Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, you know
Speaker 1: what story has made this summer really fun? I do. Actually,
Speaker 1: it has to be Tesla, right, Yeah, So the last
Speaker 1: few weeks have just been this incredible saga of Tesla,
Speaker 1: starting with early August when it's CEO Elon Musk, said
Speaker 1: he was going to take the firm private at a
Speaker 1: price of four a share, and then he said in
Speaker 1: the same tweet that he had funding secured, and ever
Speaker 1: since then, there's just been this mad scramble on the
Speaker 1: part of everyone to figure out what that tweet meant,
Speaker 1: whether it was legal, what the story behind it was,
Speaker 1: and everything. And I just found it to be incredibly
Speaker 1: fun and amusing the whole thing. Oh yeah, I mean
Speaker 1: we thought that people dissected Donald Trump's tweets quite a bit,
Speaker 1: but the way they've been examining Elon Musk's tweets is
Speaker 1: definitely even more intense than that. And I gotta say
Speaker 1: when he first tweeted it, I don't know about you,
Speaker 1: but I was really scratching my head at the four
Speaker 1: twenty reference. A lot of people thought that could potentially
Speaker 1: be a joke because four twenty is well code for marijuana, right. Yeah.
Speaker 1: I have to say I was on vacation during during
Speaker 1: the week when it happened, but of course even when
Speaker 1: I'm on vacation, I'm like still checking Twitter every ten minutes.
Speaker 1: And as soon as I saw that tweet, I was like,
Speaker 1: there's just no way this is real. Like I didn't
Speaker 1: for a second actually believe this could possibly be a
Speaker 1: real thing. And of course Tesla hasn't gone private at
Speaker 1: fo dollars a year, but of course, uh, this raises
Speaker 1: all kinds of questions about the legality of just tweeting
Speaker 1: something like that, and what funding secured means and what
Speaker 1: CEOs can tweet, and you know, Elon's already unusual. And
Speaker 1: I think our guest today to help us understand this
Speaker 1: is probably the very best person to talk about it,
Speaker 1: because as soon as this happened, the entire internet was like,
Speaker 1: we have to hear from this columnist his take, because
Speaker 1: it's definitely going to be the best take. Yeah, um,
Speaker 1: I would probably agree with that, and uh, you know,
Speaker 1: talking about us disclosure rules is always fun, but this
Speaker 1: particular person makes it even more so. And On that note,
Speaker 1: I would like to bring in this week's guest, Matt Levine.
Speaker 1: He's an opinion columnist here at Bloomberg, And like I said, honestly,
Speaker 1: I think with in a few minutes, everybody was like,
Speaker 1: we gotta get Matt Levine's take on this, and then
Speaker 1: over the next several weeks, all of Matt's columns on
Speaker 1: Tesla became must reads. So here to sort of help us,
Speaker 1: what help us understand everything that happened is Matt, thank
Speaker 1: you very much for joining us. Thanks for having me. Matt,
Speaker 1: where were you talking? I forget where I was exactly,
Speaker 1: but my column. I've been not writing my column regularly
Speaker 1: for the last couple of weeks, and I was planning
Speaker 1: to not do it, and then Ellen came along, and
Speaker 1: I've been writing mostly about him for a couple of weeks.
Speaker 1: So when you saw the first tweet, the infamous funding
Speaker 1: secured uh four dollars a share tweet, what did you
Speaker 1: think about it? I didn't think it was a joke
Speaker 1: per se, But my first reaction was kind of, he's
Speaker 1: got a little farther than he thinks he has here.
Speaker 1: You know, I've written about a lot of people who
Speaker 1: have ah, you know, launching fake takeover offers is a
Speaker 1: thing that happens, and the SEC and the regulators and
Speaker 1: prosecutors take that seriously, and people have recently gone to
Speaker 1: prison for launching fake tender offers. So I think that
Speaker 1: Ellen Musk has this funnest for sort of making bold
Speaker 1: claims that he can't necessarily always back up on Twitter,
Speaker 1: and I think he was kind of going along with
Speaker 1: that without without really kind of considering the This is
Speaker 1: a bit of a more serious there the gravity of
Speaker 1: what he just said. You know, if he's like, I'm
Speaker 1: gonna make a car that flies everyone like Ellen, all right,
Speaker 1: but he's gonna take take the company private at four twenty,
Speaker 1: it's a little more serious. It just occurred to me that, um,
Speaker 1: we should back up a second, because, like I said,
Speaker 1: this sort of intersection of finance and law is kind
Speaker 1: of your specialty, which is why so many people want
Speaker 1: to get your take. You are a lawyer by training, right,
Speaker 1: I was an m and a lawyer briefly, Um, nothing
Speaker 1: I say is every legal advice. And then I was
Speaker 1: an investment banker, and uh, I have been a columnist,
Speaker 1: so I've I worked at two of the firms that
Speaker 1: are that we're advising Musk and his going private transactions
Speaker 1: some some exposure to this world. Okay, uh, well you
Speaker 1: were a lawyer, so legal technicalities. What exactly are the
Speaker 1: sort of disclosure requirements? And didn't Musk potentially get in
Speaker 1: trouble because he said something on Twitter? Or is it
Speaker 1: because he said something on Twitter that isn't true? Uh?
