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Home / Business / Tesla Elon Musk goes to court and deliveries fall into a terrible week

Tesla Elon Musk goes to court and deliveries fall into a terrible week



You should forgive yourself if this is the first time you hear that billionaire entrepreneur Elon Musk – with his eyes staring straight ahead, unblinking – went for a Manhattan judge on Thursday.

He was there flanked by his security guards and three lawyers. The Securities and Exchange Commission was there, represented by three more lawyers. There were journalists and hobbyists and short-sellers in the packed courtroom, all waiting to see if Judge Alison Nathan would hold Musk contempt for the court.

The US Securities and Exchange Commission had asked Musk to stop making substantive statements about his car company, Tesla, on Twitter without the approval of a lawyer designated by the court. You remember that Musk caused the whole year of chaos in August when he tweeted he had "financing secured" to take the company privately. He eventually settled with the SEC, who described this and other tweets as "false and misleading."

But the SEC says that Musk broke the settlement rules in February when he tweeted that Tesla would make 500,000 cars in 201

9.

It won't.

We know that not only because the company itself has announced lower forecasts (400,000 at the top), but also because of the second urgent disaster in Tesla country right now – it does not sell enough cars.

The same day Musk sat in the courtroom, Tesla's stock falls by about 9%. Hours earlier, Wednesday night – after two days of hemming and hawing – the company quit extradition receipts from the first quarter. They were worse than most analysts had imagined. Tesla delivered only 63,000 cars, a decrease of 31% from the previous quarter. And most devastating was Tesla hit hardest on its most lucrative cars, the luxury model S and model X, who saw their sales stroke in more than half.

Given all the problems on Musk's record, it's no wonder he seemed relieved when the judge made a decision whether he was contemptuous of the court and asked his lawyers to meet with the SEC once in the next two weeks to see if they could obtain Make an appointment. "Put on your reasonableness pants," she said, or she would decide Musk's fate.

Musk left the courtroom and immediately issued a statement that dribbled with justice. "I have great respect for Judge Nathan, and I am happy with his decision today," the statement said. "The actual tweet was true, regardless of the shareholders, and in no way a breach of my agreement with the SEC." ( Nathan had not said anything of it .)

It continued: "We have always felt that we should be able to work through disagreements directly with the SEC, rather than prematurely premature. just what Judge Nathan instructed. "

For a week of loss, Musk could be forgiven for trying to oust some sort of victory. None of Musk's or Tesla's great fight – legal or economic – is in some way resolved, and even long-term investors are starting to worry.

"Yes, I own the shares. It's not one of my favorite places. I just think the cars skip everything else in this field," said Andrew Left of Citron Research, a man who went from short Tesla to long and loud if it.

"It would have been better without Elon," said the left and added: "I think this guy is just a big distraction. It kills me. It comes from the top."

"The communication is terrible," he said. "This man is crazy."

The legal problems can get worse, fast. The march scenario in the coming weeks is that the SEC and Musk's lawyers cannot come to an agreement, and Nathan expects him to contempt.

The economic problems can get worse, too. Tesla is expected to release the balance sheet in Q1 over the next few weeks, giving investors a clearer picture of the company's financial position. More bad news can send them driving to the hills.

Do you have a story to share about working for or interacting with Tesla? Contact Business Insider's Linette Lopez at llopez@businessinsider.com.

Tesla's share price this year.
Markets Insider

2019 was to be chill at Tesla, not as 2018, when Musk "bet on the company" on the success of the model 3 car and Tesla was "near death "and tried to make it happen. It seemed to pay off in the third and fourth quarters, when Tesla achieved profitability for consecutive quarters for the first time.

But then things started to go very wrong. It was a round layoffs that slammed 7%. Sales of more expensive versions of Model 3 (which were first promised $ 35,000 in public) began to fall. To lower prices across the board, Musk said he would knock down most of the company's stores, but then he took it back. The price of the cars went down and then up again (there were literally protests in China over tha t). It was a problem with customs in China that delayed sales. It was Musk's errant February tweet, and Tesla's lawyer ends after being with the company for just two months. Then came SEC to knock. If it sounds chaotic, it's because it's been. One of Tesla's loyal, top shareholders said that Musk "doesn't need to be CEO."

