to where it IS, but he’s sure it is some kind of derangement that will eventually correct and come back to the proper order of revenues, earnings, and profit that allow gentlemen of his persuasion to properly “model” and come to valuation. In his world you long undervalued companies, short overvalued ones, and ultimately reason prevails.

To a Galileo Russell, Tesla isn’t a car company at all. It makes a FABULOUS car that represents excellent incremental execution of a much grander vision of an energy future where electricity is generated and stored at the point of use using clean, quiet limitless sunshine and that can be used to cure all ills of humanity, including the need for personal transportation and meanwhile it’s a great ride.

Ignoring Mr. Russell’s gushy and adolescently awkward presentation, I am firmly in his camp. I see Tesla as a technology company with some precision and focused application to real human problems and energy is what it is all about. The blue sky of billions of buildings that need solar energy worldwide, the innate problem of storing that energy, in batteries, and electric powered (sunshine powered) mobility is just gargantuan, enormous beyond belief. By the time Porsche and VW catch up with their CAR, Tesla will be building solar powered homes on Mars. And I have personally put credibility on the line with a real and serious prediction of a $1500 stock price by 2023.

And to Mssrs Russell Rickard et al, the short in shorts is short sighted.

Here’s the problem. Russell and Rickard invested in the startup phase of Tesla by investing in both the stock AND in purchasing the cars. MOST people who can afford a Tesla can afford to take a flyer on the stock. Indeed there are a NUMBER of EVTV viewers who have done this in reverse and parlayed Tesla stock investment INTO owning a Tesla car using the house’ money. Basically the shorts have funded the rise in stock price and volatility allowing us to actually buy product and demonstrate demand using Tesla’s stock itself.

Here is something Elon Musk DOES know but has momentarily discounted. Tesla IS a cult. The small investors in Tesla Stock are also the people buying the car. And yeah, we are all excited that he’s reached the half million unit level. But that is NOT a breakout into general population. That is STILL a cult car and a cult stock and the linkage between the small investor and the car is very important to Tesla at this stage and should NOT be forfeited prematurely. Don’t rain on your follower’s dreams Elon. You just aren’t that big a shit yet. You still need the apostlehood for awhile longer, so don’t get too far out over your skis on this important point.

You see Galileo and I don’t NEED your $420. We want to Buzz LIghtyear this thing to “Infinity and BEYOND!” With patience and fortitude, we think we see 10x that return. The $8 Amazon stock going to $1880.

That’s the ticket we bought and we want the ride.

Going private would represent a huge liquidity hit. But we’ll take it with you because we believe your reasoning is sound and we’d love to revel in the agony of the shorts.

But this all comes unravelled pretty quickly in the hard light of 24 hours later. Musk has asserted that ANYONE holding Tesla stock will NOT be excluded and he indeed hopes that any shareholder who wants to transition to private shares WILL BE ABLE TO and he hopes they do.

Well we hope that too but we can’t and you can’t make it so we can. I don’t believe….

I had referred obliquely to a recent liberalization of the rules regulating the number and type of investors that private companies can offer ownership to. I welcome, applaud, and am quite enthusiastic about these dramatic changes. But they are aimed at startups and as it turns out, have severe caps on capitalization of such entities. Like $50 million. They simply don’t apply to anything like a Tesla even in Tesla’s earliest days. I do not currently see ANY path to translating a publicly traded share to a similar share in a private company. I would be astounded to learn it could be done.

John Coates, a professor of law and economics at Harvard Law School, was quoted, “I know of no legal way to offer public shareholders of a listed company an equity security while also going private. I also know of no legal way to offer $X billion worth securities of any kind to more than 35 unaccredited investors without registering with the SEC.”

Musk has reserved a waffle zone alluding to a special “fund” like they do with SpaceX. That’s actually a Fidelity mutual fund, the best mutual fund app and it by law cannot be specific even to SpaceX. There are diversification requirements for such Mutual Funds. And so if we participate in such a fund scheme, we are very subject to dilution, diversification, and a whole host of other games that can be played by the fat cats representing the major investors owning a privately held Tesla. I don’t think that is Musks intent, but along the way to $60 billion in funding, he would likely not be the only voice of control.

So I view $420 as a woefully inadequate offer for my legitimate position in Tesla. And a “special fund” an opportunity to get specially screwed the main value of which would be a further entry in my little green book of sex education.

Beyond that it only gets worse. Even if you COULD offer a share for share transition, there is not only a liquidity hit, but potentially a bit of dilution as well. Somebody has to pay the piper for the whatever billions are required to move from publicly traded to private ownership and that can only be paid with equity in the company. In theory you are just swapping the publicly traded shares for the new private shares. But every transaction has its carrying charges. And no one is going to front that kind of money without a bonus hidden in there somewhere. And so I have no desire to trade my share in Tesla the public company for the equivalent of 0.90 share in the new private company.

Too high a price to pay for you to avoid a quarterly earnings call. Suck it up and plan on spending an hour or so on the phone with those yucks every three months.

Elon refers to a “shareholder vote”. That sounds very democratic. It isn’t. For all you poor hapless Galileos out there, Elon and six of the largest current Tesla stockholders own over 50% of the shares NOW and can simply vote to go private. ALL the small fry voting together don’t even matter. You get $420 per share and no voice in it whatsoever. You can take it or take it but those are your only two options. You will have been FIRED as a Tesla owner. But it’s very convenient. Ameritrade simply wipes your shares and puts the cash in your account. You don’t even have to click on anything.

Ergo my admonition yesterday to “dance with the one what brung ya”. I think it would be curiously inelegant for Musk to thoroughly piss off all those who have supported him thus far along with his own employees who have been so heroic in helping him get here. I think a few days further consideration are in order. And I believe once the board, the committee, and the advisors all weigh in, the ultimate outcome will be naught.

Well not quite. I understand Musk has also now further plans to offer a Tesla branded pair of short shorts in the Tesla Merchandise section of the company website. This is the dog whistle that mostly what all this is about is killing off the shorts. So don’t worry about it and enjoy the show.

So I’m taking profit this morning. I’ve liquidated all September 21 CALLS though I retain my December 21s and sold off half my core holdings in common stock. If my normal fine sense of timing prevails, it will no doubt zoom to $560 this afternoon. Whatever.

There IS a very tiny sliver of daylight under the door however that may be an “unintended” consequence. This entire hoopla kind of forces all players to suddenly face the daunting task of evaluating just what IS Tesla worth and more importantly what WILL it be worth in the future. As this is pondered by a number of other large entities, that kind of puts Tesla “in play” as a possible acquisition target.

There is this fat vegen chic at every shareholder meeting demanding in the most screechingly strident tones that Musk remove all the leather from the Tesla cars immediately. She of course has the right to do so because she owns precisely ONE share of Tesla common stock. I WOULD be curious as to what her position on all this is. I understand she is assaulting Trump supporters at a popular Hollywood eatery this afternoon but perhaps she can weigh in later, so to speak.

Who knows? All of this might put the idea in her head to mount a takeover move on Tesla. A hostile takeover by another name would smell as animal product free.