Speaker 1: Much more the ladder. You know, people think that they're
Speaker 1: that they're like these real sort of formality rules around
Speaker 1: you have to you know, you can't announce a going
Speaker 1: private transaction without you know, filing a proxy and everything.
Speaker 1: That's not true at all. Like this is how it
Speaker 1: normally happens, is, you know, the CEO of a company
Speaker 1: will go to the board and we'll say I would
Speaker 1: like to take the company private, will say that before
Speaker 1: filing a proxy statement. It won't be all done. It
Speaker 1: will be a sort of the opening of a conversation
Speaker 1: that usually doesn't happen publicly, but it's not like out
Speaker 1: of the question that it might at some point become
Speaker 1: public and the CEO might say, I'm looking into I'm
Speaker 1: exploring transaction. They don't normally do it on Twitter, not
Speaker 1: because like Twitter is illegal, and in fact, the SEC
Speaker 1: has said, you know, if you if you sort of
Speaker 1: follow a few formalities and you make it clear you're
Speaker 1: gonna do this, you can announce material events on Twitter.
Speaker 1: The problem, you know, first of all, is that turned
Speaker 1: out on to be true. But but but even beyond that,
Speaker 1: the problem with doing this on Twitter if you're Elon
Speaker 1: mu Usk is that no one seems to have vetited.
Speaker 1: He didn't run it by the board or any lawyers,
Speaker 1: and so the stuff he said was kind of careless.
Speaker 1: You know, normally, whether you put it out in a
Speaker 1: tweet or a blog post or an eight K or
Speaker 1: a press release or whatever, you would say I'm thinking
Speaker 1: about taking the company public, nothing was assured. You know,
Speaker 1: things might still go wrong. All these all these like
Speaker 1: sort of lawyery language that at least kind of gives
Speaker 1: you cover if it doesn't work out. With Elon Musk
Speaker 1: was kind of the opposite. He said I'm considering, right,
Speaker 1: so he didn't actually say I'm definitely gonna do it,
Speaker 1: and then like two tweets later he's like, this is
Speaker 1: only contingent on a serrel the road. It's definitely like
Speaker 1: everything became just sort of more confident um, because that's
Speaker 1: kind of the way he uses Twitter, which is not
Speaker 1: the way you want to announce a potential but not
Speaker 1: button down transaction. Something about the way he used Twitter.
Speaker 1: I had this thought, which is that within maybe a
Speaker 1: day or two after the funding secured tweet, it's just
Speaker 1: kind of obvious that funding was not secure. Sure even
Speaker 1: arguably with hours but then but whatever, but they were
Speaker 1: like a couple of days of like fund speculation about
Speaker 1: who it might baby. Yeah. But then I know it's
Speaker 1: like a couple of weeks later that some of these
Speaker 1: like analysts who cover the stuff and they're like, it
Speaker 1: appears that funding is not secured, and we're downgrading, and
Speaker 1: I downgrading the stock, and I wonder, you know, you're
Speaker 1: on Twitter, and you also had your background in the
Speaker 1: investment banking world, whether those of us who are sort
Speaker 1: of versened in Twitter sort of so it's like, oh,
Speaker 1: this is sort of you know, this is a guy tweeting.
Speaker 1: Where is that if you're not sort of familiar with
Speaker 1: that world, The thought that you would ever flippantly say
Speaker 1: funding secured is almost unimagined. Yeah, it's a weird intersection.
