Speaker 1: Hey, this is David Popotoppolis, and boy do we have
Speaker 1: a fun bonus for you today. There's a new podcast
Speaker 1: in our Bloomberg family called money Stuff. The podcast hosted
Speaker 1: by our friends Matt Levine and Katie Greifeld. Every week,
Speaker 1: they talk about Wall Street, finance, and all the other
Speaker 1: stuff that Matt covers in his wildly popular newsletter money Stuff.
Speaker 1: Maybe you've heard of it. Of course, you can't talk
Speaker 1: about money stuff without talking about a one mister Elon Musk,
Speaker 1: and in their most recent episode, Matt and Katie discussed
Speaker 1: Elon in the upcoming shareholder vote on his pay package.
Speaker 1: We thought you might get a kick out of their conversation,
Speaker 1: so we're sharing an excerpt with you here. If you
Speaker 1: want to listen to the whole episode, we'll leave a
Speaker 1: link in the show notes, or you can find it
Speaker 1: by searching money Stuff the podcast wherever you listen to
Speaker 1: your podcasts. The elon In crew will be back in
Speaker 1: your feed tomorrow with a brand new episode.
Speaker 2: Hello and welcome to the money Stuff podcast, your weekly
Speaker 2: podcast where we talk about stuff related to money. Hi'm
Speaker 2: Matt Levie. I've read the Money Stuff colin for Bloomberg Opinion.
Speaker 3: And I'm Katie Greifeld.
Speaker 4: I'm a reporter for Bloomberg News and an anchor for
Speaker 4: Bloomberg Television.
Speaker 2: It's the best day of our lives.
Speaker 4: It is the best day of our lives, which happens
Speaker 4: every day on Fridays.
Speaker 3: We have a lot to talk about today. We have
Speaker 3: to talk about Elon Musk.
Speaker 2: Of course, we had a whole week with that Elon Musk.
Speaker 4: I think, I know it was weird that we didn't
Speaker 4: get to it in the first week. So we'll talk
Speaker 4: about Elon Musk in that pay package fifty six billion dollars,
Speaker 4: and of course his issues with Delaware. We're also going
Speaker 4: to talk about Jane Street versus Millennium. You just published
Speaker 4: on this.
Speaker 2: By the time you heard this podcast, I will have
Speaker 2: published on it roughly twenty four hours ago, recording it
Speaker 2: shortly after I published on it.
Speaker 4: It's Thursday right now, and Matt published twenty minutes ago.
Speaker 4: So this is the one I'm least prepared for, as
Speaker 4: we're also going to talk about Hunter Brook, the hedge Fund.
Speaker 4: That's also a newspaper question Mark. Indeed, before we get
Speaker 4: into this week's topics, it's our second episode.
Speaker 2: It's our second episode. We got a lot of feedback
Speaker 2: On the first episode, we got a.
Speaker 3: Lot of feedback.
Speaker 4: A lot of it was about all of it comment
Speaker 4: that I made about.
Speaker 3: The doped Olympics.
Speaker 4: Surprise, they already exist and they're funded by Peter Thiel.
Speaker 2: Well, it don't exist. They're like launching.
Speaker 4: Yeah, the idea is out there, the enhanced Games that
Speaker 4: would have no drug testing. So if you didn't want
Speaker 4: to do it performance enhancing drugs, you could still enter.
Speaker 2: You would just lose, yes, or you could do the
Speaker 2: regular Olympics, which you'll still have drug testing.
Speaker 3: Yeah, and you'll probably still lose.
Speaker 2: I wonder if, like presumably day one, the best athletes
Speaker 2: will still do the regular Olympics.
Speaker 3: Yeah.
Speaker 2: I wonder how long it'll take for the Enhanced Olympics
Speaker 2: to have faster times and it jumps.
Speaker 3: It's a great question because if you're.
Speaker 2: Like the tenth best track athlete and you do a
Speaker 2: lot of drugs better than the.
Speaker 4: Best, probably there's only one way to find out.
Speaker 2: So is going to do it?
Speaker 3: These games need to happen.
Speaker 4: The event roster includes individual sports such as athletics meaning
Speaker 4: track and field, aquatics, gymnastics, strength and combat. I would
Speaker 4: watch these.
