WEBVTT - Matt Levine Dissects Elon Musk's Controversial Tweet 0:00:10.160 --> 0:00:13.640 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:13.680 --> 0:00:17.599 I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, you know 0:00:17.640 --> 0:00:22.160 what story has made this summer really fun? I do. Actually, 0:00:22.280 --> 0:00:26.480 it has to be Tesla, right, Yeah, So the last 0:00:26.600 --> 0:00:31.640 few weeks have just been this incredible saga of Tesla, 0:00:32.280 --> 0:00:36.720 starting with early August when it's CEO Elon Musk, said 0:00:36.760 --> 0:00:39.960 he was going to take the firm private at a 0:00:40.000 --> 0:00:43.760 price of four a share, and then he said in 0:00:43.800 --> 0:00:46.560 the same tweet that he had funding secured, and ever 0:00:46.680 --> 0:00:49.839 since then, there's just been this mad scramble on the 0:00:49.880 --> 0:00:52.960 part of everyone to figure out what that tweet meant, 0:00:53.720 --> 0:00:56.480 whether it was legal, what the story behind it was, 0:00:56.600 --> 0:00:59.640 and everything. And I just found it to be incredibly 0:00:59.760 --> 0:01:02.640 fun and amusing the whole thing. Oh yeah, I mean 0:01:02.680 --> 0:01:06.440 we thought that people dissected Donald Trump's tweets quite a bit, 0:01:06.920 --> 0:01:11.200 but the way they've been examining Elon Musk's tweets is 0:01:11.240 --> 0:01:15.000 definitely even more intense than that. And I gotta say 0:01:15.080 --> 0:01:17.680 when he first tweeted it, I don't know about you, 0:01:17.720 --> 0:01:19.920 but I was really scratching my head at the four 0:01:20.000 --> 0:01:24.039 twenty reference. A lot of people thought that could potentially 0:01:24.040 --> 0:01:29.360 be a joke because four twenty is well code for marijuana, right. Yeah. 0:01:29.640 --> 0:01:33.240 I have to say I was on vacation during during 0:01:33.240 --> 0:01:35.399 the week when it happened, but of course even when 0:01:35.400 --> 0:01:38.720 I'm on vacation, I'm like still checking Twitter every ten minutes. 0:01:39.080 --> 0:01:41.080 And as soon as I saw that tweet, I was like, 0:01:41.120 --> 0:01:43.080 there's just no way this is real. Like I didn't 0:01:43.120 --> 0:01:46.480 for a second actually believe this could possibly be a 0:01:46.520 --> 0:01:50.720 real thing. And of course Tesla hasn't gone private at 0:01:50.720 --> 0:01:54.520 fo dollars a year, but of course, uh, this raises 0:01:54.520 --> 0:01:57.160 all kinds of questions about the legality of just tweeting 0:01:57.240 --> 0:01:59.840 something like that, and what funding secured means and what 0:02:00.080 --> 0:02:03.960 CEOs can tweet, and you know, Elon's already unusual. And 0:02:04.040 --> 0:02:06.680 I think our guest today to help us understand this 0:02:07.200 --> 0:02:10.360 is probably the very best person to talk about it, 0:02:10.400 --> 0:02:15.120 because as soon as this happened, the entire internet was like, 0:02:15.440 --> 0:02:18.640 we have to hear from this columnist his take, because 0:02:18.680 --> 0:02:21.280 it's definitely going to be the best take. Yeah, um, 0:02:21.320 --> 0:02:23.880 I would probably agree with that, and uh, you know, 0:02:24.400 --> 0:02:28.520 talking about us disclosure rules is always fun, but this 0:02:28.600 --> 0:02:32.480 particular person makes it even more so. And On that note, 0:02:32.520 --> 0:02:35.480 I would like to bring in this week's guest, Matt Levine. 0:02:35.520 --> 0:02:39.960 He's an opinion columnist here at Bloomberg, And like I said, honestly, 0:02:39.960 --> 0:02:42.760 I think with in a few minutes, everybody was like, 0:02:42.760 --> 0:02:44.880 we gotta get Matt Levine's take on this, and then 0:02:44.960 --> 0:02:48.120 over the next several weeks, all of Matt's columns on 0:02:48.200 --> 0:02:52.240 Tesla became must reads. So here to sort of help us, 0:02:52.280 --> 0:02:54.720 what help us understand everything that happened is Matt, thank 0:02:54.760 --> 0:02:57.800 you very much for joining us. Thanks for having me. Matt, 0:02:57.880 --> 0:03:02.160 where were you talking? I forget where I was exactly, 0:03:02.160 --> 0:03:05.040 but my column. I've been not writing my column regularly 0:03:05.040 --> 0:03:06.960 for the last couple of weeks, and I was planning 0:03:06.960 --> 0:03:10.360 to not do it, and then Ellen came along, and 0:03:10.400 --> 0:03:13.320 I've been writing mostly about him for a couple of weeks. 