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So glad I own TSLA!!!

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Deal Addict
Jan 20, 2016
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MrMom wrote: $360 strike on 19's and 21 convertible's. "Change of control" and "callable" on the straight 25's. Tesla isn't going to call this issue. COC covenants are not uniform from country to country nor bond to bond, although there has been harmonization with recent issues.


source: https://www.barrons.com/articles/tesla- ... 1533667505
attached bond prices via FINRA
Nub question then, is it possible Musk is kinda "motivated" to have TSLA share price as much lower from $360 in 2019 (and 2021) then? E.g the more difference between this convertible price and market price the better???

That could explain all this "sudden" tweet eruption, public MJ smoke etc, which hurts the stock price (but not the Musk's payout more tied to delivery now)...the worse - the better?
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asa1973 wrote: Nub question then, is it possible Musk is kinda "motivated" to have TSLA share price as much lower from $360 in 2019 (and 2021) then? E.g the more difference between this convertible price and market price the better???

That could explain all this "sudden" tweet eruption, public MJ smoke etc, which hurts the stock price (but not the Musk's payout more tied to delivery now)...the worse - the better?
He wants to pay back the bond holders with what, free EAP and AP?
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alanbrenton wrote: He wants to pay back the bond holders with what, free EAP and AP?
As I said, I do not really understand those covenants tied? to stock price. Plain bonds is no brainer, you borrowed 300m, so you payback 300m plus interest.
This one as I understand it, was borrowed 1m of shares, paid 360m at the moment. So at the payout borrower has to get to lender this 1m shares. If they wil be priced below 360 at THAT moment, the borrower will get the profit, not the lender. Correct me if I'm wrong (quite possibly)
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alanbrenton wrote:
He wants to pay back the bond holders with what, free EAP and AP?
As I said, I do not really understand those covenants tied? to stock price. Plain bonds is no brainer, you borrowed 300m, so you payback 300m plus interest.
This one as I understand it, was borrowed 1m of shares, paid 360m at the moment. So at the payout borrower has to get to lender this 1m shares. If they wil be priced below 360 at THAT moment, the borrower will get the profit, not the lender. Correct me if I'm wrong (quite possibly)
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Nov 9, 2013
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asa1973 wrote: Nub question then, is it possible Musk is kinda "motivated" to have TSLA share price as much lower from $360 in 2019 (and 2021) then? E.g the more difference between this convertible price and market price the better???

That could explain all this "sudden" tweet eruption, public MJ smoke etc, which hurts the stock price (but not the Musk's payout more tied to delivery now)...the worse - the better?
As I understand it, the strike price is black and white - either the share is at / above the strike price or it's not. If it's not, he has to pay the debt back with cash. If it's at / above strike price he can pay the debt back by converting the debenture to common shares, which means no cash comes from Tesla's balance sheet.

If I was in his situation, I would NOT want the stock price lower as it's far easier to just issue more shares to cover debt repayments rather than paying the debt with cash that Tesla may or may not have.

Furthermore he's also borrowed money from investment banks to buy more Tesla shares and he's rumoured to face a margin call at around ~ $260, so if the price drops lower not only does it impact his corporate but also his personal accounts.
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asa1973 wrote: As I said, I do not really understand those covenants tied? to stock price. Plain bonds is no brainer, you borrowed 300m, so you payback 300m plus interest.
This one as I understand it, was borrowed 1m of shares, paid 360m at the moment. So at the payout borrower has to get to lender this 1m shares. If they wil be priced below 360 at THAT moment, the borrower will get the profit, not the lender. Correct me if I'm wrong (quite possibly)
These convertible bonds give the holders the option to switch to equity at the exercise price.

If the stock price is trading below the exercise price, the bond is just like a regular bond -- interest, collateral/security, etc.

So Tesla will have to pay these back upon maturity.

