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FILE – On September 17, 2018, SpaceX's founder and general manager, Elon Musk, speaks after announcing that Japanese billionaire Yusaku Maezawa was the first private passenger in Hawthorne, California. Musk alleging that he had made false and misleading statements about privatization plans for the company in August. (AP Photo / Chris Carlson, File)
If you are lucky enough to have purchased Tesla shares at a price below $ 270.90 – where they were traded after the hours of September 27 – I firmly believe you should take those profits this morning.
The reasons for the sale of the security were suddenly ahead of why the SEC disclosed that it was seeking to get rid of Elon Musk for misleading its shareholders while tweeting that the funding was guaranteed for a purchase of $ 420, according to the the Wall Street newspaper.
Why the urgency? In short, given his precarious financial situation and lack of strike force, Tesla would be in a perilous form without Musk. And the probability that he's gone is higher than ever.
Two weeks ago, I thought Musk should be replaced as CEO by an adult – someone like former Boeing CEO and Ford CEO Alan Mulally. If Musk left and sold his stake, maybe someone of that caliber would have the chance to come to Tesla's rescue.
But I see this result as having an exceptionally low probability of occurring.
Musk's statement dated September 27 described the SEC's decision as unfair. "Integrity is the most important value in my life and the facts will show that I have never compromised this in any way."
And Musk still has his board under his thumb. According to a statement from the Tesla Board of Directors dated September 28, "Tesla and the Board of Directors have full confidence in Elon, its integrity and leadership in the company, which resulted in the largest company American automobile for more than a century. "
(I have no financial interest in the titles mentioned in this article).
Here are five reasons to sell Tesla shares today.
1. The Musk bonus
If Elon Musk were to leave Tesla, the company's shares would lose the shareholders who believe in him so passionately.
Unlike other recent people perceived as visionary leaders – like Theranos' former CEO, Elizabeth Holmes, Musk has created a company that delivers products that really work and that most people love.
Beyond the loss of emotional attachment of those who bet that the stock will continue to rise, Musk's departure would require Tesla to find a new visionary product to keep the company growing.
Of course, it is possible that Tesla can follow the path of Apple. A CEO – Tim Cook – turned out very well, which could draw much more profit from the products developed by the visionary, Steve Jobs.
2. Negative cash flow
Musk was able to keep Tesla shares alive, as investors speculated that he could persuade Wall Street to lend more money to the company.
Without Musk at the helm, can anyone else do this work? With a debt of $ 10 billion, a burn-down of $ 1 billion per quarter, and $ 2.2 billion in cash, you do not have to be a genius to realize that Tesla will run out of cash over the course of three years. next quarters.
That's not all – paying back two convertible notes would give Tesla less than two quarters before it runs out of cash.
How? In November, it is likely that Tesla will have to repay $ 230 million in convertible bonds – because it is very unlikely that its shares will reach the conversion price of $ 560.64. And in March 2019, Tesla will have to pay an additional $ 920 million to withdraw a separate convertible note, unless its shares reach $ 359.87, according to the Journal.
3. No profit
Tesla has a series of financial results that are not tainted with profitability. Musk thinks he can fix it in the third quarter. According to the Journal, he is "[betting that a third quarter profit] will prove to skeptics that the automaker has turned a page and can start generating the cash it needs to do business without having to raise additional capital. "
But as I wrote in August 2017, Musk has a much more compelling track record of what I will politely call exaggerations than delivering a profitable quarter.
4. no bench strength
In the past two years, Tesla has lost 50 Vice Presidents or Senior Managers. "Jon McNeill, commercial director of Tesla, left for a position of chief operating officer at Lyft, while the head of engineering of automaker Doug Field, has found a job at Apple," says the Journal.
And his chief accountant went to Anaplan, a connected planning company that recently filed an IPO application, after less than a month at Tesla.
This is not a good idea for a publicly traded company.
5. nervous suppliers
Tesla has asked some silver equipment suppliers to recover this summer. It's hard to see why a company would ship to a company that would not be able to pay. And as the Journal reports, an investigation by the Original Equipment Suppliers Association revealed that 18 of the 22 suppliers who responded believe that Tesla now represents a financial risk.
If I owned a Tesla right now – or if I was on the waiting list for Model 3 – I would also be nervous. To be sure, the old DeLoreans are always there and are maintained. But they do not need charging stations …
28.5% of Tesla's shares are sold short. If the Tesla board throws Musk who sells his stake – and replaces him with someone like Mulally – the short sellers could live to regret their bet.
But the odds seem greater than short sellers – like Jim Chanos – can enjoy a salary comparable to that of Enron on what turned out to be a pretty painful gamble.
