TESLA's fall, caused by Elon Musk and 'X'.
Tesla in toxic environment ?
Time to pay up.
Bank group spearheaded by $Morgan Stanley(MS)$ has held discussions with Elon Musk and his team about refinancing a roughly $12.5 Billion debt package.
It is “the” debt package, that supported the tech billionaires to take-private social media platform X (formerly known as Twitter), according to people with knowledge of the matter.
According to sources, this is not the first discussion attempt with mr musk.
Several talks conducted earlier in 2024, have faltered.
Certain banks and Musk’s team are exploring options to strengthen (??) the debt package, said the people, who asked not to be identified discussing confidential talks.
According to insider’s information, all parties discussed options that could:
Reduce the cost of the debt.
Make the debt less risky for banks to hold.
The group of seven banks, have been “stuck” holding the debt since 2022.
They have repeatedly renewed an agreement not to individually offload their holdings, with the goal of coordinating a sale when X, is on firmer financial footing (?).
By that it means:
Stable advertising revenues.
Subscription growth.
Further traction from a planned peer-to-peer payments platform.
Representatives for X and Morgan Stanley declined to comment.
The 7 “deep-in-shit” banks:
The 7 financial institutions sufficiently “foolish” to loan to the snakeoil salesman included:
Morgan Stanley.
BNP Paribas.
Mizuho.
Societe Generale.
Morgan Stanley is the largest lender on the deal, providing just over a 25% of the debt package.
That contributed to $876 Million of mark-to-market losses the bank took in 2022 on corporate loans it was looking to sell.
Morgan Stanley has said in its Annual regulatory filing last month that such losses were smaller in 2023, without providing a figure.
Fidelity, which received a stake in X after helping Musk complete his $44 Billion purchase, has marked down the value of its position by -72% since the takeover.
$Tesla Motors(TSLA)$’s fall : X-factors.
Like it or not, bad press of any kinds on — Mr Musk and his business ventures, will have a direct hit on Tesla.
This is because Mr musk’s other business ventures are not publicly listed.
Latest series of events affecting Tesla’s stock price:
1) US market sentiments.
We all know that US market has a mind of its own.
Market tends to be jittery when it is that time of the month when official reports are released progressively throughout the week of Mar: 04 to 08.
These reports focus on:
Jobs - ADP employment, Jobs opening. Non-farm payroll etc..
Labour - Labour turnover, Weekly unemployment claims etc..
Manufacturing - Wholesale inventories, etc..
2) Delaware lost lawsuit.
At the start of February 2024, Mr musk “lost” his $56 Billion pay package lawsuit, after Judge Kathaleen McCormick deemed the compensation granted by Tesla’s BOD, as an unfathomable sum, that was unfair to shareholders.
With the verdict, Mr musk stands to lose about 25% of his fortunate, that stands at around $210 Billion.
In his usual bitch-fit mode, the billionaire has been focusing his energy to re-incorporate his list of companies to Texas and Nevada, respectively.
3) Not the richest anymore.
For someone who thrives on a larger-than-life persona, losing the accolade of being the “richest” man in the world, has definitely dented his super-inflated ego.
Besides that, it may have the intangible side-effect that Tesla is not invincible after all.
Worse, it is just another car maker, no longer regarded as being at the forefront of technology.
4) China - weakening EV sales.
Perhaps the most damning piece of news that made investors nervous is Tesla’s weak sales data coming out of China (its key market) for February 2024 — instantly dimming Tesla’s global deliveries.
According to China Passenger Car Association, Tesla’s sales amounted to 60,365 Chinese-made EV sold.
This is down -19.0% YoY and it is Tesla’s lowest volume since December 2022.
In its bid to stem falling sales in China, besides the steep on-going discount, Mr musk is sweetening the deal with insurance subsidy.
In the US, the offer is 5,000 free Supercharging miles to customers who trade in their older vehicle to get a new Tesla vehicle by 31 Mar 2024.
Question: will it still be “magical” this time?
Tesla stock price has been fluctuating around the $200 resistant level.
With the latest bad news, it has plunged below that.
Investors who have bought into Tesla after its last stock split in August 2020 at $300 per share would still be reeling from the damage; not unless discipline “buy the dip” has been exercised consistently.
My viewpoints: (mine & mine only)
I think it is a lost cause to hope that X's performance will improve following the drastic cost-cutting measures undertakened.
Quite likely that the banks would not be able to offload the debt in 2024 and beyond.
Hence, the series of discussions that are still going nowhere.
On the $13 Billion loan, the annual interest to service is $1.2 Billion.
With 2023 full year ad sales amounted to only $2.5 Billion, it is clear why it is a diminishing hope for the banks.
Will all failed talks eventually lead to another lawsuit to be faced by Mr Musk?
Will Mr Tesla be forced to sell his Tesla shares to cover the banks’ shortfall ?
Speculatively, if it comes to blow, there will only be one obvious direction for Tesla stocks.
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