Speaker 1: I mean, like, like you know, as an m and
Speaker 1: al as a form of reor like the fact that
Speaker 1: you would do that is still unimagined, even though you know,
Speaker 1: I joke around on Twitter all the time like it's
Speaker 1: it's it's you're not it's a it's a mixing of
Speaker 1: the world. That just didn't really work right, And I
Speaker 1: doubt SEC rules have been updated to take into account
Speaker 1: trolling or saying outrageous things in order to provoke a reaction. Yeah,
Speaker 1: I mean, he's done. He's made jokes on tweet. He
Speaker 1: joked about Tesla going bankrupt, He's he joked about introducing
Speaker 1: a new model, like a watch. I think he joked
Speaker 1: about a Tesla watch, and I think at one point,
Speaker 1: I think the stock moved on the Tesla watch tweet,
Speaker 1: and I think the SEC was a you know, like
Speaker 1: they just sort of didn't really Ah, there's some awareness
Speaker 1: that like things can be a joke, and like the
Speaker 1: Tesla watch, it was like an April Fool's joke. It
Speaker 1: was just very clear it was a joke and if
Speaker 1: you bought stock on that, like, it's your problem. So
Speaker 1: I think the SEC has has just they're not going
Speaker 1: to pick that fight. But this is this is not
Speaker 1: a joke, you know, And this like did move the
Speaker 1: stock a lot, and this is a little more serious.
Speaker 1: Something we know about Ellen is he really doesn't like
Speaker 1: short sellers. And one of the things people were talking
Speaker 1: about is whether he tweeted this on purpose to sort
Speaker 1: of burn the short sellers. And I'm curious if there
Speaker 1: is a distinction between elon driving to the airport and thinking,
Speaker 1: you know, I think my conversations with the saudis wherever
Speaker 1: bit more or less. I mean, I have the funding security,
Speaker 1: I'm just going to tweet that versus I'm going to
Speaker 1: tweet this to really mess with the shore sellers. And
Speaker 1: whether I get whether intent matters here, yeah, it really does.
Speaker 1: I mean it's it's a little weird. A think of
Speaker 1: a company puts out misleading information about something material to
Speaker 1: the company, that's bad. The company is again to get
Speaker 1: in trouble for that. But Ellen, when he was doing
Speaker 1: this was not acting as the company. He was acting
Speaker 1: as a potential buyer for the company. So I wasn't
Speaker 1: doing it in his capacity as CEO. And if your
Speaker 1: person puts out you know, if I just like say,
Speaker 1: random lies about Tesla, that's probably not securities, not legal advice,
Speaker 1: but it's probably fine The reason people get in trouble
Speaker 1: for doing this stuff is that they have some manipulate
Speaker 1: they want to manipulate the side, they want to um,
Speaker 1: they have some manipulative purpose. And usually what that means
Speaker 1: when like just random people put out fake t cover offers,
Speaker 1: usually what it means they bought some stock. They put
Speaker 1: out the fake taker offer, the stock goes up and
Speaker 1: they sell their stock. It's like a very simple like fraud,
Speaker 1: like a scam. With Elan, it seems very unlikely he
Speaker 1: was selling, right, no indication he was selling. So it's
Speaker 1: not that. So that's not the thing he's gonna get
Speaker 1: in trouble for. And so the question is that you
Speaker 1: have some other manipulative intent. And I think the obvious
Speaker 1: one that people are looking at is he's gone on
Speaker 1: and on about burning the short sellers. He said, you know,
Speaker 1: in a few weeks or they're going to face the
Speaker 1: you know, they're gonna have a terrible they're gonna get burned, basically,
Speaker 1: and uh, you know, having made it so clear that
Speaker 1: he wants to burn the shorts, that he wants to
Speaker 1: squeeze the shorts, it suggests that one possible explanation here
Speaker 1: is that that's what he was doing. There's another facet about,
Speaker 1: you know, whether or not he intended to commit some
Speaker 1: sort of stock manipulation, which is um this notion that
Speaker 1: maybe he was on either drugs or you know, sleeping
Speaker 1: pills or valium or something like that at the time
Speaker 1: when he tweeted. If if his emotional state was UM,
Speaker 1: I don't know, let's say, like, I don't know, if
Speaker 1: his emotional state was fragile at the time, would that
Speaker 1: help him in the eyes of the sec Would he
Speaker 1: get a little bit of leeway because of that? I'm
Speaker 1: not sure there's any precedent for like saying I committed securities, right,
Speaker 1: I mean there is, right, I mean there are there
Speaker 1: are There are insider traders who you know, were addicted
Speaker 1: to things, and they sort of say that at their
Speaker 1: sentencing and it gets them a little leniency maybe here.
