> it's easier for more people to raise a lot of money for risky endeavors.
Is it easier to raise money for risky endeavors or for "hot" endeavors. I'm not sure this no structure to how a lot of people are now allocating capital is actually contributing anything positive, just pure malinvestment.
AMC is a perfect example. It's a company that raised hundreds of millions at valuations 10x of what it had months ago. Is AMC a "risky investment" we should be allocating capital too? Box office receipts and still down 50% and may never fully recover. Why is AMC a good use of that capital rather than institutions that can replace it completely?
Why do you think Elon Musk is obviously different? He's definitely had many events where he has lied about aspects of his business. You could argue that it doesn't matter now that he has built something real, but that's down to a lot of luck, not ethical backbone.
Musk has built many things over the past Many years. Though he may talk about even more, bringing EVs to the masses and creating reusable rockets is something he deserves full credit for. It has nothing to do with ethics. A rational person would not equate Musk with Milton.
Not equate, realize that they are both part of a pattern.
We also should not let Elon Musk's actions only be evaluated in their totality. We can argue about the net sum of his contributions, but it should be fundamentally irrelevant to evaluating any individual one. He shouldn't lie or allow fraud. His actions with the Solar Roof launch, Boring Company, Self Driving, and funding tweets all cross ethical lines that we as a country need to make clear are not what we want from our business leaders.
The fact that Tesla is not entirely vapourware doesn't mean that Musk hasn't lied or even committed fraud to get here. Lying to investors to fund a billion dollar company that is actually worth a few hundred million is not that different from funding one that is worth 0 dollars.
It's part of the fraud triangle studied in most business schools:
"The fraud triangle is a framework commonly used in auditing to explain the reason behind an individual’s decision to commit fraud. The fraud triangle outlines three components that contribute to increasing the risk of fraud: (1) opportunity, (2) incentive, and (3) rationalization."
Companies that are "saving the world" are rife with people willing to rationalize their behavior. That's why it is imperative they are scrutinized properly so that the other elements don't also become rampant. We've failed completely with that on the latest wave of greentech companies.
I'm not sure you are following the Elon-Solar City case if you think Elon's only sin is being a dick on Twitter. Or the original $420 funding a share saga.
Elon Musk's repeated fake-it-till-you-make-it behavior and the unwillingness of regulators to crack down on it spawns Trevor Miltons.
The SEC did enforce against tesla - when Elon tweeted "Tesla’s stock price is too high imo" - they began an investigation and subpoenaed records because they felt this this had not been approved by attorneys (it wasn't - elon claimed it was his personal opinion). So they went after him for this.
They also went after him for a lot of other stuff.
Note that they haven't gone after folks for failure to deliver issues on sales which is usually caused by shorting stocks such as Tesla's and others. Even though you'd think the basics of a regulated market is that folks selling shares actually own and will deliver them if someone buys them.
As you are probably aware, buyout offers are routinely front run on the street by insiders. Ie, folks in the know get in early and book nice gains. So some folks actually liked hearing direct from CEO on what they were thinking. His twitter post was clear, he was "considering" taking TSLA private.
Anyone who bought in at this news would have been buying in for < $84 per share (split adjusted). Current stock price is 600 per share+.
The problem the SEC has had in trying to charge him is that folks feel like the SEC really ignore some of the clear scam behavior by big players. Fail to deliver? No issue. Broker bad behavior and theft? Light FINRA slaps on the wrist. Complaints about Madoff? Investigate the complainers. CEO talking about potential to take a company private publically - all out WAR by SEC!
He said he is considering something. It was not definite. Stock price didn't jump to the "buyout" price the way it normally would on a real buyout. So we have clear market data that folks didn't not consider his tweets a statement that a buyout was occuring.
Yes - people want to make this into a huge crime. But he explained in his tweets pretty transparently to most what his thinking was.
And they did go after him for this and everything else. Hey says Stock price too high in his opinion - BAM - they were on him. And they went after him for this.
if you read between lines - the contempt court case got a bit of an eye roll from the judge involved.
> His twitter post was clear, he was "considering" taking TSLA private.