If Tesla had lots of liquidity, they could be redeeming these bonds at discounted values but I don't think they have lots of excess cash at the moment.
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Aug 17, 2008
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The conversion price and ratio are set. Whether a Convertible bond holder chooses to convert is at their option, but it's pretty simple to figure out whether they would want to or not. From Musks actions and statements about short sellers, he seemed pretty intent on keeping the share price higher rather than lower.

Come March 1, 2019, Tesla will have to have enough cash or credit to make a coupon payment and repay the $920M principal should no holders elect to convert to equity. They actually will know in advance as bond holders will have to elect what they want to do beforehand. That deadline will be spelled out in the prospectus.
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OK, seems I got it wrong, and at least from bond prospective, for TSLA it makes more sense to have stock price above 360
which would effectively let the electric-auto maker pay off that obligation in stock instead of cash.
or they
will have to have enough cash or credit to make a coupon payment and repay the $920M principal should no holders elect to convert to equity
P.s. http://doc.morningstar.com/document/a82 ... d85.msdoc/ requires a login :) However I think this prospectus should be available though other sources as well...
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MrMom wrote: The conversion price and ratio are set. Whether a Convertible bond holder chooses to convert is at their option, but it's pretty simple to figure out whether they would want to or not. From Musks actions and statements about short sellers, he seemed pretty intent on keeping the share price higher rather than lower.

Come March 1, 2019, Tesla will have to have enough cash or credit to make a coupon payment and repay the $920M principal should no holders elect to convert to equity. They actually will know in advance as bond holders will have to elect what they want to do beforehand. That deadline will be spelled out in the prospectus.
You are right. It's at a certain fixed ratio, lol.
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There's more referencing the trust indenture, but this s/b good enough for this forum.

"Subject to satisfaction of certain conditions and during the periods described below, the 2019 notes may be converted at an initial conversion rate of 2.7788 shares of common stock per $1,000 principal amount of 2019 notes (equivalent to an initial conversion price of approximately $359.87 per share of common stock) and the 2021 notes may be converted at an initial conversion rate of 2.7788 shares of common stock per $1,000 principal amount of 2021 notes (equivalent to an initial conversion price of approximately $359.87 per share of common stock). The conversion rates with respect to the 2019 notes and the 2021 notes are subject to adjustment if certain events occur."
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Jul 15, 2006
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I wish Musk didn’t have as much impact on the stock as he currently does. Tesla is a catalyst that’s good for the auto industry and there is real potential there to do what Apple did with smartphones. Sadly, it’s in this situation because the CEO is somewhat eccentric. It would be sad to see Tesla as a company fail.

Cheers,
treva84 wrote: Tesla Bond Default Insurance reaches all time high - market price indicates a 47% chance Tesla will default.
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SEC Fail: TSLA is going to explode higher without further information ahead of Monday.

(Updated to put in the full PR below and SEC webcast https://www.sec.gov/video/webcast-archi ... nce-092718)

FOR IMMEDIATE RELEASE
2018-226

Washington D.C., Sept. 29, 2018 —
The Securities and Exchange Commission announced today that Elon Musk, CEO and Chairman of Silicon Valley-based Tesla, Inc., has agreed to settle the securities fraud charge brought by the SEC against him last week. The SEC also today charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle. The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla—including Musk’s removal as Chairman of the Tesla board—and the payment by Musk and Tesla of financial penalties.

According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.

According to the SEC’s complaint against Tesla, despite notifying the market in 2013 that it intended to use Musk’s Twitter account as a means of announcing material information about Tesla and encouraging investors to review Musk’s tweets, Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings. Nor did it have sufficient processes in place to that Musk’s tweets were accurate or complete.

