In Part 2 of 3, we examine the Tornetta defendants' arguments for common law ratification, and ask whether Plaintiff can kill those arguments before they grow into fact-intensive controversies.
Another great one Montana. Thanks. I kind of hope the "kill shots" don't work and they open up discovery again. While Musk's attorneys want that for their ongoing delay strategy, they most definitely don't want see what will ultimately come out of that discovery. Fascinating.
It is fascinating. And, as you probably know, from jaberwock's Newsletter here at Substack, the best thing for Tesla bears (at least in the long run) would be for the options to be restored.
So, I'm torn between wanting a victory for sane & sensible corporate governance and the rule of law, on the one hand, and wanting Tesla "investors" to get just what they deserve, on the other. But, to be sure, I'm leaning decidedly in favor of the former.
(FWIW, I have no position in TSLA, and no intention of opening one.)
I'm going with Casey on this one. Musk loses the comp plan and there is no doubt we will see a melt down like never before. No way the board could ever recreate what Elon thinks he is due ever again. I mean they could try but at this point the impact on the financials would be outrageous. What the Tesla shareholders don't realize is that there is NO good outcome for them. Dilution and loss of interest by Elon should it be approved (Note: the plan provides NO new incentive to do anything but "clip coupons") and an even crazier (is that possible?) Musk if he loses.
It’s always difficult to predict how Musk will react, but the volume and gravity of litigation now facing Tesla over just his earlier antics is remarkable.
I agree that Tesla cannot afford the compensation expense that would go with awarding musk a new grant. Maybe Musk will lobby the Texas legislature to allow some kind of amendment to the charter that would create a dual voting scheme so that he would have all the control he wants. But what I think he really wants is to be able to sell some stock and raise some cash.
Musk has been quite fortunate in the Tesla share price. Despite the serious decline in fundamentals over the past six months, he is being rescued by options action that evidently is creating a gamma squeeze. I’m not sure how long that can be sustained.
He has really put himself and Tesla into quite a box. As one of you said, it’s time to get the popcorn out and watch how all this develops.
Quite the understatement to be sure. I really look forward to the day this mess finally unwinds and all of Musk's, let's call them "shenanigans," come to light. LOL
Personally I think that the options NOT being restored would accelerate and exacerbate Musk's downward spiral as he would no doubt force Tesla to pony up at least a significant portion of this compensation as a new grant.
To justify this compensation he will make ever larger promises and cause more self-inflicted wounds.
I have my popcorn ready, but it's been sitting out since the absurd self driving claims and financial projections started in 2016.
I couldn't disagree more about options being restored as bearish. Elon won't sell his shares unless he gets margin called. The less equity Elon has, the more likely he gets margin called. Otherwise the additional shares just sit there never sold. If the argument is about per-share fundamentals that's ridiculous too because the per share fundamentals are maybe 10% of the stonk price and clearly irrelevant. The cult of shareholders does not care about fundamentals.
The problem is that when Musk exercises the options, the strike price plus income tax comes due. That's a big number. Musk will need approximately half his shares just to raise that cash. There is a deadline for exercising the options, and it probably makes most sense for Musk to begin the exercise well in advance of that date in order not to create too much of a pricing shock. The jaberwock post I mentioned earlier has the details.
Also, just my sense of things, but the Twitter debt service is making Musk cash poor right now. SpaceX is not throwing off any cash, and neither is any of the other Musk ventures. I suppose there's always moving cash from pocket A to pocket B, but there are limits to that.
This is a very strong point! Thanks for the details. That said, he would presumably be able to borrow most of the strike price plus taxes against the value of the shares. If he’s cash poor, which you say and I agree with, the best thing to force sales is for him to own less marginable equity.
All kudos to Professor Elson. His sole motive is to help the law be properly interpreted and applied. For that he was fired from a law firm (as discussed in the media). At the request of Elon and his hard core lawyers. Of course, they deny that.
More kudos to the Chancellor. For doing the same as the Professor. Without fear or favor, she applied the law to Elon, who has otherwise been above the law.
Elon has successfully done this before with law firm hires and fires. It reminds me of Elon’s pal, Murdoch, who retained all the good family law firms in NYC so that his ex couldn’t hire a lawyer at any of those firms (NYT). Might makes right in a scorched earth strategy.
So far as I know, the hearing on the ratification issue is not yet scheduled. It will take place in late July or the first week in August. I would expect we will have decisions on legal fees and ratification, along with a final order, this summer, perhaps before August ends. It could, of course, take longer, but certainly it will be a 2024 ruling with final judgment.
The opinions (legal fees & ratification) will take a bit of time to write. I would guess the Court is at work right now on the legal fees opinion, and the ratification opinion should be somewhat less complicated & lengthy.
I think there will be a market reaction. In an alternate universe, where Tesla is valued on fundamentals, the failure of the ratification vote to undo the Chancellor's rescission order would be bullish.
But in this universe, such a ruling would likely depress the share price.
(Vice versa for a decision to undo the rescission order.)
Another great one Montana. Thanks. I kind of hope the "kill shots" don't work and they open up discovery again. While Musk's attorneys want that for their ongoing delay strategy, they most definitely don't want see what will ultimately come out of that discovery. Fascinating.
It is fascinating. And, as you probably know, from jaberwock's Newsletter here at Substack, the best thing for Tesla bears (at least in the long run) would be for the options to be restored.
https://johnd12343.substack.com/p/the-vote-on-elon-musks-bonus-no-winning
So, I'm torn between wanting a victory for sane & sensible corporate governance and the rule of law, on the one hand, and wanting Tesla "investors" to get just what they deserve, on the other. But, to be sure, I'm leaning decidedly in favor of the former.