$420 funding secure indicates he already had financing ready. Why has this mystery funder never materialized.
> Anyone who bought in at this news would have been buying in for < $84 per share (split adjusted). Current stock price is 600 per share+.
This is hugely problematic as a response. Elon Musk's behavior is unethical whether Tesla stock went up or down. The stock price should not be used as justification for previous lies. If we accept that, then we accept markets where people can gamble on a lie and things are fine if their gamble works out. That's not the business culture I want to create. People should be honest about risks so that they can be properly evaluated.
> The problem the SEC has had in trying to charge him is that folks feel like the SEC really ignore some of the clear scam behavior by big players.
Elon Musk is literally the second biggest player! Ignoring his malfeasance creates more people willing to emulate him.
> Fail to deliver? No issue. Broker bad behavior and theft? Light FINRA slaps on the wrist. Complaints about Madoff? Investigate the complainers. CEO talking about potential to take a company private publically - all out WAR by SEC!
You won't find me giving a kind word to the SEC's currently regulatory practices, but we need to recognize that corporate culture is made from examples. When someone like Elon Musk publicly flouts all responsible corporate behavior, and doesn't have an example made of him, then that is going to breed people willing to make the exact same decisions.
> He said he is considering something. It was not definite.
"Funding secured" is definite.
> Yes - people want to make this into a huge crime. But he explained in his tweets pretty transparently to most what his thinking was.
It is a huge crime. In the middle of trading, he decided to fraudulently claim he had a buyout offer for his company. That screws over not just short sellers, but any one who had calls above the $420 a share price. There is no universe where that is healthy for our markets.
> if you read between lines - the contempt court case got a bit of an eye roll from the judge involved.
He's currently in a court case for his buyout of Solar City, where he announced a fake product, used it as reasoning for his one public company to buy a company that he, his brother, and his cousin's had the largest stake in, and he, his brother, and his other companies (Tesla and SpaceX) were the largest bondholders in. This is a cartoonish set of conflicts of interest here. But apparently that shouldn't matter, because "stock price."
No one has been confused I don't think. I saw the considering the $420 buyout, I took it to mean just that.
The short sellers around tesla have been pathetic. Note I don't own any tesla stock, but the short seller hype train is just ridiculous around tesla. How there has been no action there is mind boggling.
He's a crazy guy willing to take crazy risks - look at SpaceX -> they are operating COMPLETELY outside all norms.
Despite these "huge crimes" - no prosecutor anywhere is prosecuting. The SEC efforts basically fell pretty flat - their contempt attempts also fell flat.
The conflicts with solar city were crazy - they were also public. I thought it was a terrible deal - but that was public too. If you think Elon is bad for tesla and you own stock vote him out by running your own board slate. But he has a vision for a fully integrated solar and powerwall type product no barriers. You get an app, the sun charges the battery. They had and have ideas around charging cars mixed into that. Not sure if it's a good idea - plenty of competitors coming for Tesla, but they may be able to deliver something here with their solar / energy AND car companies. And the trend is towards this type of integration - so he gets to take a crack at it.
And a heads up, if these solar city folks win their case - guess who is going to get the money. Yes, TESLA! I've followed the case a bit. Not super impressive (aside from the plaintiffs attorneys vomiting in court! What was going on!).
Importantly, you are Elon, you own 22% of two companies - Tesla and SolarCity with highly overlapping missions. You want to integrate solar / energy / cars. I mean, what would YOU do. Go do a deal with some company in China the way others have tried? These folks saying it's such a bad idea / deal - what was their much better proposal? Elon already knew the Solarcity board and management etc etc. I really am curious what was the amazingly better option to get where Elon wanted to go. Easy to criticize, harder (much) to do.
The Battery-Solar-Car angle is such an obvious integration for Tesla. I guess on paper it is frustrating it was a family connection, but their alternative was for Tesla to start building their own Solar capability when they had a significant stake in one already.
SEC is a joke - chasing Elon is like a weird hobby for them... meanwhile things like 2008 happen and they shrug and go "Sorry, we missed that one"... What's their mission again?
