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(Reuters) – Tesla Inc Chief Executive Elon Musk was filmed smoking marijuana and wielding a sword on a webcast, just hours before the automaker said its recently-appointed accounting chief would leave, the latest in a string of unusual behavior and executive departures that have stunned investors.
Shares of the electric carmaker tumbled more than 6 percent on Friday to $ 263.24, with investors on edge after a tumultuous August during which Musk proposed and then abruptly pulled the plug on a go-private deal.
Chief Accounting Officer Dave Morton resigned after just one month in the job because of discomfort with the attention on the company and pace of work during that time, Tesla said in a filing on Friday. It later said that Chief People Officer Gaby Toledano would not return from a leave of absence, just over a year after joining.
Later on Friday, Tesla named a new president of automotive operations, promoting eight-year Tesla employee and former Daimler truck exec Jerome Guillen into the role overseeing all automotive operations and reporting to Musk.
That move, described in a company blog with several other promotions as a result of board and management discussions, gives Musk a seasoned auto industry veteran to lean on at a time when some investors have called for a new chief operating officer. Shares barely moved after hours, when the promotions were announced.
Morton and Toledano, whose departures come shortly after the U.S. Securities and Exchange Commission opened an inquiry into Musk’s aborted privatization plan, join dozens of senior executives who have left Tesla.
“Since I joined Tesla on August 6th, the level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations. As a result, this caused me to reconsider my future,” Morton said in the filing.
Late on Thursday, Musk was filmed drinking whiskey, briefly smoking marijuana and wielding a Samurai sword during a 2-1/2-hour live Web show with comedian Joe Rogan that swiftly spread across social media.
Taking a puff from a joint, which Rogan said was a blend of tobacco and marijuana and legal in California, Musk said he “almost never” smoked.
“I’m not a regular smoker of weed,” Musk said. “I don’t actually notice any effect … I don’t find that it is very good for productivity.”
It was the latest in a string of unconventional behavior by the billionaire South African native who is also CEO of rocket startup SpaceX.
Even before Musk’s surprise Aug. 7 tweet that he had funding “secured” for a go-private deal, Tesla had been under scrutiny from investors, analysts and short-sellers as it works to hit production targets and slow its cash burn.
Morton, who is walking away from a $ 350,000 base salary and a $ 10 million new-hire stock grant that would vest over four years, said he believed “strongly” in Tesla and that he had no disagreements with the company’s leadership or its financial reporting.
Analysts on Friday reiterated their call for Tesla to bring in another senior leader.
“We have been calling for a co-CEO or COO to assist to codifying the leadership structure and in so doing, the culture at Tesla,” said James Albertine, analyst at brokerage Consumer Edge, speaking before the promotions were announced.
“We think this is further evidence that the time is now for management and the board to address these issues.”
SOBERING EFFECT ON INVESTORS
Tesla’s $ 1.8 billion junk bond maturing in August 2025 plunged as much as 4 cents on the dollar to below 82 cents, a record low, in Friday trading, pushing the yield above 8.8 percent.
Coupled with an upfront cost of 21 percent of insured value, it now costs an investor around $ 280,000 to insure $ 1 million of Tesla debt for a year.
With Tesla’s stock falling to its lowest level since April, short sellers added 810,000 shares to their positions, bringing the total as of Thursday to about 32.6 million shares, according to S3 Partners, a financial technology and analytics firm.
Tesla has told investors it expects to turn a profit in the second half of this year, a forecast the company’s head of investor relations, Martin Viecha, reiterated at a conference earlier this week sponsored by RBC Capital Markets, RBC analyst Joseph Spak wrote in a note on Thursday.
Viecha also restated Tesla’s forecast that it will build 50,000 to 55,000 of its Model 3 sedans in the current quarter, and indicated the company’s working capital will improve as production increases, Spak wrote.
Prominent short-seller Andrew Left has sued Tesla and Musk, saying in his proposed class-action complaint on Thursday that Musk’s issuance of materially false and misleading information related to his abandoned plan harmed both short-sellers and those hoping the stock would rise.
