Author Topic: TSLA going Private??!?  (Read 1218 times)

canadian235

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TSLA going Private??!?
« on: August 07, 2018, 07:46:44 PM »
Sooo holy crap what a day today... IF Tesla goes private... what would happen to all investors who hold the company in their Tax free accounts? Tesla said they would allow people to continue to hold the company in private but can we do that in our RRSP / 401k portfolios?

Other companies like Dell have done this so there ha to be some precedent for this.

ILikeDividends

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Re: TSLA going Private??!?
« Reply #1 on: August 07, 2018, 07:53:24 PM »
Sooo holy crap what a day today... IF Tesla goes private... what would happen to all investors who hold the company in their Tax free accounts? Tesla said they would allow people to continue to hold the company in private but can we do that in our RRSP / 401k portfolios?

Other companies like Dell have done this so there ha to be some precedent for this.

According to this article, it's all good from an IRS standpoint:

https://www.benzinga.com/pressreleases/18/07/p12049193/holding-private-stock-in-a-self-directed-ira

Whether it's all good with your broker is another question altogether.  Best to check with them for specifics.

According to this article, there could be a gotcha if you want to hold it both in an IRA and in another account:

https://finance.zacks.com/can-ira-hold-closely-held-stock-8563.html

"You can invest in a closely held company in your IRA as long as you and your immediate family do not either work in the business, have other ownership interests in it outside of the IRA, or manage the business."

Not sure how literally this applies, but if you want to own the same private company in both an IRA and in another account (e.g., a taxable account), it seems you should consult a tax advisor to cover all your bases.

If you get that part wrong it seems it could render your whole IRA ineligible for preferential tax treatment.
« Last Edit: August 08, 2018, 12:06:02 AM by ILikeDividends »

BobTheBuilder

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Re: TSLA going Private??!?
« Reply #2 on: August 08, 2018, 12:03:06 AM »
Stunning action yesterday. I locked my paper gains on Tesla and made a few bucks after the initial tweet that read like Elon might have lost it. Somehow I am more sad that for now, it seems like the small retail investors are out.

Considering if it would be a smart move to hold some stocks during the "private" phase and see what happens if the stock goes public again in 2022 or so? What do you guys think? You can still buy some for 380$ a piece.

Retire-Canada

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Re: TSLA going Private??!?
« Reply #3 on: August 08, 2018, 07:02:30 AM »
Considering if it would be a smart move to hold some stocks during the "private" phase and see what happens if the stock goes public again in 2022 or so? What do you guys think? You can still buy some for 380$ a piece.

No. If you buy enough to move the needle of your portfolio you'll be too concentrated in Tesla and if you don't it won't matter enough to be worth the risk. Buy some index funds and sit back with some popcorn and watch the Tesla drama unfold.

BobTheBuilder

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Re: TSLA going Private??!?
« Reply #4 on: August 08, 2018, 08:54:59 AM »
Considering if it would be a smart move to hold some stocks during the "private" phase and see what happens if the stock goes public again in 2022 or so? What do you guys think? You can still buy some for 380$ a piece.

No. If you buy enough to move the needle of your portfolio you'll be too concentrated in Tesla and if you don't it won't matter enough to be worth the risk. Buy some index funds and sit back with some popcorn and watch the Tesla drama unfold.

You're right, I now started phase 2 of my investing life with indexing. Still rooting for Tesla!

Retire-Canada

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Re: TSLA going Private??!?
« Reply #5 on: August 08, 2018, 08:58:27 AM »
Still rooting for Tesla!

I as well. Electric cars, solar panels, space colonisation...it's all the future so I wish Mr. Musk well despite his quirks.

talltexan

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Re: TSLA going Private??!?
« Reply #6 on: August 08, 2018, 08:59:31 AM »
I see the growth case for Tesla. But I also see the erratic and--in some cases--reality-bending actions and statements of its CEO. I do not think I could trust him to manage something for me, especially away from the sunlight and constraints that are on Publicly-traded companies. I think Musk wants to take Tesla private because he's tired of being asked to account for his choices, and he wants an environment in which the haters are excluded.