Sure, battery solar goes together, but why did they need to specifically buy his conflict of interest failing one instead of another solar company? Because he had leveraged investments in it and even mixed SpaceX into it having them use NASA money to buy SolarCity bonds. Crazy self-dealing and ultimately fraud with the fake shingle demo and claims.
I wish folks saying they should have bought X company would actually name X company. Seriously - what was the company they should have purchased.
Elon already owned basically 22% of both companies. After they did the stock deal he owned 22% or whatever of the combined company. He already knew the folks / board / management of both companies.
Can you name the company he "should" have purchased?
Pretty sure Solar is a big part of energy generation in Space related stuff.
So I can obviously see the self dealing side… but there is also an equally “it just made sense” side. Do billionaires need to self enrich with crazy side deals?
Solar city had nothing to do with space solar, and if they did bonds don't give access to the tech anyway. It was residential (contracted?) install and financialization of the deal and payback terms.
> No one has been confused I don't think. I saw the considering the $420 buyout, I took it to mean just that.
Clearly options traders didn't, since all options above $420 went to zero.
> The short sellers around tesla have been pathetic. Note I don't own any tesla stock, but the short seller hype train is just ridiculous around tesla. How there has been no action there is mind boggling.
I disagree. I think the behavior of the stock holders have been pathetic. The short sellers demands for greater transparency and a company not entirely based on smoke and mirrors are easily met. The company itself has refused to meet those minimal standards.
> He's a crazy guy willing to take crazy risks - look at SpaceX -> they are operating COMPLETELY outside all norms.
So? This shouldn't be an excuse for fraudulent behavior. Everytime I bring up a specific problematic behavior of Elon Musk, someone wants to reframe the conversation around the totality of his behavior, rather than the single criticism. I don't know about rockets, but from what I hear, Elon has done a great deal for him. Good for him. That doesn't make any of his behaviors faking a buyout ok, his behavior in the SolarCity merger, or his behavior with the Boring Company.
If we want better businessmen, we have to hold the ones we have accountable. Continuing to refuse to do that for Elon is spawning generations of people like Trevor Milton who assume laws don't apply if you're charming enough.
> The conflicts with solar city were crazy - they were also public. I thought it was a terrible deal - but that was public too. If you think Elon is bad for tesla and you own stock vote him out by running your own board slate. But he has a vision for a fully integrated solar and powerwall type product no barriers. You get an app, the sun charges the battery. They had and have ideas around charging cars mixed into that. Not sure if it's a good idea - plenty of competitors coming for Tesla, but they may be able to deliver something here with their solar / energy AND car companies. And the trend is towards this type of integration - so he gets to take a crack at it.
He lied to shareholders about both SolarCity's financial state and faked a product in order to secure the merger. You can say, "these are public companies" all you want, but the public companies voted for the merger purely on Elon's word, which apparently isn't worth much.
> Importantly, you are Elon, you own 22% of two companies - Tesla and SolarCity with highly overlapping missions. You want to integrate solar / energy / cars. I mean, what would YOU do. Go do a deal with some company in China the way others have tried? These folks saying it's such a bad idea / deal - what was their much better proposal? Elon already knew the Solarcity board and management etc etc. I really am curious what was the amazingly better option to get where Elon wanted to go. Easy to criticize, harder (much) to do.
Not fake a product and lie about the financial status of my company. You know, the bare minimum.
Call me pessimistic, but my thoughts on the matter is that TSLA and by association Musk have become too big to fail. Anything that would take Musk down would harm a lot of very wealthy investors.
There are people looking to take him down along with SpaceX / Tesla etc. Others are glad to have someone powering ahead relative to competition in places like China etc. We will see how it plays out.
I mean, similarly to my certainty Donald Trump was lying that his taxes are under audit, and thats why he can't release them. Do I have exact knowledge of Elon's head state, no, but I can make inferences from all his actions since. If a buyer truly existed to facilitate that transaction, that would be public knowledge at this point.
If you muck in the private equity world at all you'd know that this isn't true at all. Lots of deals and nearly deals happen everyday and they only reach the public sphere if the parties want it too.
This was an $100 billion deal at the time. It would have been the largest LBO of all time. If there hasn't been any institution revealed to have been financing it at this point then there wasn't one.