Reporting by Nivedita Balu and Ismail Shakil in Bengaluru, additional reporting by Noel Randewich in San Francisco, Joe White in Detroit and Dan Burns in New York; Writing by Meredith Mazzilli; Editing by Matthew Lewis and Rosalba O’Brien
SAN FRANCISCO (Reuters) – Chief Executive Elon Musk said on Tuesday he is considering taking Tesla Inc private in what would be the largest deal of its type, moving the electric car maker out of the glare of Wall Street as it goes through a period of rapid growth under tight financial constraints.
“Am considering taking Tesla private at $ 420. Funding secured,” Musk said on Twitter bit.ly/2Om3gn3. At $ 420 per share, a deal would be worth $ 72 billion overall.
In a letter to Tesla employees published more than an hour later on the company’s blog here, Musk explained that going private would be “the best path forward.” Such a move – over which no final decision had been made – would let Tesla “operate at its best, free from as much distraction and short-term thinking as possible,” he wrote.
Tesla shares closed up 11 percent at $ 379.57, slightly below their all-time high.
Asked on Twitter whether Musk would continue to be CEO under such a scenario, he replied there would be “no change.”
Musk has been under intense pressure this year to turn his money-losing, debt-laden company into a profitable higher-volume manufacturer, a prospect that has sent Tesla’s valuation higher than that of General Motors Co.
The company is still working its way out of what Musk called “production hell” at its home factory in Fremont, California, where a series of manufacturing challenges delayed the ramp-up of production of its new Model 3 sedan, on which the company’s profitability rests.
The Silicon Valley company faces a make-or-break moment in its eight-year history as a public company as competition from European automakers is poised to intensify with new electric vehicles from Audi and Jaguar, with more rivals to follow suit next year.
Meanwhile, Tesla has announced plans to build a factory in Shanghai, China, and another in Europe, but details are scarce and funding unknown.
Going private is one way to avoid close scrutiny by the public market as Musk and the company face those challenges. Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.
“Musk does not want to run a public company,” said Gene Munster of Loup Ventures, as Tesla’s ambitious mission makes it “difficult to accommodate investors’ quarterly expectations.”
Musk owns nearly 20 percent of the company. He said in his letter to employees he did not seek to expand his ownership.
A price of $ 420 per share would represent a nearly 23 percent premium to Tesla’s closing price on Monday, which gave the company a market value of about $ 58 billion.
In his letter, Musk suggested a choice for shareholders of selling their shares for $ 420 each or remaining investors in a private Tesla. He said he hoped all current investors would remain were the company to go private.
He made no mention in his tweets nor his letter where the funding for a deal would come from, and the letter did not discuss funding for the plan.
Like any other investor, Musk is beholden to securities laws and several securities attorneys told Reuters he potentially could face lawsuits if it was proven he did not have secure financing at the time of his tweet.
(GRAPHIC-Market value of Tesla, Ford, GM: tmsnrt.rs/2n4mFjh)
BIGGEST GO-PRIVATE DEAL
If Musk were to succeed in taking Tesla private, it would be the largest leveraged buyout of all time, beating the record set by the $ 45 billion deal for Texas power utility Energy Future Holdings, which ended in bankruptcy in 2014.
Raising both the debt and equity required for such a deal would be a challenge. Many major Wall Street bankers contacted by Reuters said on condition of anonymity they were not aware of Musk’s plans ahead of his tweets, and several expressed skepticism that a leveraged buyout of Tesla could be financed given the company’s negative cash flow.
“It’s unfathomable to me that anyone would finance the acquisition of such a liability-laden company that is losing so much money and have massive capex requirements going forward,” said Mark Spiegel, portfolio manager of hedge fund Stanphyl Capital Partners, who holds a short position in Tesla and has been a vocal critic of Musk on Twitter.
The most obvious equity partners for Musk would be a sovereign wealth fund such as Saudi Arabia’s Public Investment Fund (PIF) or major technology investment funds such as SoftBank Group Corp’s Vision Fund, bankers said.