0:03:14.080 --> 0:03:17.520 So when you saw the first tweet, the infamous funding 0:03:17.600 --> 0:03:21.800 secured uh four dollars a share tweet, what did you 0:03:21.840 --> 0:03:24.239 think about it? I didn't think it was a joke 0:03:24.360 --> 0:03:27.200 per se, But my first reaction was kind of, he's 0:03:27.240 --> 0:03:29.679 got a little farther than he thinks he has here. 0:03:29.720 --> 0:03:31.880 You know, I've written about a lot of people who 0:03:31.919 --> 0:03:36.680 have ah, you know, launching fake takeover offers is a 0:03:36.720 --> 0:03:40.320 thing that happens, and the SEC and the regulators and 0:03:40.440 --> 0:03:43.280 prosecutors take that seriously, and people have recently gone to 0:03:43.320 --> 0:03:46.640 prison for launching fake tender offers. So I think that 0:03:46.680 --> 0:03:50.200 Ellen Musk has this funnest for sort of making bold 0:03:50.280 --> 0:03:53.440 claims that he can't necessarily always back up on Twitter, 0:03:54.040 --> 0:03:57.360 and I think he was kind of going along with 0:03:57.400 --> 0:04:00.400 that without without really kind of considering the This is 0:04:00.440 --> 0:04:02.720 a bit of a more serious there the gravity of 0:04:02.760 --> 0:04:04.920 what he just said. You know, if he's like, I'm 0:04:04.920 --> 0:04:07.480 gonna make a car that flies everyone like Ellen, all right, 0:04:07.480 --> 0:04:09.800 but he's gonna take take the company private at four twenty, 0:04:09.840 --> 0:04:13.240 it's a little more serious. It just occurred to me that, um, 0:04:13.560 --> 0:04:16.120 we should back up a second, because, like I said, 0:04:16.560 --> 0:04:20.560 this sort of intersection of finance and law is kind 0:04:20.600 --> 0:04:22.760 of your specialty, which is why so many people want 0:04:22.839 --> 0:04:26.520 to get your take. You are a lawyer by training, right, 0:04:27.520 --> 0:04:29.960 I was an m and a lawyer briefly, Um, nothing 0:04:30.000 --> 0:04:32.080 I say is every legal advice. And then I was 0:04:32.120 --> 0:04:34.840 an investment banker, and uh, I have been a columnist, 0:04:35.160 --> 0:04:38.640 so I've I worked at two of the firms that 0:04:38.640 --> 0:04:41.800 are that we're advising Musk and his going private transactions 0:04:42.160 --> 0:04:47.000 some some exposure to this world. Okay, uh, well you 0:04:47.000 --> 0:04:51.120 were a lawyer, so legal technicalities. What exactly are the 0:04:51.240 --> 0:04:56.320 sort of disclosure requirements? And didn't Musk potentially get in 0:04:56.360 --> 0:04:59.320 trouble because he said something on Twitter? Or is it 0:04:59.320 --> 0:05:03.920 because he said something on Twitter that isn't true? Uh? 0:05:04.080 --> 0:05:06.160 Much more the ladder. You know, people think that they're 0:05:06.279 --> 0:05:09.360 that they're like these real sort of formality rules around 0:05:09.360 --> 0:05:11.400 you have to you know, you can't announce a going 0:05:11.480 --> 0:05:15.120 private transaction without you know, filing a proxy and everything. 0:05:15.320 --> 0:05:18.400 That's not true at all. Like this is how it 0:05:18.440 --> 0:05:21.120 normally happens, is, you know, the CEO of a company 0:05:21.160 --> 0:05:23.480 will go to the board and we'll say I would 0:05:23.520 --> 0:05:25.320 like to take the company private, will say that before 0:05:25.320 --> 0:05:27.160 filing a proxy statement. It won't be all done. It 0:05:27.200 --> 0:05:29.120 will be a sort of the opening of a conversation 0:05:29.480 --> 0:05:32.640 that usually doesn't happen publicly, but it's not like out 0:05:32.640 --> 0:05:34.760 of the question that it might at some point become 0:05:34.800 --> 0:05:37.320 public and the CEO might say, I'm looking into I'm 0:05:37.360 --> 0:05:41.839 exploring transaction. They don't normally do it on Twitter, not 0:05:41.880 --> 0:05:44.599 because like Twitter is illegal, and in fact, the SEC 0:05:44.760 --> 0:05:46.520 has said, you know, if you if you sort of 0:05:46.600 --> 0:05:49.200 follow a few formalities and you make it clear you're 0:05:49.200 --> 0:05:51.960 gonna do this, you can announce material events on Twitter. 