But he's also too damn good at making products and businesses for me to short.

Proud Foot

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Re: TSLA going Private??!?
« Reply #7 on: August 08, 2018, 10:52:59 AM »
I honestly think this is a good move for TSLA. Going private will allow them to focus more on the products they are producing and developing. A lot easier to do this without having to report everything on a quarterly basis with SEC filings, earnings reports, and conference calls. This will allow the owners to let the company focus more on the long term and improve on their processes to be able to meet projections without as much backlash when they fall short.

Not too surprised to see TSLA down today as I bet a lot of the shorts are trying to cover before they lose too much. The price will rise to $420 as more information comes out about the transaction. To me and investment in TSLA was highly speculative and risky enough to begin with, going private and greatly reducing ownership liquidity will make it even more of a risky investment.

sherr

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Re: TSLA going Private??!?
« Reply #8 on: August 08, 2018, 11:43:02 AM »
I honestly think this is a good move for TSLA. Going private will allow them to focus more on the products they are producing and developing. A lot easier to do this without having to report everything on a quarterly basis with SEC filings, earnings reports, and conference calls. This will allow the owners to let the company focus more on the long term and improve on their processes to be able to meet projections without as much backlash when they fall short.

I mostly agree, but it's not the quarterly reporting and conference calls that are detrimental to long-term thinking, it's the big institution's focus on immediate returns. You don't go public because it's "better", you go public because you need the money (either personally as a cash-out or for the business as a source of funding).

Not too surprised to see TSLA down today as I bet a lot of the shorts are trying to cover before they lose too much. The price will rise to $420 as more information comes out about the transaction. To me and investment in TSLA was highly speculative and risky enough to begin with, going private and greatly reducing ownership liquidity will make it even more of a risky investment.

If shorts were covering that would drive the stock price up, not down.
« Last Edit: August 08, 2018, 03:07:23 PM by sherr »

talltexan

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Re: TSLA going Private??!?
« Reply #9 on: August 08, 2018, 12:04:23 PM »
I cannot help but think the share price is going down because he's not really taking it private, he just said that for other reasons.

ILikeDividends

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Re: TSLA going Private??!?
« Reply #10 on: August 08, 2018, 02:12:28 PM »
I cannot help but think the share price is going down because he's not really taking it private, he just said that for other reasons.
That would run right up to the edge of stock price manipulation, which is illegal.  Committing such a crime in such a highly public way would almost certainly prove the shorts correct.  The SEC has already opened an inquiry into yesterdays tweets:

https://www.cnbc.com/2018/08/08/sec-has-reportedly-made-inquiries-to-tesla-over-elon-musks-tweet-abou.html

Musk is at the very least skating along the edges of the law.  We will probably find out pretty quickly whether he skated over the ledge of that cliff or not.

I don't really think Musk has any choice now, except to put the proposal to a vote of the shareholders, since he publicly said that was the only final step needed in order to take the company private.

If he doesn't do that, or if he hasn't already secured funding, I would not want to be him right now, and I sure as hell wouldn't want to be a shareholder in that case.  Musk will at least have to convince the SEC that funding really is available now, if he wants the option to continue "thinking about taking Tesla private."

If he's got a $71B check in his pocket from the Saudis or someone else, he might be o.k.  But then I'd suppose he'll still have to explain to the SEC his reasons for the public announcement. "I wanted to scare the shorts," is probably not going to be an acceptable explanation.
« Last Edit: August 08, 2018, 03:12:20 PM by ILikeDividends »

Proud Foot

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Re: TSLA going Private??!?
« Reply #11 on: August 08, 2018, 03:41:40 PM »
Thanks for the correction on the shorts @sherr. I was not thinking correctly when I made that comment.

Of course it is not the reporting requirements but everything that happens reactionary to the reporting. If they do end up going private I hope they will consider doing quarterly, semi-annual, or annual reports of the innovative technologies they are working on. I always looked forward to when they would talk about them in the conference calls.