Speaker 1: I mean, like if it were a joke, if it
Speaker 1: were like a drug trip, then he would have backed
Speaker 1: away from it, right. I mean. The fact that he
Speaker 1: spent two weeks, you know, putting out blog posts the
Speaker 1: next day and the next week saying this is why
Speaker 1: I said funding was security, they suggests that he was
Speaker 1: a little more serious than that, and that he wasn't
Speaker 1: just you know, he didn't back away from immediately one
Speaker 1: of the columns you wrote and just goes back to
Speaker 1: your experience as a lawyer, was essentially Okay, the tweet
Speaker 1: is out there, now, how can a law firm and
Speaker 1: Ellen sort of back in to making the tweet true? Yeah?
Speaker 1: Like so obviously clearly like they scrambled to be like,
Speaker 1: can we make an excuse for this that it looks
Speaker 1: kind of real? Because lawyers are going to take on
Speaker 1: any task and they'll try. So what was in your
Speaker 1: view the most plausible approach to sort of make make it?
Speaker 1: You know, if you were if you were Elon's lawyer,
Speaker 1: what would be the most plausible structure to back up
Speaker 1: the tweet? So they basically did it, which is they
Speaker 1: raised money from people who wanted to invest, and there
Speaker 1: there is commitments, right, and they went out and canvassed.
Speaker 1: You know, one reason that you might want to go
Speaker 1: public with this, with this notion before having it all
Speaker 1: locked down is that way everyone knows about it, and
Speaker 1: if there is someone sitting around being like I'd love
Speaker 1: to put ten billion dollars into Tesla, then they'll call
Speaker 1: you up. And that kind of seems to have happened,
Speaker 1: you know, and he announced on Friday that he's calling
Speaker 1: the deal off. He said, you know, we got a
Speaker 1: lot of inbound interest. So they did find people who
Speaker 1: were willing to explore putting money into it. And the
Speaker 1: journal report that they raised about thirty billion dollars, which
Speaker 1: is not enough to take Tesla private, but you know,
Speaker 1: it's not nothing. It's a lot of money, and you know,
Speaker 1: and it combines with the notion all along was that
Speaker 1: a lot of the public shareholders would roll into the
Speaker 1: new private Tesla. That's not it's not clear they were
Speaker 1: ever interested in that. Um, you know, some some were,
Speaker 1: but had you know, some of the big public mutual
Speaker 1: funds like Tesla, but have regulatory restrictions or have charter
Speaker 1: restrictions on how much private stock they can own. So
Speaker 1: you know, like what they seem to have cobbled together
Speaker 1: is the thirty billion dollars of money and then some
Speaker 1: number of shareholders who would roll you can sort of
Speaker 1: like look at it and it kind of looks like
Speaker 1: you could almost get to a going private transaction. And
Speaker 1: that's kind of what they presented to the board. And
Speaker 1: then Ellen said never mind, So there is a real um.
Speaker 1: So I mean, like, the structure that you do is
Speaker 1: that is offering some combination of new cash from new
Speaker 1: investors plus rolling over big current investors in in Tesla,
Speaker 1: and you try to get those two numbers to add
Speaker 1: to about seventy billion dollars just which is the you know,
Speaker 1: four twenty times the number of shares. So like, the
Speaker 1: other fun problem that that I'm sure that Musk's advisers
Speaker 1: are working on is that when he initially announced this,
Speaker 1: one thing he said was that every shareholder was going
Speaker 1: to get an opportunity to roll over into the new
Speaker 1: private Tesla, which is one of the weirdest things about it.
Speaker 1: The idea that you can take all of your public shareholders,
Speaker 1: all these like mom and pop share olders who have
Speaker 1: ten shares and roll them into a private company is
Speaker 1: not normally how you think of private companies. So I'm
Speaker 1: sure that people were trying to find some way to
Speaker 1: make that true. And I know I read a lot
Speaker 1: of articles analyzing, well, you could do stub equity, you
Speaker 1: could do this or that. It never seemed all that
Speaker 1: realistic to me. And Uh in his latest announcement must
Speaker 1: conceider that there is not really a practical path to
Speaker 1: do it. So in terms of damage control, I mean,
Speaker 1: you briefly mentioned this just that then, but um, the
Speaker 1: four twenty number, Like how much more complicated would that
Speaker 1: have made attempts to contain the damage. And also the
Speaker 1: four twenty number, where do you think he caught that from?