Speaker 2: But what we don't have on that list.
Speaker 3: Is drissage.
Speaker 4: Trissage Yeah, for the uninitiated, dressage is horse dancing effectively,
Speaker 4: just go on YouTube look it up. It's a ridiculous
Speaker 4: sport that, for better or worse, I've partake in. I'm
Speaker 4: not sure if when I enter the enhanced games, which
Speaker 4: I will, whether I take the drugs, the horse takes
Speaker 4: the drugs. Do we both take the drugs the drugs?
Speaker 2: Have you or your horse ever been like offered drugs?
Speaker 2: Has ever been like a controversy at your dressage?
Speaker 4: We're not that good maybe in higher levels of the sport,
Speaker 4: but what we're doing, it's very loosely dressage.
Speaker 3: Let's talk about the time, moving gracefully along. Elon Musk.
Speaker 4: The big news this week is that Tesla came out
Speaker 4: with their proxy statement. Two items of interest. They're going
Speaker 4: to have shareholders to vote again on that twenty eighteen
Speaker 4: pay package of fifty six billion dollars that was voided
Speaker 4: by a Delaware judge, and related to that, they're going
Speaker 4: to vote on whether to move Tesla's state of incorporation
Speaker 4: from Delaware to Texas.
Speaker 3: What do you want to start with?
Speaker 2: They're interrelated, Yes, right, he got paid a giant snack
Speaker 2: of options in about twenty eighteen. Everyone says they're worth
Speaker 2: fifty six billion dollars. Whatever they're worth, like forty billion dollars,
Speaker 2: fifty billion dollars, just like a conventional number that people
Speaker 2: attached to it because you know, go up and down
Speaker 2: with the stock. But right now they're with forty billion
Speaker 2: dollars and judge took them away in January. I said
Speaker 2: that was too much to pay him and it wasn't
Speaker 2: properly approved by the shareholders. And so they're going back
Speaker 2: to the shareholders to one get it properly approved and
Speaker 2: two never has to deal with the Delaware judge again
Speaker 2: because they're going to move to Texas.
Speaker 4: Like you said, these are two intimately related issues. But
Speaker 4: sticking with the pay package, which everyone is saying is
Speaker 4: fifty six billion dollars, maybe it's forty billion dollars, but
Speaker 4: the vote is in June. Yeah, are they going to
Speaker 4: approve it again these shareholders?
Speaker 2: I think so. The proxy quits a lot of letters
Speaker 2: from individual shareholders saying how much they love Elon Musk
Speaker 2: and how they're going to approve it. And also, by
Speaker 2: the way, letters from like trope price right big shareholders too.
Speaker 2: It's interesting if you were a S. Sherelder in like
Speaker 2: twenty twenty one, or even like December of last year,
Speaker 2: I think you would say this pay package was worth it.
Speaker 2: In twenty eighteen, they said we're going to pay youl
Speaker 2: On Musk fifty six billion dollars if he takes the
Speaker 2: market cap of Tesla from like sixty billion dollars, like
Speaker 2: six hundred and fifty billion dollars, And at the time
Speaker 2: that seemed like a real stretch goal. And then he
Speaker 2: did it really quickly, and so all the shareholders got rich,
Speaker 2: like they made a lot of money on Tesla, and
Speaker 2: I think they felt a real sense of gratitude, and
Speaker 2: so I think very few shoholders were complaining about his
Speaker 2: pay package, but one did ensued. Right, Yes, I think
Speaker 2: the shareholders were happy with it. But now if you
Speaker 2: go back to them and say you want to reprove
Speaker 2: it again, they could be like, we already got whatever
Speaker 2: he did. He did the stuff that made it a
Speaker 2: six hundred and fifty billion dollar company, So if we
Speaker 2: can get those passed efforts for free, why shouldn't they
Speaker 2: get it for free. They feel grateful, but did they
Speaker 2: feel fifty six billion dollars grateful? But that' said if
Speaker 2: you're a Tesla scherolder at this point, you're playing a
Speaker 2: longer game, and rightly or wrongly, I think Tesla sherolders
Speaker 2: assume that Elon Musk and his continued affection are essential
Speaker 2: to the value of Tesla stock. And so if they
Speaker 2: vote down this paypackage, like, will he quit in a huff?