Car Jack

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Re: TSLA going Private??!?
« Reply #12 on: August 09, 2018, 08:02:04 AM »
......so buy at $320?

daverobev

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Re: TSLA going Private??!?
« Reply #13 on: August 09, 2018, 02:22:45 PM »
At the OP: AFAIK you are not allowed to hold things in a TFSA that are not sold on a 'listed' exchange. If the company is private, it won't be listed anywhere. So - no, you'd have to sell.

Not sure about the RRSP, but I would imagine things are different.

CCCA

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Re: TSLA going Private??!?
« Reply #14 on: August 16, 2018, 11:00:09 PM »
sounds like the SEC is having a talk with all involved, Musk and the Board to see if "Funding secured" was just a tweet to hurt short sellers (and illegal stock manipulation) or it was the real thing.  It sort of seems like everyone is now going through the motions to find a way to go private just so it won't seem like the former. 


Anyway, who knows what will happen, but it's been fascinating to watch.  If you search for "$TSLA" on twitter, you find quite alot of ridiculous, but interesting nonetheless, discussions with people convinced Musk is a scam artist and those who think he's basically Jesus. 


https://twitter.com/search?f=tweets&vertical=default&q=tsla

ILikeDividends

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Re: TSLA going Private??!?
« Reply #15 on: August 16, 2018, 11:32:35 PM »
sounds like the SEC is having a talk with all involved, Musk and the Board to see if "Funding secured" was just a tweet to hurt short sellers (and illegal stock manipulation) or it was the real thing.  It sort of seems like everyone is now going through the motions to find a way to go private just so it won't seem like the former. 


Anyway, who knows what will happen, but it's been fascinating to watch.  If you search for "$TSLA" on twitter, you find quite alot of ridiculous, but interesting nonetheless, discussions with people convinced Musk is a scam artist and those who think he's basically Jesus. 


https://twitter.com/search?f=tweets&vertical=default&q=tsla

I don't think Musk is a scammer, based on what I know now, but I think he's proven, at best, to be childishly naive regarding his fiduciary duties and accepted processes and norms for vetting and disclosing material information publicly.

At this point it doesn't matter whether he goes forward with taking the company private.  He originally said he had "secured funding," but subsequent blog posts he's made (probably in a panic) reveal that what he was actually referring to in no way even approximates what a reasonable person would consider secured funding to mean. 

If he is unable to convince the SEC that he wasn't trying to scare the shorts out of the stock, then things won't go well for him.  His original statement still stands, and the SEC is now asking questions.  Shorts are entitled to the same regulatory protections that longs are entitled to.

In my unqualified opinion, he will not be forced out of his position at Tesla over this, but he has certainly drawn regulatory scrutiny that I doubt he intended to do, and that won't go away any time soon; regardless of what he does going forward.

If the SEC investigation turns up anything more substantial than what we know already, things could go south quickly, and his tenure at Tesla could well be at risk.  I wouldn't expect the stock to respond well in that scenario.

His board of directors has already requested he stop tweeting about anything at all.  He has not tweeted anything yet, presumably as a result of that request.  Just shut the hell up already, is probably the least bad of all his other bad options at this point.

He has certainly dug a pothole on his road to the future that is only there because of him, and which shouldn't be there at all.  Whether it stays a pothole, or becomes a sinkhole, remains to be seen.  Musk is probably already looking back fondly on the days when all he had to rant against were stock analysts and short sellers.

Now Musk has the SEC and pending lawsuits to deal with, in addition to analysts and short sellers.  And what did he gain from his original tweet?  A three day pop in the stock price hardly seems worth it.  Many of those buyers were probably the shorts who covered, and who are suing right now as a result of covering based on that patently misleading tweet.
« Last Edit: August 17, 2018, 01:55:31 AM by ILikeDividends »

CCCA

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Re: TSLA going Private??!?
« Reply #16 on: August 17, 2018, 01:50:36 AM »
Good summary. I just read the NYTimes article (https://www.nytimes.com/2018/08/16/business/elon-musk-interview-tesla.html) and its a weird article.