Speaker 1: Do you think it was based on reality or is
Speaker 1: it something he just sort of like pulled out of
Speaker 1: the air. I'll defend that the four twenty number is
Speaker 1: like a premium. I think I think that that what
Speaker 1: he said is that he wanted to offer a premium
Speaker 1: to the trading precess arend around three, and so he
Speaker 1: did that math like multiplying by one point two, and
Speaker 1: he got like four hundred nineteen dollars, and he decided
Speaker 1: that four twenties sounded like a nicer rounder number. And
Speaker 1: everyone kind of scoffed at this explanation, But it's totally reasonable.
Speaker 1: That's how every going private deal has done. Like there's
Speaker 1: no you know, there's no he's not doing a discounted
Speaker 1: cash flow analysis. There's no cash flow. It's it's a
Speaker 1: it's the way that you do a going private transaction
Speaker 1: is you offer like a sort of reasonable premium to
Speaker 1: the current trading price, and then you go to the
Speaker 1: board and you see what the board says, and you
Speaker 1: negotiate from there. So I think like offering a round
Speaker 1: number that's from the from the trading price, it's fine.
Speaker 1: The discounted cash flow analysis that that's typically like backed
Speaker 1: into right. They come up with the number, and then
Speaker 1: someone's job is to sort of put together a spreadsheet
Speaker 1: that explains it. At some point, if you were really
Speaker 1: going to buy the company, he would have to come
Speaker 1: up with a sense of how many dollars the company
Speaker 1: was worth, and the board would have to come up
Speaker 1: with a sense of how many dollars the company is worth,
Speaker 1: and they'd have to be not too far apart so
Speaker 1: that they could negotiate a price. Uh. One way to
Speaker 1: do that traditionally is a discounted cash for analysis, where
Speaker 1: you discount the present value of the future cash flows
Speaker 1: of the company. I think it's very hard to predict that,
Speaker 1: and I think there's a kind of wide bit ask
Speaker 1: on what that number is. What do you think about
Speaker 1: CEOs who are obsessed with shorts? Because both CEOs don't
Speaker 1: seem to care that much, but every once in a while,
Speaker 1: there's the CEO comes along that really gets worked up
Speaker 1: about them. There's this belief that the shorts can do
Speaker 1: something to you that I think is mostly wrong. Sometimes
Speaker 1: it's right. So the companies that need a lot of finance,
Speaker 1: particularly like you know, in the financial crisis, banks were
Speaker 1: really worried about shorts because if they couldn't roll their
Speaker 1: financing every day, they couldn't stay in business. Um. You know,
Speaker 1: when Herbal Life was in a fight with Bill Ackman,
Speaker 1: when Bill Ackman was really trying to get regulators to
Speaker 1: shut them down, Like they had a real belief that
Speaker 1: Bill Ackman was doing things to them. Most of the time, though,
Speaker 1: shorts just short the stock and they think the company
Speaker 1: is bad or the or the stock is overvalued, and
Speaker 1: they're like tools to do something bad to the company
Speaker 1: are fairly limited. Um. Tesla, you know, Musk talks a
Speaker 1: lot about how the shorts are pushing a narrative that
Speaker 1: will destroy Tesla, and it's very hard for me to
Speaker 1: understand what that could mean. Tesla cells cars, and like,
Speaker 1: I don't think short sellers are going to like potential
Speaker 1: car buyers and trying to talk them out of buying Teslas.
Speaker 1: I mean they were a little bit they're putting out.
Speaker 1: You know, they would not you know, they will put
Speaker 1: out a little um uh claims that the cars are
Speaker 1: badly made, but like, ah, there's not a lot they
Speaker 1: can do. And I think the focus on short sellers
Speaker 1: is more of a like psychological like aversion to having
Speaker 1: anyone criticized as you than like a real like rational
Speaker 1: analysis of what the company needs. I think most public
Speaker 1: company CEOs recognize that the company needs their attention on
Speaker 1: the business rather than they're like ego driven tweeting about
Speaker 1: how evil short sellers are. Isn't Tesla burning through cash
Speaker 1: quite rapidly though, like I e. Don't they need pretty
Speaker 1: decent access to financing in order to basically stay in
Speaker 1: existence for a time to come. And wouldn't that be
Speaker 1: a vulnerability that the shorts could target by sort of
Speaker 1: interrupting that flow of financing. Yeah, I mean look like
Speaker 1: they do. I mean, like, like, you know, the fact
Speaker 1: is that like the marginal buyer of Tesla stock can
Speaker 1: buy it from a short seller rather than from Tesla.