0:05:52.400 --> 0:05:54.640 The problem, you know, first of all, is that turned 0:05:54.640 --> 0:05:56.400 out on to be true. But but but even beyond that, 0:05:56.440 --> 0:05:59.760 the problem with doing this on Twitter if you're Elon 0:05:59.800 --> 0:06:03.040 mu Usk is that no one seems to have vetited. 0:06:03.080 --> 0:06:04.919 He didn't run it by the board or any lawyers, 0:06:05.400 --> 0:06:08.400 and so the stuff he said was kind of careless. 0:06:08.480 --> 0:06:10.680 You know, normally, whether you put it out in a 0:06:10.680 --> 0:06:12.360 tweet or a blog post or an eight K or 0:06:12.400 --> 0:06:14.599 a press release or whatever, you would say I'm thinking 0:06:14.640 --> 0:06:18.280 about taking the company public, nothing was assured. You know, 0:06:19.160 --> 0:06:21.479 things might still go wrong. All these all these like 0:06:21.520 --> 0:06:25.080 sort of lawyery language that at least kind of gives 0:06:25.080 --> 0:06:27.520 you cover if it doesn't work out. With Elon Musk 0:06:27.600 --> 0:06:29.919 was kind of the opposite. He said I'm considering, right, 0:06:29.920 --> 0:06:31.599 so he didn't actually say I'm definitely gonna do it, 0:06:31.720 --> 0:06:33.480 and then like two tweets later he's like, this is 0:06:33.560 --> 0:06:35.760 only contingent on a serrel the road. It's definitely like 0:06:36.240 --> 0:06:39.720 everything became just sort of more confident um, because that's 0:06:39.760 --> 0:06:42.280 kind of the way he uses Twitter, which is not 0:06:42.839 --> 0:06:45.520 the way you want to announce a potential but not 0:06:45.560 --> 0:06:49.040 button down transaction. Something about the way he used Twitter. 0:06:49.120 --> 0:06:52.400 I had this thought, which is that within maybe a 0:06:52.520 --> 0:06:56.800 day or two after the funding secured tweet, it's just 0:06:56.880 --> 0:06:59.160 kind of obvious that funding was not secure. Sure even 0:06:59.360 --> 0:07:03.200 arguably with hours but then but whatever, but they were 0:07:03.240 --> 0:07:05.240 like a couple of days of like fund speculation about 0:07:05.240 --> 0:07:07.240 who it might baby. Yeah. But then I know it's 0:07:07.279 --> 0:07:10.520 like a couple of weeks later that some of these 0:07:10.560 --> 0:07:12.640 like analysts who cover the stuff and they're like, it 0:07:12.680 --> 0:07:15.640 appears that funding is not secured, and we're downgrading, and 0:07:15.680 --> 0:07:19.200 I downgrading the stock, and I wonder, you know, you're 0:07:19.240 --> 0:07:22.760 on Twitter, and you also had your background in the 0:07:22.800 --> 0:07:25.600 investment banking world, whether those of us who are sort 0:07:25.600 --> 0:07:28.440 of versened in Twitter sort of so it's like, oh, 0:07:28.480 --> 0:07:31.560 this is sort of you know, this is a guy tweeting. 0:07:32.080 --> 0:07:34.440 Where is that if you're not sort of familiar with 0:07:34.520 --> 0:07:37.520 that world, The thought that you would ever flippantly say 0:07:37.520 --> 0:07:41.400 funding secured is almost unimagined. Yeah, it's a weird intersection. 