Speaker 2: Maybe he's got a lot going on, right, He's got
Speaker 2: a lot of distractions, so he could quit in a huff.
Speaker 2: And although his mercurial stewardship has not been great for
Speaker 2: the stock price in the last couple of years, he
Speaker 2: quits in a huff, that's going to take the stock.
Speaker 4: Think, Yeah, I mean the stock's already down forty percent
Speaker 4: year to day.
Speaker 2: Yeah, Like it's been a rough ride. But still I
Speaker 2: think they want him there. It's not like if they
Speaker 2: vote this dan, he'll come back and be like, Okay, fine,
Speaker 2: can you be like two billion dollars? Like I think, like,
Speaker 2: if they vote this down, he's going to be really mad,
Speaker 2: really mad.
Speaker 4: I guess I have two kind of related points to that,
Speaker 4: to what you're saying, what is the key man risk
Speaker 4: to Tesla, Like how much does Tesla need Elon Musk
Speaker 4: at this point is something I think about all the time.
Speaker 4: This is an established company at this point.
Speaker 2: No, I agree with that it's an established company. They
Speaker 2: could probably operate on its own. It's not like the
Speaker 2: stock has been continuing to go out from strength to strength.
Speaker 2: It's been a rough time. I do think that there's
Speaker 2: probably still a valuation premium for Elon Musk, And I
Speaker 2: think like it's a somewhat retail have you stocked the
Speaker 2: a lot of people who like Elon Musk and the stock,
Speaker 2: And I think if he were to leave, that would
Speaker 2: be bad. But I'm not sure of that in the
Speaker 2: way that I might have been in like twenty twenty one.
Speaker 3: Yeah.
Speaker 2: I also think, by the way, whatever your sort of
Speaker 2: economic calculation, I do think that some of the sheolders
Speaker 2: at least are like, we agreed to pay him to
Speaker 2: these options. We voted on it a court in a
Speaker 2: weird technical opinion strike that down, and we don't think
Speaker 2: that's fair. We think it's like bad for corporate democracy
Speaker 2: and also bad for like fairness to Elon Musk, And
Speaker 2: so we're going to give him that fifty six billion
Speaker 2: dollars back anyway. I think there's probably some of that
Speaker 2: going on among some of the shell including some of
Speaker 2: the institutional shoolders.
Speaker 4: Even if this is approved, we'll just get avoided again.
Speaker 4: Like how does this work if they approve it again.
Speaker 2: It's a fascinating question, I think, and Tesla thinks the
Speaker 2: answer is that if they approve it again, this time
Speaker 2: it will stick, right, because what happened last time is
Speaker 2: they approved it and the judge found that the shaholders
Speaker 2: were not fully informed of all the conflicts of interest
Speaker 2: involved in setting his pay package. Now they're fully informed,
Speaker 2: in part because, like Tesla went back and gave disclosures,
Speaker 2: but also they just detached the judge's opinion to the
Speaker 2: proxy statement to be like anything that the judge found
Speaker 2: bad here, you can read it right. So I think
Speaker 2: they have to be fully informed. There's no problem with
Speaker 2: the vote, but the law and this is not super clear,
Speaker 2: and they say in the proxy statement, we're not totally
Speaker 2: sure what the effect of this will be. I think
Speaker 2: there's some argument that the disgruntled shaholder can sue again
Speaker 2: and the judge again gets to decide if the pay
Speaker 2: package is fair, and we kind of know she thinks
Speaker 2: it isn't so it might get struckt. But the other
Speaker 2: thing I want to say is that I don't know
Speaker 2: what the disgruntled cherold. There's a guy named Richard turnouta.
Speaker 2: I don't know what he thinks. I don't know if
Speaker 2: he wants to do this again. But you know who
Speaker 2: cares his lawyers who when they won in the Delaware
Speaker 2: court and they strike down this fifty six billion dollar
Speaker 2: pay package. They went to the court and they said,
Speaker 2: we want five point six billion dollars worth of Tesla
Speaker 2: stock as a fee for this win. Right, And their
Speaker 2: theory is, we saved shareholders all this money by clawing
Speaker 2: back the fifty six billion dollars from Elon Musk. If
Speaker 2: the shareholders give you On Musk the fifty six billion
Speaker 2: dollars back, they haven't gotten the fee yet, right, it's
Speaker 2: still in court. Yeah, if they give the money back,
Speaker 2: what is their argument that they save the shareholders any money? Like, Yeah,
Speaker 2: They've got a lot of money riding on the argument
Speaker 2: that Musk's compensation actually got clawed back, so they care.