China’s Tencent Holdings, which took a 5 percent stake in Tesla last year, is another possible partner.
Such foreign sources of capital would be subject to scrutiny by the Committee on Foreign Investment in the United States (CFIUS), which looks closely at deals for potential national security risks.
Earlier on Tuesday, a source familiar with the matter said Saudi Arabia’s PIF had bought a minority stake of just below 5 percent in Tesla.
The U.S. Securities and Exchange Commission declined to comment on Musk’s tweet, but the agency allows companies to use social media outlets like Twitter to announce key information in compliance with its fair disclosure rules if investors are alerted about which social media outlets will be used.
Tesla alerted investors in a 2013 SEC filing that they should follow Musk’s Twitter feed for “additional information” about the company. There is no reference to Musk’s Twitter account on the company’s investor relation page under “investor communication,” although Tesla’s Twitter feed is included.
In his letter to employees, Musk wrote that, “as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”
A short squeeze is a trading scenario that occurs from time to time in heavily shorted stocks, when bearish traders are forced to buy shares to avoid big losses – something that ends up pushing the stock only higher.
Short interest in Tesla on Tuesday stood at nearly $ 13 billion, according to S3 Partners, a financial analytics firm.
(GRAPHIC-Tesla shares jump 10 percent, near record high: tmsnrt.rs/2MbzJin)
Reporting by Sonam Rai in Bengaluru, Alexandria Sage in San Francisco, Carl O’Donnell, Liana Baker, David Randall in New York and Pete Schroeder in Washington; editing by Saumyadeb Chakrabarty, Bill Rigby and Chris Reese
(Reuters) – Etsy Inc on Thursday raised its full-year revenue growth forecast, boosted by an increase in its transaction fee for sellers, sending shares of the company surging 35 percent to a record high.
The share jump pushed up the company’s market cap by $ 1.4 billion.
The site for handmade goods, which struggled after its initial public offering in 2015, began its turnaround effort after board member and former eBay executive Josh Silverman took charge as chief executive officer in May last year after ex-CEO Chad Dickerson stepped down.
Silverman came to Etsy amid concerns about slowing growth, poor functionality of the company’s website and the specter of competition from Amazon.com Inc, which launched a marketplace for handmade goods in 2015.
The company now expects revenue growth of 32 percent to 34 percent in 2018, up from its previous forecast of 22 percent to 24 percent. It also raised the higher end of its gross merchandise sales growth range.
Etsy’s share movement was in contrast to arts and crafts specialty retailer Michaels Cos Inc, which dropped 15 percent after it expected flat comparable sales in the second quarter and comparable sales growth of up to 1.5 percent in fiscal 2018.
Etsy, however has beaten average analysts’ estimates in every quarter since Silverman’s appointment to the helm. It missed estimates in the four quarters prior to his arrival.
The company’s shares have more than doubled in the last 12 months.
“Etsy management has improved its merchandising, which in turn has led to stronger merchant sales. As Etsy is doing more for the merchants, Etsy is able to charge more, especially since the fees were relatively cheaper than competitors,” analyst Ronald Bookbinder of IFS Securities said.
Etsy said it would increase the transaction fee it charges when a seller makes a sale to 5 percent from 3.5 percent. The new fee would apply to the cost of shipping.
The company said it plans to increase direct marketing spending by at least 40 percent in 2018 and revamp community platforms.
Etsy has shifted its focus to areas that are showing the most growth for the handmade marketplace, particularly on its core e-commerce site.
The company has improved its website’s search function and uses artificial intelligence to provide better product recommendations for customers. In 2017 the company also ran holiday promotions for the first time.
“They took that really good business model and fine tuned the engine and now they have got that engine firing on all cylinders,” D.A. Davidson & Co. analyst Tom Forte said.
Reporting by Arjun Panchadar in Bengaluru; Editing by Bernard Orr and Shounak Dasgupta
Warren Buffett said the following:
I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors (NYSE:GM) at 47! U.S. Steel (NYSE:X) at 39! And nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like. Then when the fielders are asleep, you step up and hit it.”