0:07:41.440 --> 0:07:43.480 I mean, like, like you know, as an m and 0:07:43.560 --> 0:07:45.360 al as a form of reor like the fact that 0:07:45.400 --> 0:07:47.560 you would do that is still unimagined, even though you know, 0:07:47.600 --> 0:07:49.760 I joke around on Twitter all the time like it's 0:07:49.800 --> 0:07:52.200 it's it's you're not it's a it's a mixing of 0:07:52.240 --> 0:07:55.080 the world. That just didn't really work right, And I 0:07:55.160 --> 0:07:58.880 doubt SEC rules have been updated to take into account 0:07:58.880 --> 0:08:04.480 trolling or saying outrageous things in order to provoke a reaction. Yeah, 0:08:04.520 --> 0:08:07.760 I mean, he's done. He's made jokes on tweet. He 0:08:07.800 --> 0:08:11.200 joked about Tesla going bankrupt, He's he joked about introducing 0:08:11.840 --> 0:08:13.720 a new model, like a watch. I think he joked 0:08:13.720 --> 0:08:16.240 about a Tesla watch, and I think at one point, 0:08:16.240 --> 0:08:18.320 I think the stock moved on the Tesla watch tweet, 0:08:18.960 --> 0:08:21.560 and I think the SEC was a you know, like 0:08:21.640 --> 0:08:27.440 they just sort of didn't really Ah, there's some awareness 0:08:27.480 --> 0:08:29.360 that like things can be a joke, and like the 0:08:29.440 --> 0:08:31.360 Tesla watch, it was like an April Fool's joke. It 0:08:31.400 --> 0:08:32.760 was just very clear it was a joke and if 0:08:32.800 --> 0:08:35.560 you bought stock on that, like, it's your problem. So 0:08:35.640 --> 0:08:39.200 I think the SEC has has just they're not going 0:08:39.280 --> 0:08:41.200 to pick that fight. But this is this is not 0:08:41.240 --> 0:08:42.760 a joke, you know, And this like did move the 0:08:42.760 --> 0:08:45.920 stock a lot, and this is a little more serious. 0:08:46.000 --> 0:08:48.920 Something we know about Ellen is he really doesn't like 0:08:49.000 --> 0:08:53.000 short sellers. And one of the things people were talking 0:08:53.040 --> 0:08:57.600 about is whether he tweeted this on purpose to sort 0:08:57.600 --> 0:09:00.320 of burn the short sellers. And I'm curious if there 0:09:00.400 --> 0:09:05.640 is a distinction between elon driving to the airport and thinking, 0:09:06.000 --> 0:09:09.400 you know, I think my conversations with the saudis wherever 0:09:09.480 --> 0:09:11.240 bit more or less. I mean, I have the funding security, 0:09:11.240 --> 0:09:14.560 I'm just going to tweet that versus I'm going to 0:09:14.600 --> 0:09:17.480 tweet this to really mess with the shore sellers. And 0:09:17.520 --> 0:09:20.520 whether I get whether intent matters here, yeah, it really does. 0:09:20.559 --> 0:09:22.240 I mean it's it's a little weird. A think of 0:09:22.280 --> 0:09:26.920 a company puts out misleading information about something material to 0:09:26.960 --> 0:09:29.480 the company, that's bad. The company is again to get 0:09:29.480 --> 0:09:33.160 in trouble for that. But Ellen, when he was doing 0:09:33.200 --> 0:09:35.880 this was not acting as the company. He was acting 0:09:35.920 --> 0:09:37.760 as a potential buyer for the company. So I wasn't 0:09:37.800 --> 0:09:40.280 doing it in his capacity as CEO. And if your 0:09:40.280 --> 0:09:42.600 person puts out you know, if I just like say, 0:09:42.720 --> 0:09:46.120 random lies about Tesla, that's probably not securities, not legal advice, 0:09:46.120 --> 0:09:48.680 but it's probably fine The reason people get in trouble 0:09:48.720 --> 0:09:51.080 for doing this stuff is that they have some manipulate 0:09:51.120 --> 0:09:53.280 they want to manipulate the side, they want to um, 0:09:53.320 --> 0:09:56.280 they have some manipulative purpose. And usually what that means 0:09:56.720 --> 0:10:00.640 when like just random people put out fake t cover offers, 0:10:00.760 --> 0:10:02.720 usually what it means they bought some stock. They put 0:10:02.760 --> 0:10:05.120 out the fake taker offer, the stock goes up and 0:10:05.120 --> 0:10:08.000 they sell their stock. It's like a very simple like fraud, 0:10:08.120 --> 0:10:11.160 like a scam. With Elan, it seems very unlikely he 0:10:11.240 --> 0:10:14.240 was selling, right, no indication he was selling. So it's 0:10:14.280 --> 0:10:16.440 not that. So that's not the thing he's gonna get 0:10:16.440 --> 0:10:18.520 in trouble for. And so the question is that you 0:10:18.600 --> 0:10:21.040 have some other manipulative intent. And I think the obvious 0:10:21.040 --> 0:10:24.199 one that people are looking at is he's gone on 0:10:24.240 --> 0:10:26.640 and on about burning the short sellers. He said, you know, 0:10:26.640 --> 0:10:28.600 in a few weeks or they're going to face the 0:10:28.760 --> 