In short: Elon Musk's assignment as CEO has been tortured.

Some investors are like Gene Munster of Loup Ventures. He still believes Tesla and Musk need each other, but he considers their relationship to a challenge as much as a resource.

"It's a Catch-22," he told Business Insider. "It would be better if Elon did not make it harder for himself. As an investor, there are some things you must admit and you must admit the stability of a firm."

Thursday, Tesla sent a letter of support to Musk, but the company itself had not been sanctioned by the SEC over Musk's tweet. That's why the SEC's lawyer said Tesla had "whatever reason threw in much with Mr. Musk," it calls "a problem." She added that the agency still looked at whether Tesla was performing its duties by allowing Musk's errant tweet.

As a means, the SEC suggested setting up a new system to approve and monitor Musk's tweets. It also suggested a fine scale if he tweeted misinformation again.

"The company definitely needs more professional management," said Chester Spatt, CFO of Carnegie Mellon, who was formerly CFO of the SEC, Business Insider said. "Musk's lawyers must also be afraid of him, they can't control him. I think it's a reasonable chance in the next two weeks that Musk and Tesla survive their hand in negotiating with the SEC."

Spatt added, "I think the SEC, by not trying to take him down, gives a lot. But in reality, Tesla must abide by prior agreement, not two ways of doing it."

In the background of all this legal drama, the SEC and the Ministry of Justice are still investigating Tesla and Musk if they have wished investors for the production of model 3.

The bet

That's because of Model 3 that Tesla is in dire financial trends. Tesla started out by making a more expensive, longer-range version of the car, but it was originally marketed as a $ 35,000 car for everyman. Thousands gave the company a $ 1000 deposit to reserve one.

But the $ 35,000 car isn't here yet. And higher margin sales, the long-distance version fell in the first quarter. Tesla's luxury cars went even worse. Analysts are starting to wonder if there is much demand for the cars that will actually make Tesla a profitable company.

"We lower our estimates and pricing targets for Tesla shares today (to $ 200 from $ 215), reflecting the softer 1Q deliveries and throughput of what we see as reduced underlying demand ahead for the higher ASP [average selling price] S & X, "analysts at JPMorgan said.

Like all car companies, Tesla is expensive to run. It needs $ 1.5 billion to $ 2 billion at hand to keep the lights on. In March, it paid a $ 920 billion loan, and it has more debt due to the next year. This is partly why Moody & # 39; s rating agency warned that despite Tesla's success in 2018, "it means significant pressure on Tesla's credit profile."

And it was even before Q1 deliveries turned out to be a dud. The company is expected to report earnings in the coming weeks, and several bad news will put additional pressure on the management to correct its financial vessel. Probably it will get an old question: Will Tesla get money? The company used to say in no uncertain terms that it would not. Towards the end of last year it softened its attitude.

"They are going to lose money in the March quarter, and they didn't think they would," Munster said, adding that the company could also lose money in the next quarter and asked why Tesla didn't reap more money. "They don't have as much money now as they said they would six months ago," he said.

Tesla needs money, not just to survive, but to fund his plans. It builds a new factory in China, which it raised $ 500 million (due next March) from a syndicate of Chinese banks.

Musk on model Y disclosure.
Jae C. Hong / AP

It has also recently unveiled a new car, model Y, which will start production next year. Model Y's revealing last month was even a sign of Tesla's tougher times. There was nothing missing.

It was not the cars. There were many cars. Every model that the company had made or proposed was for everyone to see – Roadster, Model S, Model X, Model 3, Semi. It wasn't shot because Musk, in a pair of custom made Jordan's, was full of it.

What was missing was the affair's usual whiz-bang finale. You see, in Tesla country, at the end of each disclosure there is a "and one thing" moment when the company gives it a faithful one last wow, pulling a new trick from the sleeve. But there was nothing this time around, and Wall Street sent the shares down 4% the next day.

The market just didn't seem impressed anymore.

Do you have a story to share about working for or interacting with Tesla? Contact Business Insider's Linette Lopez at llopez@businessinsider.com.


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