Speaker 1: Um that narrative is complicated by the fact that, you know,
Speaker 1: Musk is not fond of saying that they need financing right,
Speaker 1: and that, and if you're a company that needs billions
Speaker 1: of dollars of financing from the equity markets, it's weird
Speaker 1: to say, you know what, we're gonna buy all of
Speaker 1: our stock back. We don't need any public sheer olders,
Speaker 1: We're gonna buy back. It's like, I tend to agree
Speaker 1: with you that Tesla does require access to the public markets,
Speaker 1: and that short sellers not by like pushing a narrative
Speaker 1: or anything, but just by the fact that they are
Speaker 1: like a supply of shares. Short sellers tend to reduce
Speaker 1: their access to cheap financing not that much, right, I
Speaker 1: mean still seventy sixty billion dollar company, right, It's you know,
Speaker 1: they still have plenty of access to public markets. Short
Speaker 1: sellers do it the margin reduce that, But like that's
Speaker 1: not the narrative that Tesla says. Yeah, this, this whole
Speaker 1: story has sort of coming in a very weird time
Speaker 1: where there's this other big thing people are talking about,
Speaker 1: and that is the supposed shortsightedness of public markets and
Speaker 1: whether investors demand companies hit a number every quarter. And
Speaker 1: Tesla seems like a company that, more than anything, hasn't
Speaker 1: been forced to adear by the demands of the market,
Speaker 1: because they never get punished for failing to hit some number,
Speaker 1: and there doesn't seem to be any particular expectation that
Speaker 1: if they don't nail uh an EPs or that wall
Speaker 1: Streets put out there, that they're going to lose their
Speaker 1: access to the market. It's never an EPs figure because
Speaker 1: they don't make money. Now there are like they do
Speaker 1: sort of announce short term production targets and then when
Speaker 1: they failed to meet them, people say, ah, you failed
Speaker 1: to meet them. And I think that there's like a
Speaker 1: psychological thing where like I think Musk feels like he
Speaker 1: is subject to the short term pressures of the stock market.
Speaker 1: But objectively, there's this enormous valuation on a company that
Speaker 1: doesn't make money, and that valuation is driven purely by
Speaker 1: a belief that in the long term it's going to
Speaker 1: be an enormous success. As you said, it's like it's
Speaker 1: exactly the sort of counter narrative to this idea that
Speaker 1: the public markets are so shortsighted. Public markets are funding
Speaker 1: very cheaply, you know, at very high valuations this total
Speaker 1: long shot, long term company, and nonetheless Musk is like
Speaker 1: public markets are short so short term we have to
Speaker 1: get out of here, sorry, just to take a step back. Then,
Speaker 1: do we have any indication or do we have a
Speaker 1: guess um even about why Elon Musk would have found
Speaker 1: going private desirable, especially if he's talking about going private
Speaker 1: in a way that still brings along the existing public shareholders. Yeah,
Speaker 1: I mean, I don't think he had a fully baked
Speaker 1: sense of like exactly what it would mean. But I
Speaker 1: think that basically I don't think he wanted to go private.
Speaker 1: I think he wanted to be private. I think he
Speaker 1: looked at like the company being like Uber, where you
Speaker 1: don't announce quarterly results and have to do a conference
Speaker 1: call and get questions about how you miss production targets,
Speaker 1: you don't have short sellers, like those are the two
Speaker 1: big things. Like you're like and your stock doesn't move
Speaker 1: around day to day, and you don't like sort of
Speaker 1: have whatever demoralizing or moralizing effect that has on your
Speaker 1: staff when the stock goes down. So I think he
Speaker 1: looks at like big private companies and thinks those companies
Speaker 1: are fine. They have this sort of like public face
Speaker 1: and the ability to access capital that like public companies
Speaker 1: have always had, and they don't have the share price
Speaker 1: moves and the quarter of the earnings reports and the
Speaker 1: short sellers, and he thought that would be more attractive.
Speaker 1: That's not a reason to like do a going private
Speaker 1: transaction and go out to Saudi Arabia and raise money
Speaker 1: to buy out your shareholders. But if you could flip
Speaker 1: a switch and go from being a public company to
Speaker 1: a private company, I think you would have liked to
Speaker 1: do that. That reminds me. Actually, So there were a
Speaker 1: couple of reports recently that the Saudis weren't very impressed
Speaker 1: by Elon Muska, basically talking about conversations that they'd had.