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations. Among other relief, the settlements require that:

* Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
* Tesla will appoint a total of two new independent directors to its board;
* Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
* Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
* “The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

“As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms —including an obligation to oversee Musk’s communications with investors—and both will pay financial penalties,” added Steven Peikin, Co-Director of the SEC’s Enforcement Division. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”

The SEC’s investigation was conducted by Walker Newell, Brent Smyth, and Barrett Atwood and supervised by Steven Buchholz, Erin Schneider, and Jina Choi in the San Francisco Regional Office and Cheryl Crumpton in the SEC’s Home Office.
Last edited by MrMom on Sep 29th, 2018 6:06 pm, edited 2 times in total.
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MrMom wrote: SEC Fail: TSLA is going to explode higher without further information ahead of Monday.

"Elon Musk Settles SEC Fraud Charges; Tesla Charged With and Resolves Securities Law Charge"

https://www.sec.gov/news/press-release/2018-226

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations. Among other relief, the settlements require that:

* Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
* Tesla will appoint a total of two new independent directors to its board;
* Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
* Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.

“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

“As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms —including an obligation to oversee Musk’s communications with investors—and both will pay financial penalties,” added Steven Peikin, Co-Director of the SEC’s Enforcement Division. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”
That's it?
SEC is a joke, as usual.
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SEC Chairman posts a statement on their website defending their decision to settle.

https://www.sec.gov/news/public-stateme ... -and-tesla
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Jul 15, 2006
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Oh boy, he remains CEO, Bulls are going to be out swinging -- As for the SEC, I think Musk made his first public smart looking decision in a long long while, nobody in their right mind goes to fight the SEC. He made the right choice for his shareholders.
With that said, nobody knows what's going on in that head of his so I doubt this will be the end of the wild ride for shareholders.

I don't personally own Tesla stock but do want to see realize the EV disruption to its full extent, this is great.

Cheers,
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Cress wrote: I wish Musk didn’t have as much impact on the stock as he currently does. Tesla is a catalyst that’s good for the auto industry and there is real potential there to do what Apple did with smartphones. Sadly, it’s in this situation because the CEO is somewhat eccentric. It would be sad to see Tesla as a company fail.

Cheers,
A clear headed individual wouldn’t go for it like Musk does. It’s part of the package.
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Mar 10, 2018
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does it matter?
Karma is biatch. He sues Ontario government and he pays that money.

esla's Musk ousted as chairman in SEC settlement, will remain CEO
Elon Musk will relinquish the role of Tesla Inc. chairman and split a US$40 million penalty with the electric-car maker to settle fraud charges brought by the U.S. over his tweeted claims about taking the company private
"Laws for thee but not for me!" I will keep on jet-setting around the world. Spend as much as I can and enjoy vacations Free at Friends estate. Do as I do not as I say. I used to pay for my vacation until I met my hero.
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callernamet wrote: Karma is biatch. He sues Ontario government and he pays that money.

esla's Musk ousted as chairman in SEC settlement, will remain CEO
Plus there’s still the DOJ, indidivual lawsuits to deal with. There were real financial consequences to his action to investors that remain to be dealt with. And with him gone as Chariman that’s minus 1 on the board plus 2 new independent directors. As CEO he is now an employee. And the board has to now be aware the spotlight is on them if he goes on his crazy rampages again. Judging by the idea he turned down the first deal, the board must have overrode him the next time around or he got common sense?

I think the SEC realized he’s a big part of the stocks valuation and didn’t want to be seen as destroying the company but also enforcing something. If people think being removed as Chairman isn’t a big deal, I’d hazard they are wrong.
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cartfan123 wrote: I think the SEC realized he’s a big part of the stocks valuation and didn’t want to be seen as destroying the company but also enforcing something. If people think being removed as Chairman isn’t a big deal, I’d hazard they are wrong.
I agree - I think this shows the psychology around Elon Musk and Tesla. People love to eat up the narrative he sells and everyone is tripping over themselves to believe he will succeed, even if the facts to date suggest that Tesla may not. With or without Elon, it's still a car company with too much debt that has been unprofitable for 15 years. Yes, they make a nice car and have a fanatical following, but no matter how you spin it the balance sheet and financial metrics still suck.

It reminds me of this cartoon:

Image
Buy right, hold tight. Keep calm and go long.

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