Tesla CEO Elon Musk has rebuffed a shareholder attempt to overhaul the electric car maker's board and strip him of his role as chairman, despite worries about the company's shaky finances and inability to meet its production goals for its first mass-market sedan.
All three directors seeking to remain on Tesla's nine-member board were re-elected during the company's annual meeting held Tuesday in Mountain View, California.
Directors Antonio Gracias, James Murdoch and Elon's brother, Kimbal Musk, won by "a wide margin," according to Tesla. CtW Investment Group, an activist firm that represents labor union pension funds, had spearheaded a rebellion seeking to oust the trio from the board on the grounds that they didn't know about the auto industry at a critical time in Tesla's existence.
The company said a "supermajority" of shareholders also rejected a proposal to force Musk to step down as Tesla's chairman, a position he has held since 2004 — four years before he also assumed the CEO job.
The precise voting totals will be disclosed within the next few days.
Elon Musk holds a 22 percent stake in Tesla, increasing the degree of difficulty for shareholders trying to challenge his authority. After the results were announced, he sought to reassure shareholders attending the meeting and others watching on a webcast.
After describing the past few months as among the most "hellish" in his life, Musk said he expected Tesla to post a quarterly profit during the July-September period. That's something the Palo Alto, California, company has rarely pulled off in a 15-year history marked by steady losses while investing heavily in its technology and manufacturing plants.
Tesla has been burning through so much cash — more than $1 billion during the first three months of this year alone — that investors have been worrying it will have to sell more stock or add to its already hefty debt load to raise enough money to survive.
After conceding that "staying alive" is difficult in the auto industry, Musk told shareholders that Tesla will be "cash flow positive" during the second half of this year. If Musk is correct, the prediction will translate into Tesla bringing in more cash than it's spending in both the third and fourth quarters.
To do that, Tesla will probably have to meet Musk's manufacturing goals for its Model 3, a sedan with a starting price tag of $35,000 that represents the company's attempt to reach a mass market. Tesla still needs to more than double its recent production rate to reach Musk's target of delivering 5,000 Model 3s per week. Musk reiterated previous predictions that that will happen during the second half of this year.
Tesla's stock gained about 1 percent to $294.35 in Tuesday's extended trading. That's about 24 percent below its all-time high set in September at $389.61
-_-_-_-otalp-_-_-_- on June 6th, 2018 at 04:40 UTC »
This will get buried, but for a lay person, this is why Tesla is the most shorted stock on the market and why some people want Musk out:
Summary of Tesla's situation:
Tesla currently has 2.67 billion in cash.
About 1.1 billion of this is in loans that need to be returned early next year
Around 40% of their cash in hand is from refundable deposits, many from people who thought they would get a $35k car
Tesla cannot make $35k Model 3s at a profit(this is generally accepted, and even Tesla hinted at it), they'll probably lose money even making $42k cars. They need to make $50k cars at scale to earn strong profits
When asked in the earning call last for last quarter about reservations and how many people chose to cancel/take up their car once offered, Musk stunningly called the question "boring" and "boneheaded" and went on take questions from a youtuber for 20 mins. This was considered unprecedented and bizarre and stock dove.
Tesla is losing about 800-900 million a quarter, so they will run out of money without a cash infusion. Literally everyone(all major banks/investors/analysts) knows that Tesla will need to raise capital this year.
Musk though, has insisted that Tesla will not need to raise cash because they will be "profitable by Q3 or Q4". A reminder that they lost 780 million in Q1, and even small profits won't be enough to prevent running out of cash. In order to make sustainable profits they need to sell around 10,000 model 3s a week. They were supposed to produce 5000 cars a week in 2017. They have just now been able to produce 2500/week.
Even bulls say that Musk is bluffing and he will eventually raise cash this year. Moody's downgrade of Tesla to essentially junk stocks makes it harder to raise cash at good interest rates. Moreover, there is speculation and some evidence that the reason Tesla haven't already done so, is that they are under SEC investigation which would prevent them from raising cash without disclosing a lot of details harmful to them.
Tesla has access to standard credit lines for about 500 million, but they recently had to pledge their Fremont factory to just maintain these credit lines.
A lot of Tesla's financial executives have left the company - a red flag to many including Jim Chanos, who famously shorted Enron due to similar indicators. The head of autopilot left and the head of engineering left 'for vacation' recently
Tesla's autopilot is complete false advertising. Their original autopilot was developed by MobilEye. MobilEye hated tesla's exaggeration of the system's capabilities and withdrew their supply after a person died using autopilot. Tesla responded that mobileye was jealous of Tesla's superior "Enhanced Autopilot" which has hardware capable of full self driving. It is generally accepted on owner and enthusiast forums that enhanced autopilot is worse than mobileye's system right now(edit: in the last few months some people feel Enhanced AP has surpassed the original one in terms of capabilities, though most agree it is still less relaible), and in general both are basically lane-keeping system with AEB. Waymo and GM/Cruise are far ahead with their FSD capabilities than Tesla(again, widely accepted)
Part of Tesla's debt comes from bailing out Solar City, a completely unprofitable company loaded with debt that was run by Musk's cousins. Some people saw this as nepotistic and a conflict of interest(Musk held part ownership of SolarCity while his cousins ran it), with a few investors suing Tesla over the deal.
Starting from 2019 and 2020, all the major automakers are bringing out electric models. This will further damage Tesla's competitiveness, since they have the wost QA and build quality due to their haphazard and panicked development process and their $7500 tax credit is about to run out.
Despite all this, the market cap of tesla is larger than Ford, Fiat and nearly equal to GM. Their inflated market cap(which even Musk admits is inflated if you "look at past results") is fuelling their funding which inflates the market cap even more as they lose more money trying to make bigger promises.
What does Tesla have to its advantage? Tremendous marketing and brand value. They're probably inching towards or even surpassing Apple - and virtually all of this is tied to Musk.
What does Tesla have against it? The realities of running a business and actually making the products.
Edit: I did not expect this to blow up and regret not linking the sources(the original text was for myself and people who follow tesla closely). Most of it is from quarterly earnings report, public statements, article and analysis. It's very late night here, I will update this comment with sources for every point tomorrow. In the mean time you can google most of the specific ones. (Eg: 'Tesla Fremont factory pledge' leads to this: https://www.reuters.com/article/tesla-factory/tesla-offers-fremont-factory-to-boost-liquidity-ifr-news-idUSL1N1SF2LU) or ask at r/RealTesla
Also: I don't short Tesla and I am not an investor or stock expert: just someone who's spent the past few months researching them out of curiosity that stemmed form my interest in them. I think people should be exposed to the reasons why Tesla is betted against, as people don't hear the reasons in the mainstream - just the fact that they are 'in trouble' or 'shorted'. But most people would like to know more, so I posted this.
an_exciting_couch on June 6th, 2018 at 03:22 UTC »
Note that this is chairman, not CEO. He would have retained the CEO position even if ousted from the board.
LaceSexDoctor on June 6th, 2018 at 01:34 UTC »
Why was this up for bit at all? Am I out of the loop?