Speaker 1: Does Elon have any sort of obligations to the Saudias
Speaker 1: when it comes to like what he was able to
Speaker 1: reveal and not reveal, Not that I know of. I
Speaker 1: mean I think that normally when things like this happened,
Speaker 1: you know, you sign agreements, and those agreements might include
Speaker 1: a confidentiality agreement, but they more importantly, they just include
Speaker 1: some sort of like coordination on how you'd approach the
Speaker 1: company and how you'd approach publicity, and you'd agree on
Speaker 1: how you'd announced the deal in all these things that
Speaker 1: didn't that doesn't seem to have happened here. Maybe he
Speaker 1: violated a convention of that agreement, but I doubt I
Speaker 1: think more likely is he just had casual, relatively casual
Speaker 1: conversations with them that didn't lead to any sort of
Speaker 1: formal agreement, and they feel burned by his representing it
Speaker 1: as a formal agreement. Let's talk about what's next. So
Speaker 1: obviously Ellen announced late on a Friday, I think it
Speaker 1: was eleven PM that like, actually it's over, We're not
Speaker 1: going to go private, back to business as usual. But
Speaker 1: the whole affair has a perhaps damaged Elon's reputation among
Speaker 1: some in Wall Street, though I don't know how much
Speaker 1: that will actually matter. But more importantly, there's now an investigation,
Speaker 1: and we've and others have reported that the SEC has
Speaker 1: sent subpoenas to Tesla. So, in your view, what are
Speaker 1: some of the ways that this could go? I think
Speaker 1: from like the company's perspective, I think they're on board
Speaker 1: with Ellen, right, Like the board is like sort of
Speaker 1: his buddies, and like frankly, the company sort of makes
Speaker 1: the most sense with this like visionary leader, right, So
Speaker 1: I think it's very important for them, And I have
Speaker 1: to say, it looks like this has happened it's very
Speaker 1: important for them to be like stop doing this, right,
Speaker 1: like pay more attention to like following the rules and
Speaker 1: not misleading shareholders and not like creating enormous painful distractions
Speaker 1: for the company that that reverberate for months just because
Speaker 1: like you like were in a car on the way
Speaker 1: to the airport and you had a whim. So I
Speaker 1: think in the company's preside of like they're not going
Speaker 1: to fire him, you know, but like they really should
Speaker 1: read him the Riot Act and tell him to stop
Speaker 1: doing this. And it seems like that's happened now. From
Speaker 1: the sec IS perspective, I really don't know. I mean,
Speaker 1: I don't think it's like an open and shut case
Speaker 1: that he like, uh like committed the crime or the
Speaker 1: or the you know, the violation of manipulating the stock,
Speaker 1: because I do think that in his mind he was
Speaker 1: sort of just sort of giving a window into his
Speaker 1: thought process and maybe also trying to bring the shorts.
Speaker 1: So I think they have a bit of a tough case.
Speaker 1: If I were the SEC, I would really really really
Speaker 1: want to bring an enforcement action here because it looks
Speaker 1: really bad for a big, famous public company CEO to
Speaker 1: announce a big material transaction when it's not true. Um,
Speaker 1: but I also like it's not such a sort of like, yeah,
Speaker 1: it doesn't have so much bad intent that i'd want
Speaker 1: to like ban him from being the CEO. I'd like
Speaker 1: want to get some money, yell at him and move on.
Speaker 1: You mentioned in one of your columns and everyone found
Speaker 1: out really amusing this idea that like if you were
Speaker 1: an SEC staff or you would really want to be
Speaker 1: on this case, Like this would be like one of
Speaker 1: the juiciest cases of your career, like that it would
Speaker 1: be hilarious to be the person who called Tesla to
Speaker 1: be like, so, where is that funny because everyone else
Speaker 1: is like, where's this? Funding is as real as as possible,
Speaker 1: and yeah, CEC, you could just call up and be like,
Speaker 1: so really, I think that like the initial stage of
Speaker 1: this investigation would be just hilarious because like this like
Speaker 1: very sort of rickety, fake seeming transaction, Like you could
Speaker 1: go and be like is this real or not? And
Speaker 1: like they have every like they have to tell you
Speaker 1: because if you're the regular there and you have a
Speaker 1: you know, primo faciae case that something bad has gone
Speaker 1: on here, I think at this point I'm less envious
Speaker 1: with those people because at this point they kind of
Speaker 1: like we feel it feels like we know all the facts,
Speaker 1: Like they probably know all the facts and they have
Speaker 1: to decide what to do with it. And it's not
Speaker 1: like there's an open and shut like either walk away
Speaker 1: or like throw the book at them. Like there's some
Speaker 1: facts are clear about what you do with them is
Speaker 1: less clear. Yeah, I think it's it's, you know, like
Speaker 1: the idea that like you can't just let him get
Speaker 1: away with it because like it just doesn't it's just
Speaker 1: the stock moved a lot on information that seemed not
Speaker 1: to be true. But at the same time, you can't
Speaker 1: be like he can never be a public company director
Speaker 1: anymore because like he's doing a good job for share
Speaker 1: olders in many respects. Yeah, it feels like you have
Speaker 1: to sort of get inside Musk's mind a little bit
Speaker 1: as well, And I wonder, I wonder what those conversations
Speaker 1: would be, like, Yeah, I don't really think you do that.