I distinctively remember Apple (AAPL) at around $ 90 a share back in 2016. Sentiment was on the floor, commentary was circulating on mass that iPhone growth was history. Fast forward a couple of years and shares have more than doubled. I suspect few would have thought that AAPL would have recovered so quickly. However as the chart illustrates below, AAPL also suffered a steep decline in 2013 but came roaring back to life soon thereafter. Why didn’t investors “trust” the charts instead of one or two disappointing earnings reports? Hindsight is 20/20, as they say.
Then we have Gilead (GILD). Shares collapsed to close to $ 60 a share last year and have been very slow to gain momentum since then. Granted Gilead’s shares collapsed more than Apple’s and over a much longer time frame, but you can be sure that many investors doubled down on their positions or bought at levels much higher than the present share price. Apple and Gilead before these share price declines relied mostly on one product which was obviously the iPhone in AAPL and HPC cures for Gilead. So why did one stock bounce back strongly whereas the other flattered to deceive?
I think these articles are helpful because it is at these inflection points where the most fortunes are made. With AAPL, for example, you had the likes of Buffett joining the party, but then you had the likes of Carl Icahn who ran for the exit. Now both of these billionaires made a lot of money but Icahn as we can see now sold far too early.
Buffett also has stated.
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
The problem though is that everything is so easy in hindsight. AAPL’s top line sales have come roaring back to currently stand at $ 247.41 billion over a trailing 12-month average. Gilead’s top line sales growth has deteriorated to currently stand at $ 24.69 billion (almost $ 8 billion down from its 2015 high).
Many newsletters got Gilead wrong which is why one should always make their own investing decisions. Why? Because an opinion backed by research and hours of study usually means one will stand by the position even if the going gets tough for a while. Gilead never rebounded because it ultimately cured hepatitis C. I wrote more about this here but many were caught out on this at the time.
Here though was the skinny compared to Apple. Although Gilead was generating strong cash flows from the likes of its HCV and HIV divisions, there was absolutely no link between the two segments. These two diseases are totally different and one cannot “lift up” the other, so to speak, when the likes of HCV is struggling.
We cannot though say the same about Apple. I remember its March quarter in 2016 when revenue collapsed by 13% to print the worst top line quarter since 2003. The main culprit was of course iPhone unit sales which were down 16% over a rolling quarter basis. However there were a number of reasons for the decline both in dollar amount sales and iPhone unit sales. Softness in China, currency headwinds plus also a poor product mix led to the disappointing quarter. Shares headed toward $ 90 as investors ran for the exit. However the launch of the iPhone 7 in September kept the purists hopeful.
However it wasn’t that model that turned the tide for AAPL. It was the fact that smartphone growth was still in an uptrend (still is to this day) and Apple was working really hard in the background to both coax customers from Android (through the likes of the iPhone SE) while also tie in customers more and more into its ecosystem of products. Just remember the strength of AAPL’s ecosystem today will dictate the strength of sales in the future. Gilead never had this competitive advantage and its results demonstrated this.
So when the next blip occurs, we will look at the strength of that ecosystem to see how growth rates are faring in other products. It’s all about engagement and loyalty going forward. These metrics are probably the best ones to measure when the inevitable happens and iPhone growth slows once again. As for Gilead, there still seems to be no catalyst in the cards to help growth. AAPL despite its valuation and snap back rally continues to look a far better long contender here.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
WASHINGTON (Reuters) – Shares of Amazon.com Inc (AMZN.O) pared earlier gains on Tuesday after U.S. President Donald Trump repeated his unsubstantiated claim that deliveries for the world’s biggest online retailer cost the U.S. Postal Service money and threatened to raise rates.
Citing an unnamed report, Trump told reporters at the White House the company is not paying the USPS a fair rate, costing U.S. taxpayers billions of dollars and forcing other retailers out of business.
It was the latest salvo in a string of attacks in recent days as Trump stepped up his criticism of Amazon and its founder and Chief Executive Jeff Bezos, who privately owns The Washington Post.