(FWIW, I have no position in TSLA, and no intention of opening one.)
I'm going with Casey on this one. Musk loses the comp plan and there is no doubt we will see a melt down like never before. No way the board could ever recreate what Elon thinks he is due ever again. I mean they could try but at this point the impact on the financials would be outrageous. What the Tesla shareholders don't realize is that there is NO good outcome for them. Dilution and loss of interest by Elon should it be approved (Note: the plan provides NO new incentive to do anything but "clip coupons") and an even crazier (is that possible?) Musk if he loses.
Monk & Mike,
We really are in a strange place.
It’s always difficult to predict how Musk will react, but the volume and gravity of litigation now facing Tesla over just his earlier antics is remarkable.
I agree that Tesla cannot afford the compensation expense that would go with awarding musk a new grant. Maybe Musk will lobby the Texas legislature to allow some kind of amendment to the charter that would create a dual voting scheme so that he would have all the control he wants. But what I think he really wants is to be able to sell some stock and raise some cash.
Musk has been quite fortunate in the Tesla share price. Despite the serious decline in fundamentals over the past six months, he is being rescued by options action that evidently is creating a gamma squeeze. I’m not sure how long that can be sustained.
He has really put himself and Tesla into quite a box. As one of you said, it’s time to get the popcorn out and watch how all this develops.
"Fortunate" in the Tesla share price.
Quite the understatement to be sure. I really look forward to the day this mess finally unwinds and all of Musk's, let's call them "shenanigans," come to light. LOL
Personally I think that the options NOT being restored would accelerate and exacerbate Musk's downward spiral as he would no doubt force Tesla to pony up at least a significant portion of this compensation as a new grant.
To justify this compensation he will make ever larger promises and cause more self-inflicted wounds.
I have my popcorn ready, but it's been sitting out since the absurd self driving claims and financial projections started in 2016.
I couldn't disagree more about options being restored as bearish. Elon won't sell his shares unless he gets margin called. The less equity Elon has, the more likely he gets margin called. Otherwise the additional shares just sit there never sold. If the argument is about per-share fundamentals that's ridiculous too because the per share fundamentals are maybe 10% of the stonk price and clearly irrelevant. The cult of shareholders does not care about fundamentals.
Hi, Paul,
The problem is that when Musk exercises the options, the strike price plus income tax comes due. That's a big number. Musk will need approximately half his shares just to raise that cash. There is a deadline for exercising the options, and it probably makes most sense for Musk to begin the exercise well in advance of that date in order not to create too much of a pricing shock. The jaberwock post I mentioned earlier has the details.
Also, just my sense of things, but the Twitter debt service is making Musk cash poor right now. SpaceX is not throwing off any cash, and neither is any of the other Musk ventures. I suppose there's always moving cash from pocket A to pocket B, but there are limits to that.
This is a very strong point! Thanks for the details. That said, he would presumably be able to borrow most of the strike price plus taxes against the value of the shares. If he’s cash poor, which you say and I agree with, the best thing to force sales is for him to own less marginable equity.
You need crazy pills to understand most things in this day and age. Markets/economics for sure. Politics/government definitely. Courts obviously.
All kudos to Professor Elson. His sole motive is to help the law be properly interpreted and applied. For that he was fired from a law firm (as discussed in the media). At the request of Elon and his hard core lawyers. Of course, they deny that.
More kudos to the Chancellor. For doing the same as the Professor. Without fear or favor, she applied the law to Elon, who has otherwise been above the law.
A courageous lady. Fortunately, much more intelligent than Elon Musk.
All true
Elon (through his hard core lawyers): “Fire that guy or forget about the millions in fees me and Tesla pay you.”
Professor: “I won’t back down.”
Firm: “Unacceptable. What you are doing is a conflict of interest. Even though you have never worked on one of Elon’s cases. You’re fired.”
Elson did the right thing by terminating his consulting relationship.
His first amicus brief has left a permanent dent in Elon's chin. Let's see what the second one does.
Elon has successfully done this before with law firm hires and fires. It reminds me of Elon’s pal, Murdoch, who retained all the good family law firms in NYC so that his ex couldn’t hire a lawyer at any of those firms (NYT). Might makes right in a scorched earth strategy.
Has Professor Elson's amicus brief been accepted as part of the trial record?
I seem to recall that the defendants were rather opposed to that.
Has the date been set for the ratification hearing?
Whatever they are paying Chancellor McCormick, it's not enough.
When do we expect a ruling from the chancellor?
So far as I know, the hearing on the ratification issue is not yet scheduled. It will take place in late July or the first week in August. I would expect we will have decisions on legal fees and ratification, along with a final order, this summer, perhaps before August ends. It could, of course, take longer, but certainly it will be a 2024 ruling with final judgment.
The opinions (legal fees & ratification) will take a bit of time to write. I would guess the Court is at work right now on the legal fees opinion, and the ratification opinion should be somewhat less complicated & lengthy.
Do you think the market (aka cult) will care?
I think there will be a market reaction. In an alternate universe, where Tesla is valued on fundamentals, the failure of the ratification vote to undo the Chancellor's rescission order would be bullish.
But in this universe, such a ruling would likely depress the share price.
(Vice versa for a decision to undo the rescission order.)