0:10:32.720 you know, they're gonna have a terrible they're gonna get burned, basically, 0:10:33.160 --> 0:10:37.320 and uh, you know, having made it so clear that 0:10:37.360 --> 0:10:39.080 he wants to burn the shorts, that he wants to 0:10:39.080 --> 0:10:43.360 squeeze the shorts, it suggests that one possible explanation here 0:10:43.400 --> 0:10:47.119 is that that's what he was doing. There's another facet about, 0:10:47.160 --> 0:10:50.160 you know, whether or not he intended to commit some 0:10:50.200 --> 0:10:53.880 sort of stock manipulation, which is um this notion that 0:10:53.960 --> 0:10:57.520 maybe he was on either drugs or you know, sleeping 0:10:57.520 --> 0:11:00.480 pills or valium or something like that at the time 0:11:00.480 --> 0:11:05.360 when he tweeted. If if his emotional state was UM, 0:11:06.280 --> 0:11:09.600 I don't know, let's say, like, I don't know, if 0:11:09.600 --> 0:11:12.920 his emotional state was fragile at the time, would that 0:11:13.280 --> 0:11:15.559 help him in the eyes of the sec Would he 0:11:15.600 --> 0:11:18.480 get a little bit of leeway because of that? I'm 0:11:18.520 --> 0:11:21.800 not sure there's any precedent for like saying I committed securities, right, 0:11:22.559 --> 0:11:24.080 I mean there is, right, I mean there are there 0:11:24.120 --> 0:11:27.640 are There are insider traders who you know, were addicted 0:11:27.679 --> 0:11:30.040 to things, and they sort of say that at their 0:11:30.080 --> 0:11:33.200 sentencing and it gets them a little leniency maybe here. 0:11:33.240 --> 0:11:35.360 I mean, like if it were a joke, if it 0:11:35.400 --> 0:11:37.840 were like a drug trip, then he would have backed 0:11:37.840 --> 0:11:39.280 away from it, right. I mean. The fact that he 0:11:39.559 --> 0:11:43.080 spent two weeks, you know, putting out blog posts the 0:11:43.080 --> 0:11:44.800 next day and the next week saying this is why 0:11:44.800 --> 0:11:47.200 I said funding was security, they suggests that he was 0:11:47.640 --> 0:11:51.520 a little more serious than that, and that he wasn't 0:11:51.600 --> 0:11:55.280 just you know, he didn't back away from immediately one 0:11:55.280 --> 0:11:57.840 of the columns you wrote and just goes back to 0:11:57.840 --> 0:12:01.080 your experience as a lawyer, was essentially Okay, the tweet 0:12:01.200 --> 0:12:05.000 is out there, now, how can a law firm and 0:12:05.040 --> 0:12:08.559 Ellen sort of back in to making the tweet true? Yeah? 0:12:08.720 --> 0:12:11.680 Like so obviously clearly like they scrambled to be like, 0:12:11.760 --> 0:12:13.800 can we make an excuse for this that it looks 0:12:13.840 --> 0:12:15.720 kind of real? Because lawyers are going to take on 0:12:15.760 --> 0:12:18.240 any task and they'll try. So what was in your 0:12:18.320 --> 0:12:24.120 view the most plausible approach to sort of make make it? 0:12:24.440 --> 0:12:26.360 You know, if you were if you were Elon's lawyer, 0:12:26.440 --> 0:12:29.000 what would be the most plausible structure to back up 0:12:29.000 --> 0:12:31.640 the tweet? So they basically did it, which is they 0:12:31.720 --> 0:12:34.480 raised money from people who wanted to invest, and there 0:12:34.800 --> 0:12:37.320 there is commitments, right, and they went out and canvassed. 0:12:38.120 --> 0:12:40.280 You know, one reason that you might want to go 0:12:40.360 --> 0:12:43.040 public with this, with this notion before having it all 0:12:43.080 --> 0:12:46.680 locked down is that way everyone knows about it, and 0:12:46.720 --> 0:12:48.839 if there is someone sitting around being like I'd love 0:12:48.840 --> 0:12:51.000 to put ten billion dollars into Tesla, then they'll call 0:12:51.040 --> 0:12:52.760 you up. And that kind of seems to have happened, 0:12:52.760 --> 0:12:54.320 you know, and he announced on Friday that he's calling 0:12:54.320 --> 0:12:55.600 the deal off. He said, you know, we got a 0:12:55.600 --> 0:12:59.920 lot of inbound interest. So they did find people who 0:13:00.040 --> 0:13:02.839 were willing to explore putting money into it. And the 