Speaker 4: Yeah, let's talk about the second part of what happened Texas.
Speaker 4: Are they going to run into this problem again in
Speaker 4: Texas moving to Texas.
Speaker 3: What does that do for Tesla?
Speaker 2: They say that moving to Texas makes sense because they're
Speaker 2: big factories in Texas, their headquarters in Texas. Elon lives
Speaker 2: in Texas, and so they have to meet their incorporation
Speaker 2: to Texas because that just makes sense. No other company
Speaker 2: thinks that, right, Like, that's not really a thing, Like
Speaker 2: every company is incorporated in Delaware and very few are
Speaker 2: located in Delaware. But it's what they say. The answer is,
Speaker 2: nobody knows. There's a lot of Delaware corporate law and
Speaker 2: there's not a lot of corporate law anywhere else because
Speaker 2: most big companies that have big lawsuits are incorporated in Delaware,
Speaker 2: and so that's where all the cases are, Tesla says,
Speaker 2: And it's proxy that they think the law in Texas
Speaker 2: is mostly the same as the law in Delaware. I
Speaker 2: think it's probably true. But everyone kind of assumes that
Speaker 2: if this had all happened in Texas, and if a
Speaker 2: shareholder had sued Elon Musk in Texas to get back
Speaker 2: the fifty six billion dollars, a Texas judge would have
Speaker 2: been like, nah, Elon Musk can keep that money. There's
Speaker 2: no basis for assuming that nobody knows. It seems that way,
Speaker 2: and clearly Elon Musk assumes it because as soon as
Speaker 2: the Delaware opinion came out, he's like, we're moving to Texas.
Speaker 2: By the way, that happened, the opinion came out and
Speaker 2: he was like, we're moving to Texas right away. He
Speaker 2: was saying it on Twitter. But Tesla now and it's
Speaker 2: proxy statement has to explain why it's moving to Texas,
Speaker 2: and it describes this very thorough process that did to
Speaker 2: evaluate moving to Texas. So it formed a special committee
Speaker 2: of independent directors. There's one person on the committee, was
Speaker 2: this name Elon Musk. No, no, it's a truly independent director.
Speaker 2: Her name is Kathleen Wilson Thompson. The special committee met
Speaker 2: sixteen times for more than twenty six hours, says the Proxy,
Speaker 2: which is like a fun thing to imagine, Like I
Speaker 2: first imagined it as like I met four hours today
Speaker 2: with the money stuff Committee. Like I was like typing
Speaker 2: on my computer. I was like, oh, there's a meeting.
Speaker 2: But in fact she met with like her lawyers, so
Speaker 2: she did. There were real meetings, but just she was
Speaker 2: the only director at the meetings, but they the committee
Speaker 2: evaluated all fifty states to decide. It's like throwing darts,
Speaker 2: being like, which state should we move to, and like
Speaker 2: it just so happens that the best state turned out
Speaker 2: to be Texas. Coincidentally, the same thing that Elon Musk
Speaker 2: was treating about like two months ago. It's beautiful, So
Speaker 2: it worked out nicely.
Speaker 3: Yeah, it's good that it turned out that way.
Speaker 2: By the way, you asked her, if the laws move
Speaker 2: with them. I wrote this before there's some small chance
Speaker 2: of a Delaware judge saying, no, you're not allowed to
Speaker 2: move to Texas because you're only moving to Texas to
Speaker 2: pay Elon.
Speaker 3: Musk more and which seems to reasonable.
Speaker 2: That is like a violation of your pretty shadds to
Speaker 2: your Delaware shareholders, so we're gonna stop you. I wrote
Speaker 2: that in like January. I thought that was like some
Speaker 2: extremely funny theoretical chance of that happening. Since then, there's
Speaker 2: been like a Delaware court decision that makes it less likely.
Speaker 2: So I don't think that's gonna happen, but it would
Speaker 2: be really funny.
Speaker 4: So I have one point, and I also have a question.