Amazon shares were down about 0.3 percent in early afternoon trade on the Nasdaq after trading up about 1.8 percent on Tuesday morning before Trump’s latest Amazon-related tweet, making another day of volatility after its shares fell more than 5 percent a day earlier.
Trump attacked the company over its shipping on Monday after criticizing it last week over taxes.
On Tuesday, he said the federal government was subsidizing deliveries for Amazon and the company would need to pay more.
“The post office is losing billions of dollars … because it delivers packages for Amazon at a very low rate,” Trump told reporters. “If you look at the cost that we’re subsidizing, we’re giving a subsidy to Amazon.”
Trump offered no specific details about the report he cited to back up his criticisms or how he planned to charge the company more through USPS.
Representatives of Amazon and USPS had no comment on Trump’s tweet on Tuesday, and could not be immediately reached regarding his latest comments to reporters.
Reporting by Steve Holland; Additional reporting by Makini Brice and Lisa Lambert; Writing by Susan Heavey; Editing by Bill Rigby and Chris Reese
HONG KONG (Reuters) – China’s Leshi Internet said about 5.62 billion yuan ($ 890 million) of its debts would be due by the end of this year, or almost two-thirds of the company’s total loans and liabilities, sending its shares down for a ninth day.
This is the first time the video-streaming firm – which is battling the fallout from a severe cash crunch at its founder Jia Yueting’s embattled technology conglomerate LeEco – has provided an estimate for its debt in 2018.
Earlier, the company had said that a part of its total loans and financial liabilities of 9.29 billion yuan ($ 1.5 billion)would be due this year, without giving any further details.
Leshi shares plunged by the daily limit of 10 percent on Monday. Nine days of declines, since the stock resumed trading in January after a nine-month suspension, have knocked 37.5 billion yuan off the company’s market capitalization, that is currently at 23.7 billion yuan.
At its peak in 2015, Leshi was valued at 153 billion yuan.
Just last week, Leshi flagged that it expected a loss of 11.6 billion yuan for 2017, more than five times its combined profits since listing on the Shenzhen stock exchange in 2010, due to the ongoing crisis at LeEco.
LeEco was once China’s Netflix-to-Tesla contender but ran into a cash crunch since late 2016 after expanding too fast. Leshi used to be the main listed unit of the conglomerate.
But under the control of property developer Sunac China – its second-largest shareholder, Leshi is now trying to distance itself from the LeEco brand.
Leshi says its largest shareholder Jia and related LeEco units owe it 7.5 billion yuan ($ 1.19 billion). LeEco disputes the figure.
Shares of Sunac plunged as much as 6 percent, lagging a nearly 2 percent fall for the benchmark index.
Reporting by Sijia Jiang; Editing by Himani Sarkar
LONDON/FRANKFURT (Reuters) – Dialog Semiconductor said on Monday top customer Apple could build its own power-management chips into future iPhones rather than rely on the Anglo-German chipmaker, sending its shares plunging as much as 19 percent.
The company, which analysts reckon derives more than half of its revenue from Apple, said there was no risk to its existing supply deals in 2018 and it was in the advanced stages of working with Apple on designing “2019-type products” that could lead to commercial contracts by next March.
“Our position remains that we have seen no material change to our ongoing relationship with Apple Inc,” Chief Executive Jalal Bagherli told investors on a conference call.
However, the company acknowledged for the first time that “Apple has the resources and capability to internally design a PMIC and could potentially do so in the next few years.”
PMICs are power-management integrated circuits that are vital to conserve battery life in products like Apple iPhones.
Investors are wary of companies that rely heavily on Apple, which has cut out several small suppliers in the past.
The U.S. technology giant said in April it planned to replace graphics chip supplier Imagination Technologies, sending its shares down 70 percent in a single session. Imagination was subsequently sold off in two separate deals.
The Nikkei business daily last week quoted one source as saying Apple would make about half the iPhone’s power-management chips starting next year, with another source saying this could be delayed to 2019. (s.nikkei.com/2Al5nSl)
Since then, Dialog shares have lost nearly a third of their value. At 1035 GMT, they were down 15.2 percent at 26.47 euros.