0:13:02.920 --> 0:13:05.280 journal report that they raised about thirty billion dollars, which 0:13:05.280 --> 0:13:08.920 is not enough to take Tesla private, but you know, 0:13:09.720 --> 0:13:11.560 it's not nothing. It's a lot of money, and you know, 0:13:11.600 --> 0:13:14.080 and it combines with the notion all along was that 0:13:14.160 --> 0:13:16.520 a lot of the public shareholders would roll into the 0:13:16.600 --> 0:13:20.400 new private Tesla. That's not it's not clear they were 0:13:20.400 --> 0:13:24.000 ever interested in that. Um, you know, some some were, 0:13:24.080 --> 0:13:25.839 but had you know, some of the big public mutual 0:13:25.880 --> 0:13:29.000 funds like Tesla, but have regulatory restrictions or have charter 0:13:29.080 --> 0:13:32.040 restrictions on how much private stock they can own. So 0:13:32.760 --> 0:13:34.640 you know, like what they seem to have cobbled together 0:13:34.720 --> 0:13:36.680 is the thirty billion dollars of money and then some 0:13:36.800 --> 0:13:39.280 number of shareholders who would roll you can sort of 0:13:39.320 --> 0:13:40.920 like look at it and it kind of looks like 0:13:40.960 --> 0:13:43.600 you could almost get to a going private transaction. And 0:13:43.600 --> 0:13:45.079 that's kind of what they presented to the board. And 0:13:45.080 --> 0:13:48.439 then Ellen said never mind, So there is a real um. 0:13:48.520 --> 0:13:50.080 So I mean, like, the structure that you do is 0:13:50.120 --> 0:13:54.280 that is offering some combination of new cash from new 0:13:54.280 --> 0:13:58.679 investors plus rolling over big current investors in in Tesla, 0:13:58.920 --> 0:14:00.640 and you try to get those two numbers to add 0:14:00.679 --> 0:14:03.679 to about seventy billion dollars just which is the you know, 0:14:04.440 --> 0:14:07.040 four twenty times the number of shares. So like, the 0:14:07.080 --> 0:14:10.680 other fun problem that that I'm sure that Musk's advisers 0:14:10.720 --> 0:14:12.640 are working on is that when he initially announced this, 0:14:13.160 --> 0:14:15.920 one thing he said was that every shareholder was going 0:14:15.960 --> 0:14:18.040 to get an opportunity to roll over into the new 0:14:18.080 --> 0:14:20.320 private Tesla, which is one of the weirdest things about it. 0:14:20.360 --> 0:14:22.760 The idea that you can take all of your public shareholders, 0:14:22.760 --> 0:14:24.440 all these like mom and pop share olders who have 0:14:24.440 --> 0:14:26.920 ten shares and roll them into a private company is 0:14:26.920 --> 0:14:29.440 not normally how you think of private companies. So I'm 0:14:29.440 --> 0:14:32.000 sure that people were trying to find some way to 0:14:32.040 --> 0:14:33.520 make that true. And I know I read a lot 0:14:33.560 --> 0:14:36.200 of articles analyzing, well, you could do stub equity, you 0:14:36.200 --> 0:14:38.560 could do this or that. It never seemed all that 0:14:38.640 --> 0:14:42.680 realistic to me. And Uh in his latest announcement must 0:14:42.880 --> 0:14:45.360 conceider that there is not really a practical path to 0:14:45.400 --> 0:14:48.800 do it. So in terms of damage control, I mean, 0:14:49.240 --> 0:14:52.480 you briefly mentioned this just that then, but um, the 0:14:52.560 --> 0:14:57.520 four twenty number, Like how much more complicated would that 0:14:57.560 --> 0:15:01.760 have made attempts to contain the damage. And also the 0:15:01.840 --> 0:15:04.400 four twenty number, where do you think he caught that from? 0:15:04.440 --> 0:15:06.800 Do you think it was based on reality or is 0:15:06.840 --> 0:15:09.160 it something he just sort of like pulled out of 0:15:09.200 --> 0:15:12.000 the air. I'll defend that the four twenty number is 0:15:12.040 --> 0:15:14.560 like a premium. I think I think that that what 0:15:14.640 --> 0:15:16.800 he said is that he wanted to offer a premium 0:15:16.840 --> 0:15:20.200 to the trading precess arend around three, and so he 0:15:20.760 --> 0:15:23.440 did that math like multiplying by one point two, and 0:15:23.440 --> 0:15:25.960 he got like four hundred nineteen dollars, and he decided 0:15:26.000 --> 0:15:28.680 that four twenties sounded like a nicer rounder number. And 0:15:28.720 --> 0:15:31.520 everyone kind of scoffed at this explanation, But it's totally reasonable. 