Speaker 4: I guess I'll start with the point and that is
Speaker 4: that there is like a human psychology component to this,
Speaker 4: because I remember when this happened in January that it
Speaker 4: was voided this pay package. My suggestion to Elon Musk
Speaker 4: would be, why don't you just have Tesla do a dividends.
Speaker 4: Mark Zuckerberg did that with Meta. Now he's going to
Speaker 4: make like seven hundred million dollars a year. Mark Zuckerberg
Speaker 4: obviously owns a lot more Meta share, so it makes
Speaker 4: more sense there. But you made the point to me
Speaker 4: that Elon Musk isn't trying to make normal extremely wealthy
Speaker 4: man money. He has like insane aspirations that he needs all.
Speaker 3: This money for.
Speaker 2: He owns it. My aloraity of Tesla, he's a controlling herl.
Speaker 2: Everybody owns like twenty percent of the stock, so a
Speaker 2: dividend would go mostly to other people, and like they're
Speaker 2: not so rolling in cash, they could pay at like
Speaker 2: tens of billions of dollars or dividends. Mark Zuckerwood gets
Speaker 2: a dividend because he likes to go water skiing or
Speaker 2: whatever it is that he does, right, hoverboarding, He.
Speaker 3: Has cows, right house, Yeah, archery.
Speaker 2: I don't know all sorts of normal things hobbies. Yeah,
Speaker 2: like moderately expensive hobbies some of them. But Elon Musk's
Speaker 2: hobbies are like brain implants, going to Mars, buying Twitter.
Speaker 2: I'm forgetting a few, but like, he's not like looking
Speaker 2: to spend money on a nice vacation. He's looking to
Speaker 2: have tens of billions of dollars to fund going to Mars,
Speaker 2: and so he needs these giant pay packages every now
Speaker 2: and then to pursue his next ambition.
Speaker 4: You're not going to get that from your dividend checks.
Speaker 4: And then my question for you is, what do you
Speaker 4: think is the most interesting way that this proxy.
Speaker 3: Vote could turn out?
Speaker 4: What would be the most interesting chain of events for you?
Speaker 2: Look, I love the idea of a Delaware court preventing
Speaker 2: Musk from leaving for Texas. I think that would be
Speaker 2: extremely funny. But I actually think the simpler answer is funnier,
Speaker 2: which is if the shareholders vote this down, that's wild.
Speaker 2: Like he'll quit in a huff on Twitter like that day. Yeah,
Speaker 2: it'll be an amazing thread of tweets and it will
Speaker 2: be an amazing corporate debacle. Whatever time he's devoting to Tesla,
Speaker 2: he'll go and devote to some other wild thing and
Speaker 2: that'll be wild, and Tesla will like find its way,
Speaker 2: as you know, it'll get back that fifty million dollars
Speaker 2: and find its way as a company not controlled by
Speaker 2: a wild, wild sequence of events.
Speaker 4: Now, in my mind, would be the most interesting scenario
Speaker 4: as well, and then we could truly find out what
Speaker 4: the Elon Musk premium is.
Speaker 2: The thing about Elon Musk companies is that if you're
Speaker 2: an investor in Elon Musk companies, like you like Elon Musk,
Speaker 2: like that's just how it goes, right, Like you're not
Speaker 2: there because you like the assets but think they're mismanaged,
Speaker 2: Like you're there because you like Elon Musk. It would
Speaker 2: be really shocking for the investors in an Elon Musk
Speaker 2: company to vote against them in such a striking way.
Speaker 4: Do you want to talk about Elon Musk for like
Speaker 4: twenty five more minutes or do you think we should
Speaker 4: move on?
Speaker 2: I saw your look of like I have wrapped this
Speaker 2: up so nicely, and then Matt comes in with more stuff.
Speaker 2: I have some more stuff, but if're gonna wrap it up, never.
Speaker 3: Mind, Stay tuned, Stay tuned.
Speaker 2: There's always more lock.
Speaker 1: If you want to listen to the whole episode. We'll
Speaker 1: leave a link in the show notes, or you can
Speaker 1: find it by searching money Stuff the podcast wherever you
Speaker 1: listen to your podcasts. The elon Ink crew will be
Speaker 1: back in your feed tomorrow with a brand new episode.