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FILE – On September 17, 2018, SpaceX's founder and general manager, Elon Musk, speaks after announcing that Japanese billionaire Yusaku Maezawa was the first private passenger in Hawthorne, California. Musk alleging that he had made false and misleading statements about privatization plans for the company in August. (AP Photo / Chris Carlson, File)
If you are lucky enough to have purchased Tesla shares at a price below $ 270.90 – where they were traded after the hours of September 27 – I firmly believe you should take those profits this morning.
The reasons for the sale of the security were suddenly ahead of why the SEC disclosed that it was seeking to get rid of Elon Musk for misleading its shareholders while tweeting that the funding was guaranteed for a purchase of $ 420, according to the the Wall Street newspaper.
Why the urgency? In short, given his precarious financial situation and lack of strike force, Tesla would be in a perilous form without Musk. And the probability that he's gone is higher than ever.
Two weeks ago, I thought Musk should be replaced as CEO by an adult – someone like former Boeing CEO and Ford CEO Alan Mulally. If Musk left and sold his stake, maybe someone of that caliber would have the chance to come to Tesla's rescue.
But I see this result as having an exceptionally low probability of occurring.
Musk's statement dated September 27 described the SEC's decision as unfair. "Integrity is the most important value in my life and the facts will show that I have never compromised this in any way."
And Musk still has his board under his thumb. According to a statement from the Tesla Board of Directors dated September 28, "Tesla and the Board of Directors have full confidence in Elon, its integrity and leadership in the company, which resulted in the largest company American automobile for more than a century. "
(I have no financial interest in the titles mentioned in this article).
Here are five reasons to sell Tesla shares today.
1. The Musk bonus
If Elon Musk were to leave Tesla, the company's shares would lose the shareholders who believe in him so passionately.
Unlike other recent people perceived as visionary leaders – like Theranos' former CEO, Elizabeth Holmes, Musk has created a company that delivers products that really work and that most people love.
Beyond the loss of emotional attachment of those who bet that the stock will continue to rise, Musk's departure would require Tesla to find a new visionary product to keep the company growing.
Of course, it is possible that Tesla can follow the path of Apple. A CEO – Tim Cook – turned out very well, which could draw much more profit from the products developed by the visionary, Steve Jobs.
2. Negative cash flow
Musk was able to keep Tesla shares alive, as investors speculated that he could persuade Wall Street to lend more money to the company.
Without Musk at the helm, can anyone else do this work? With a debt of $ 10 billion, a burn-down of $ 1 billion per quarter, and $ 2.2 billion in cash, you do not have to be a genius to realize that Tesla will run out of cash over the course of three years. next quarters.
That's not all – paying back two convertible notes would give Tesla less than two quarters before it runs out of cash.
How? In November, it is likely that Tesla will have to repay $ 230 million in convertible bonds – because it is very unlikely that its shares will reach the conversion price of $ 560.64. And in March 2019, Tesla will have to pay an additional $ 920 million to withdraw a separate convertible note, unless its shares reach $ 359.87, according to the Journal.
3. No profit
Tesla has a series of financial results that are not tainted with profitability. Musk thinks he can fix it in the third quarter. According to the Journal, he is "[betting that a third quarter profit] will prove to skeptics that the automaker has turned a page and can start generating the cash it needs to do business without having to raise additional capital. "
But as I wrote in August 2017, Musk has a much more compelling track record of what I will politely call exaggerations than delivering a profitable quarter.
4. no bench strength
In the past two years, Tesla has lost 50 Vice Presidents or Senior Managers. "Jon McNeill, commercial director of Tesla, left for a position of chief operating officer at Lyft, while the head of engineering of automaker Doug Field, has found a job at Apple," says the Journal.
And his chief accountant went to Anaplan, a connected planning company that recently filed an IPO application, after less than a month at Tesla.
This is not a good idea for a publicly traded company.
5. nervous suppliers
Tesla has asked some silver equipment suppliers to recover this summer. It's hard to see why a company would ship to a company that would not be able to pay. And as the Journal reports, an investigation by the Original Equipment Suppliers Association revealed that 18 of the 22 suppliers who responded believe that Tesla now represents a financial risk.
If I owned a Tesla right now – or if I was on the waiting list for Model 3 – I would also be nervous. To be sure, the old DeLoreans are always there and are maintained. But they do not need charging stations …
28.5% of Tesla's shares are sold short. If the Tesla board throws Musk who sells his stake – and replaces him with someone like Mulally – the short sellers could live to regret their bet.
But the odds seem greater than short sellers – like Jim Chanos – can enjoy a salary comparable to that of Enron on what turned out to be a pretty painful gamble.