0:15:31.560 --> 0:15:33.680 That's how every going private deal has done. Like there's 0:15:33.680 --> 0:15:36.280 no you know, there's no he's not doing a discounted 0:15:36.280 --> 0:15:38.800 cash flow analysis. There's no cash flow. It's it's a 0:15:39.000 --> 0:15:42.840 it's the way that you do a going private transaction 0:15:42.920 --> 0:15:45.280 is you offer like a sort of reasonable premium to 0:15:45.360 --> 0:15:47.040 the current trading price, and then you go to the 0:15:47.080 --> 0:15:48.680 board and you see what the board says, and you 0:15:48.720 --> 0:15:51.080 negotiate from there. So I think like offering a round 0:15:51.120 --> 0:15:54.080 number that's from the from the trading price, it's fine. 0:15:54.600 --> 0:15:59.040 The discounted cash flow analysis that that's typically like backed 0:15:59.080 --> 0:16:01.040 into right. They come up with the number, and then 0:16:01.080 --> 0:16:03.920 someone's job is to sort of put together a spreadsheet 0:16:03.960 --> 0:16:06.720 that explains it. At some point, if you were really 0:16:06.720 --> 0:16:09.480 going to buy the company, he would have to come 0:16:09.560 --> 0:16:13.440 up with a sense of how many dollars the company 0:16:13.520 --> 0:16:15.560 was worth, and the board would have to come up 0:16:15.560 --> 0:16:17.520 with a sense of how many dollars the company is worth, 0:16:17.840 --> 0:16:19.600 and they'd have to be not too far apart so 0:16:19.640 --> 0:16:22.800 that they could negotiate a price. Uh. One way to 0:16:22.840 --> 0:16:25.480 do that traditionally is a discounted cash for analysis, where 0:16:25.480 --> 0:16:27.760 you discount the present value of the future cash flows 0:16:27.760 --> 0:16:31.120 of the company. I think it's very hard to predict that, 0:16:31.200 --> 0:16:33.160 and I think there's a kind of wide bit ask 0:16:33.200 --> 0:16:37.040 on what that number is. What do you think about 0:16:37.600 --> 0:16:40.640 CEOs who are obsessed with shorts? Because both CEOs don't 0:16:40.680 --> 0:16:42.640 seem to care that much, but every once in a while, 0:16:43.440 --> 0:16:46.880 there's the CEO comes along that really gets worked up 0:16:46.880 --> 0:16:50.120 about them. There's this belief that the shorts can do 0:16:50.240 --> 0:16:53.080 something to you that I think is mostly wrong. Sometimes 0:16:53.080 --> 0:16:54.880 it's right. So the companies that need a lot of finance, 0:16:54.880 --> 0:16:58.400 particularly like you know, in the financial crisis, banks were 0:16:58.440 --> 0:17:00.800 really worried about shorts because if they couldn't roll their 0:17:00.800 --> 0:17:04.439 financing every day, they couldn't stay in business. Um. You know, 0:17:04.480 --> 0:17:06.399 when Herbal Life was in a fight with Bill Ackman, 0:17:06.440 --> 0:17:09.040 when Bill Ackman was really trying to get regulators to 0:17:09.040 --> 0:17:12.000 shut them down, Like they had a real belief that 0:17:12.080 --> 0:17:15.200 Bill Ackman was doing things to them. Most of the time, though, 0:17:15.240 --> 0:17:17.560 shorts just short the stock and they think the company 0:17:17.640 --> 0:17:20.520 is bad or the or the stock is overvalued, and 0:17:20.840 --> 0:17:23.800 they're like tools to do something bad to the company 0:17:23.840 --> 0:17:27.800 are fairly limited. Um. Tesla, you know, Musk talks a 0:17:27.800 --> 0:17:30.879 lot about how the shorts are pushing a narrative that 0:17:30.920 --> 0:17:33.760 will destroy Tesla, and it's very hard for me to 0:17:33.880 --> 0:17:37.199 understand what that could mean. Tesla cells cars, and like, 0:17:37.280 --> 0:17:40.320 I don't think short sellers are going to like potential 0:17:40.359 --> 0:17:42.760 car buyers and trying to talk them out of buying Teslas. 