Speaker 1: I think you do to bring like a case in court,
Speaker 1: and I don't think that's what anyone wants. I think
Speaker 1: what you have to do is there's like probably some
Speaker 1: brob middle ground where it's like they pay a fine,
Speaker 1: he promises not to do it again. The SEC yells
Speaker 1: at him a lot, and everyone kind of moves on
Speaker 1: with their lives. You don't really need to talk about
Speaker 1: exactly what his intent was. You need to be like,
Speaker 1: this wasn't true, So let's announced that let's keep public market,
Speaker 1: you know, do something for the integrity public markets by
Speaker 1: going after Musk in some way for for tweeting this. Though. Well,
Speaker 1: on that note, Matt uh, that gives us something to
Speaker 1: look forward to down the line. And it was great
Speaker 1: to talk to you. Appreciate your coming up. Thanks for
Speaker 1: having Joe. I really like that conversation. I always love
Speaker 1: having matt on. But I think you were right, he's
Speaker 1: sort of the perfect person to talk about this. Yeah,
Speaker 1: and the last point, which is sort of this idea
Speaker 1: that everybody now kinds of nose the facts like that
Speaker 1: was really fun in the immediate days after the tweet,
Speaker 1: because it did not seem very ambiguous. It seemed like
Speaker 1: either he had funding secured or he didn't have funding secured.
Speaker 1: And while all of us on Twitter or sort of
Speaker 1: is this real? It always seemed like pretty straightforward for
Speaker 1: the SEC to just ask the question and find out,
Speaker 1: now what you do with that information, though, it'll be interesting,
Speaker 1: but maybe not quite as maybe not quite as juicy. Yeah.
Speaker 1: I also wonder still about the long term reputational damage
Speaker 1: to Tesla and to Elon Musk in particular. Like, if
Speaker 1: you think that this is a guy who basically made
Speaker 1: his reputation and his career by coming up with sort
Speaker 1: of out of this world ideas and then figuring out
Speaker 1: how to do them, it kind of feels like in
Speaker 1: this instance, he came up with a sort of crazy
Speaker 1: financial idea but had no actual discernible way of knowing
Speaker 1: how to follow through with it. So maybe you can
Speaker 1: be a visionary when it comes to electric cars and
Speaker 1: not financial markets, or maybe people think you should be
Speaker 1: a visionary in all things. I don't know. I do
Speaker 1: wonder whether this really will have any long term ramifications
Speaker 1: on Tesla's ability to borrow money or tap the capital markets.
Speaker 1: People say that it will, and like you see analysts
Speaker 1: talking about how this sort of reduces his credibility, but
Speaker 1: you have to wonder whether it actually will matter. Also,
Speaker 1: outside of financial markets, there's also the whole issue of
Speaker 1: Testlas suppliers and whether they supply parts in exchange for
Speaker 1: payments down the down the road. So there are some
Speaker 1: areas where he does need to maintain trust, but you know,
Speaker 1: I don't I don't know which way. I could certainly
Speaker 1: see this all blowing over. Yeah, And there is a
Speaker 1: sort of ultimate irony in here that a company that
Speaker 1: seems to hate public markets so much has actually kind
Speaker 1: of gotten away with um ignoring certain norms of public
Speaker 1: markets for so long. And the irony that ostensibly one
Speaker 1: reason to go private is to avoid distraction and is
Speaker 1: big of a distraction as they come. Right, Okay, this
Speaker 1: has been the ultimate tale of Tesla irony. Then, um,
Speaker 1: shall we leave it there? Let's do it all right?
Speaker 1: This has been another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joe wi Isn't All. You can
Speaker 1: follow me on Twitter at the Stalwart, and you should
Speaker 1: follow our guest Matt Levine on Twitter at Matt Underscore
Speaker 1: at Levine, and you should follow our producer tofur Foreheads
Speaker 1: at Foreheads T, as well as the Bloomberg head of podcast,
Speaker 1: Francesca Levy at Francesca Today. Thanks for listening.