I think it was pretty clear that he was thinking about Saudi / middle east / Norwegian / sovereign wealth type funding on equity side. Then debt for rest if needed.
These funds are looking to diversify away from oil - so for them a play in EV space makes sense.
The Saudis in particular planned to do an IPO in oil industry - but that ended up not happening which really changed their decision making. If it had they were explicit about desire to diversify (smart in my view).
It wasn't a $100B deal. Many larger investors would rolled their holdings into the private entity - Elon alone would have. $40 - $50B. If debt is in mix equity portion even smaller. It would have been the deal of the century.
"Saudi’s Public Investment Fund built the undisclosed stake of between 3 and 5 per cent of Tesla’s shares this year, according to people with direct knowledge of the matter.
At Tesla’s current share price the position is worth between $1.7bn and $2.9bn. The stake, which is below the 5 per cent threshold that requires public disclosure, makes the PIF one of Tesla’s eight biggest shareholders, according to Bloomberg data.
The PIF, which has more than $250bn in assets, initially approached Tesla and chief executive Elon Musk to express interest in purchasing newly issued shares in the electric vehicle company.
However, Tesla did not act on the interest, one person informed on the matter said. Instead, the Saudi state fund acquired the position in secondary markets with the help of JPMorgan."
- Financial Times.
Someone's just chased down $2B of your stock on SECONDARY market - yeah - that's actually more interest than many deal talks even get to.
And yes - discussions like this happen with some frequency - and it's not a scandal if the deal doesn't close - you just don't usually read about them. Elon says he wanted to talk to Apple about buying tesla as well, he's on twitter more than most. That said, folks on the deal side - there tends to be movement in stock prices 3 days before deals are announced - so someone is making money on the normally secret considerations.
> I think it was pretty clear that he was thinking about Saudi / middle east / Norwegian / sovereign wealth type funding on equity side. Then debt for rest if needed.
He was "thinking"? That's not funding secured. Why have all of these institutions specifically denied having discussed it at the time too? Either it wasn't these institutions, or funding was very far from secure at the time he claimed it was.
> It wasn't a $100B deal. Many larger investors would rolled their holdings into the private entity - Elon alone would have. $40 - $50B. If debt is in mix equity portion even smaller. It would have been the deal of the century.
If you are going to get investors for something like this, you're also going to roll over all the debt/options that you have on your books as well. It would have been close to ~100 billion, the largest LBO ever done.
> And yes - discussions like this happen with some frequency - and it's not a scandal if the deal doesn't close - you just don't usually read about them.
You don't read about them because the CEO doesn't announce they secured funding for one in the middle of trading. You know, the responsible thing to do.
This has been going on since time immemorial. A part of me thinks it's a necessary evil in a world where people won't fund revolutionary ideas. However, that also means Milton and Holmes etc.
I would agree that fraud is always going to happen; how much though is up for debate, and I would tend to argue that more fraud makes the world worse at funding revolutionary ideas. More revolutionary ideas happen and get funded in the US, which while I believe has become rife with fraud over the past decade, is no where near the scale the number of frauds in China or Africa or less well monitored markets.
Trust is fundamental part of markets and is basically its own interest rate. The more people can trust one another, the riskier investments people are willing to partake in.
Eh, your mileage may vary, but I've normally found too completely open ended questions impossible to ever really get a good signal from. I've done enough interviews to feel like questions with a pretty binary "you either get it or you don't", evaluation make it pretty hard to judge someone. I'd rather ask questions where there are multiple levels of evaluation, rather than a single trick.
It was written very lazily and quickly, by someone who knows that getting an article out first is going to be one of the most important things to driving clicks.
Is it easier to raise money for risky endeavors or for "hot" endeavors. I'm not sure this no structure to how a lot of people are now allocating capital is actually contributing anything positive, just pure malinvestment.
AMC is a perfect example. It's a company that raised hundreds of millions at valuations 10x of what it had months ago. Is AMC a "risky investment" we should be allocating capital too? Box office receipts and still down 50% and may never fully recover. Why is AMC a good use of that capital rather than institutions that can replace it completely?