0:17:42.800 --> 0:17:44.240 I mean they were a little bit they're putting out. 0:17:44.280 --> 0:17:46.520 You know, they would not you know, they will put 0:17:46.520 --> 0:17:49.119 out a little um uh claims that the cars are 0:17:49.119 --> 0:17:52.439 badly made, but like, ah, there's not a lot they 0:17:52.480 --> 0:17:55.320 can do. And I think the focus on short sellers 0:17:55.359 --> 0:17:59.159 is more of a like psychological like aversion to having 0:17:59.200 --> 0:18:02.080 anyone criticized as you than like a real like rational 0:18:02.200 --> 0:18:06.240 analysis of what the company needs. I think most public 0:18:06.320 --> 0:18:10.159 company CEOs recognize that the company needs their attention on 0:18:10.200 --> 0:18:13.720 the business rather than they're like ego driven tweeting about 0:18:13.720 --> 0:18:17.480 how evil short sellers are. Isn't Tesla burning through cash 0:18:17.600 --> 0:18:20.879 quite rapidly though, like I e. Don't they need pretty 0:18:20.880 --> 0:18:25.000 decent access to financing in order to basically stay in 0:18:25.080 --> 0:18:27.080 existence for a time to come. And wouldn't that be 0:18:27.119 --> 0:18:30.360 a vulnerability that the shorts could target by sort of 0:18:30.560 --> 0:18:33.600 interrupting that flow of financing. Yeah, I mean look like 0:18:33.640 --> 0:18:36.400 they do. I mean, like, like, you know, the fact 0:18:36.560 --> 0:18:39.080 is that like the marginal buyer of Tesla stock can 0:18:39.119 --> 0:18:41.200 buy it from a short seller rather than from Tesla. 0:18:41.760 --> 0:18:44.720 Um that narrative is complicated by the fact that, you know, 0:18:44.840 --> 0:18:48.040 Musk is not fond of saying that they need financing right, 0:18:48.080 --> 0:18:51.600 and that, and if you're a company that needs billions 0:18:51.640 --> 0:18:54.560 of dollars of financing from the equity markets, it's weird 0:18:54.960 --> 0:18:57.080 to say, you know what, we're gonna buy all of 0:18:57.080 --> 0:18:59.480 our stock back. We don't need any public sheer olders, 0:18:59.520 --> 0:19:03.440 We're gonna buy back. It's like, I tend to agree 0:19:03.480 --> 0:19:06.760 with you that Tesla does require access to the public markets, 0:19:06.800 --> 0:19:10.040 and that short sellers not by like pushing a narrative 0:19:10.119 --> 0:19:11.640 or anything, but just by the fact that they are 0:19:11.680 --> 0:19:15.240 like a supply of shares. Short sellers tend to reduce 0:19:15.359 --> 0:19:17.680 their access to cheap financing not that much, right, I 0:19:17.680 --> 0:19:21.040 mean still seventy sixty billion dollar company, right, It's you know, 0:19:21.080 --> 0:19:23.240 they still have plenty of access to public markets. Short 0:19:23.280 --> 0:19:25.360 sellers do it the margin reduce that, But like that's 0:19:25.400 --> 0:19:28.760 not the narrative that Tesla says. Yeah, this, this whole 0:19:28.880 --> 0:19:31.359 story has sort of coming in a very weird time 0:19:31.400 --> 0:19:33.840 where there's this other big thing people are talking about, 0:19:33.880 --> 0:19:37.760 and that is the supposed shortsightedness of public markets and 0:19:37.920 --> 0:19:42.719 whether investors demand companies hit a number every quarter. And 0:19:42.800 --> 0:19:46.440 Tesla seems like a company that, more than anything, hasn't 0:19:46.480 --> 0:19:50.200 been forced to adear by the demands of the market, 0:19:50.280 --> 0:19:53.679 because they never get punished for failing to hit some number, 0:19:53.760 --> 0:19:56.240 and there doesn't seem to be any particular expectation that 0:19:56.560 --> 0:20:00.520 if they don't nail uh an EPs or that wall 0:20:00.520 --> 0:20:02.399 Streets put out there, that they're going to lose their 0:20:02.440 --> 0:20:04.600 access to the market. It's never an EPs figure because 0:20:04.600 --> 0:20:06.800 they don't make money. Now there are like they do 0:20:07.040 --> 0:20:09.720 sort of announce short term production targets and then when 0:20:09.720 --> 0:20:11.680 they failed to meet them, people say, ah, you failed 0:20:11.680 --> 0:20:13.600 to meet them. And I think that there's like a 0:20:13.640 --> 0:20:17.320