Bagherli said Apple’s feedback so far on 2019 product plans had been “very good” and that he expected to have more clarity by March on the terms of new business from Apple for 2019. Dialog would update investors when it had more details, he said.
Semiconductor suppliers are typically barred by Apple from revealing their supply relationships. Dialog, which has previously declined to name Apple, referring to it only obliquely as its “largest customer” or its “main business”, said it had received a special dispensation from Apple to mention it.
Dialog emphasized it “does not have reason to believe its current expectations of 2018 Apple business would be impacted” should Apple decide to design the chips itself.
Dialog, itself heavily reliant on the smartphone industry, said it was aware that in order to remain a key supplier to Apple it would have to continue to meet the U.S. company’s “technology, quality, price and volume expectations”.
The slide in its shares echoed one in April, after Bankhaus Lampe analyst Karsten Iltgen advised investors to sell the stock because Apple was working on its own battery-saving chip. The stock is off more than 40 percent since then.
($ 1 = 0.8434 euros)
Additional reporting by Ludwig Burger in Frankfurt; Editing by Edmund Blair and Mark Potter
(Reuters) – Advanced Micro Devices Inc on Tuesday flagged competitive pressures with a forecast that pointed to the first revenue drop in seven quarters, sending the chipmaker’s shares plunging 11 percent in after-hours trading.
The company, which has gained from a surge in demand for its chips from cryptocurrency miners, also sought to tamp down expectations of benefits from the boom.
“We’re also predicting that there will be some leveling off of some of the cryptocurrency demand,” said Chief Executive Lisa Su on a post-earnings call.
AMD’s underwhelming forecast overshadowed a strong third-quarter performance, which was aided by a slew of launches this year such as the Epyc processors for servers and a new range of Ryzen desktop processors.
The company said it expects fourth-quarter revenue to fall about 12 percent to 18 percent from the third quarter. This implies a revenue of about $ 1.35 billion to $ 1.44 billion, according to Reuters calculation.
“AMD has headwinds with competition from Intel and Nvidia among other worries,” Daniel Ives, chief strategy officer at GBH Insights said.
Bigger rival Intel Corp recently launched its new line of Coffee Lake processors, which analysts said could challenge AMD’s Ryzen processors.
AMD’s total revenue surged 25.7 percent to $ 1.64 billion in the third quarter, beating analysts’ average estimate of $ 1.51 billion.
Sales in its graphics and computing business, which makes processors for servers and gaming consoles such as Microsoft Corp’s Xbox and Sony Corp’s PlayStation, surged 73.5 percent to $ 819 million.
“We anticipate seasonal demand to remain healthy as our customers enter the holiday sales cycle with Sony’s PlayStation 4 Pro and Microsoft’s Xbox One X,” Lisa Su said on the call.
France-based company Atari said last month that its latest gaming console Ataribox would feature AMD’s customised processor Radeon.
AMD reported a net income of $ 71 million, or 7 cents per share, in the quarter ended Sept. 30, compared with a loss of $ 406 million, or 50 cents per share, a year earlier.
Excluding items, the company earned 10 cents per share, topping analysts’ estimate of 8 cents, according Thomson Reuters I/B/E/S.
AMD’s shares have risen 25.7 percent this year, outperforming the S&P 500’s nearly 15 percent increase but underperfoming the Philadelphia semiconductor index’s 37 percent gain.
Reporting by Laharee Chatterjee in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila
TOKYO (Reuters) – Toshiba shares rose 3 percent in early trade on Wednesday after sources told Reuters that Western Digital Corp has offered to drop out of a group bidding for its flash memory chip business to take a stronger position in their joint venture instead.
The move could see Toshiba finally seal a deal to sell the chip business after months of delays, providing it with the funds needed to cover billions of dollars in liabilities arising from the failure of U.S. nuclear unit Westinghouse.
Reporting by Chris Gallagher; Editing by Stephen Coates
The fund owned 18,329 shares of the cloud computing company’s stock after buying an additional 15,346 shares during the period. Princeton Alpha …