Basicallly he says he just made up the $420 price. Then describes how difficult his year has been. Doesn’t really address the main questions that people are asking. The ending of the article makes it seem like he might be gone sometime soon either willingly or unwillingly.

ILikeDividends

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Re: TSLA going Private??!?
« Reply #17 on: August 17, 2018, 02:04:47 AM »
Good summary. I just read the NYTimes article (https://www.nytimes.com/2018/08/16/business/elon-musk-interview-tesla.html) and its a weird article.

Basicallly he says he just made up the $420 price. Then describes how difficult his year has been. Doesn’t really address the main questions that people are asking. The ending of the article makes it seem like he might be gone sometime soon either willingly or unwillingly.

Musk might well have to depart the company.  But in my humble opinion, the SEC will have to find substantially more in order to force that.

The directors--of which Musk is the chairman--could theoretically remove Musk, regardless of the SEC findings.  But I can't imagine anything other than Musk's obvious talents and personal charisma moving this company into the future as a going concern.

Die-hard investors thought they bought a piece of Musk, not a piece of Tesla.  Tesla fundamentals certainly don't justify the valuation Tesla stock has now.  I believe this, alone, makes the BOD reluctant to remove Musk from the helm of Tesla.

If Musk is removed, who on earth--beside the likes of a Steve Jobs--could take over the helm of Tesla?  Sadly, Jobs is not available for the position. R.I.P. :(
« Last Edit: August 17, 2018, 03:39:53 AM by ILikeDividends »

rbuck

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Re: TSLA going Private??!?
« Reply #18 on: August 17, 2018, 03:12:28 PM »
Good summary. I just read the NYTimes article (https://www.nytimes.com/2018/08/16/business/elon-musk-interview-tesla.html) and its a weird article.

Basicallly he says he just made up the $420 price. Then describes how difficult his year has been. Doesn’t really address the main questions that people are asking. The ending of the article makes it seem like he might be gone sometime soon either willingly or unwillingly.

Musk might well have to depart the company.  But in my humble opinion, the SEC will have to find substantially more in order to force that.

The directors--of which Musk is the chairman--could theoretically remove Musk, regardless of the SEC findings.  But I can't imagine anything other than Musk's obvious talents and personal charisma moving this company into the future as a going concern.

Die-hard investors thought they bought a piece of Musk, not a piece of Tesla.  Tesla fundamentals certainly don't justify the valuation Tesla stock has now.  I believe this, alone, makes the BOD reluctant to remove Musk from the helm of Tesla.

If Musk is removed, who on earth--beside the likes of a Steve Jobs--could take over the helm of Tesla?  Sadly, Jobs is not available for the position. R.I.P. :(

When you buy Tesla you are really buying Elon and if goes then I think Tesla is done. They are bleeding cash at an alarming rate and based on their current cash burn don't have enough money to last a year. They have a cool product but the traditional car companies are starting to catch up. The problem was that while Tesla purposely decided to do things differently than the traditional company and threw the baby out with the bath water, specifically the tooling up of a manufacturing plant. To that end they have never come close to fulfilling their production estimates, a significant percentage of the cars are rolling off the line with defects, and there was some allegations that they were forgoing critical safety tests to meet their figures. Plus they did produce enough units recently that the federal tax incentive has been phased out.

The only reason people are so high on Tesla is because of the sort of cult that Elon. Without his personality at the company I see the company failing fairly quickly with the IP being purchased by one of traditional companies.

Financial.Velociraptor

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Re: TSLA going Private??!?
« Reply #19 on: August 17, 2018, 05:07:15 PM »
TSLA is in one hell of a bind.  To remain a going concern, they have to become a high volume manufacturer.  To become a  high volume manufacturer means revealing to shareholders once and for all that auto manufacture is a capital intensive and low margin business that deserves a low multiple to earnings.  Who among the people and groups who have the kind of capital to take TSLA private is damned fool enough to do it?!? 

My take, Musk gets a slap on the wrist from the SEC and then suffers enormous public shame when TSLA inevitably folds leaving shareholders nothing and bond holders with a serious haircut.