A SpaceX merger could dilute Tesla shareholders’ protections

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 18:56

   Tesla shareholders. And I think that's right. We should just discuss like how this merger would actually work. Like how would these two things come together? What would probably happen is that SpaceX would acquire Tesla and they would offer Tesla investors SpaceX stock and then Tesla shareholders will convert their existing Tesla shares into SpaceX shares. The price will be determined by the boards. It's expected or RBC predicts that Tesla shareholders will get a 20 to 30 percent premium. So you might think, oh, that's good. Like you get paid more than it's currently trading at right now. You're going to get rich. But you also have to remember that the currency is going to be the spacex shares and the price of those shares is based on whatever the current market value of this of spacex is so you know your shares will convert and you'll look like

2. 19:51

   you're 20 rich you're like oh my god that's great but then if spacex stock falls by 20 the next day then you're not actually getting a premium and my view is that that that could very very easily happen and the reason i think that is because i think the spacex valuation is basically bullshit and the reason it's bullshit is because the float is still incredibly small it's still around 15 to 20 percent and you look at a company like NVIDIA or microsoft these actual multi-trillion dollar companies they have floats of almost 100 all of their shares are trading and so the spacex shares right now are not experiencing genuine price discovery because only a fraction of them are actually being publicly traded and the smaller the float the more you can manipulate the price with extremely large shareholders.

3. 20:37

   And we have every reason to believe that that is happening, especially for this company, which is saying it's going to raise hundreds of billions more dollars in the future, which is why I believe all of the investment banks are pumping up the price in their investment research such that they have a better chance of underwriting these debt and equity offerings that are going to come down the pipeline, which is exactly how the investment banks make money.

4. 20:58

   And, you know, I get that that right there is kind of a conspiracy theory, but I do believe it's true, especially considering what we saw last year where the SEC eliminated the one law that was designed to prevent this conflict of interest from happening. happening. So now I see this happening. They got rid of the law. It's like, yeah, I think that these price targets from these banks are total bullshit. I think it's ridiculous that Raymond James is saying that SpaceX is worth $10 trillion today. So I believe that the price is being extremely inflated right now. I think it's being manipulated. And Elon is deciding, OK, now that my shares, these SpaceX shares, are worth saying that this company is worth $2 trillion, even though that is a bullshit number in my personal view.

5. 21:42

   I'm going to use that as currency to go out and buy Tesla. And the ultimate reason why I think that he is doing this, one is the multiple and the brown laundering. But I think the biggest reason is that this is going to consolidate massive amounts of power. And that is that SpaceX has a dual-class shareholder structure. Elon has 80% of the votes. Tesla does not. he only has around 20%. And this is why he's had problems when there have been shareholder lawsuits. And he's tried to reincorporate the company in Texas. And he was able to kind of get around some of those things and bend the company to his will. But ultimately, he only has 20% of the votes. But by converting Tesla stock into SpaceX, and they're going to use the non-voting SpaceX shares as currency here, that is my prediction, he is going to eliminate

6. 22:34

   essentially all of the shareholder protections that have gotten in the way of him doing whatever he wants at Tesla. So it's going to basically mean that he has 80% control over this entire merged corporation, whereas before he only had 20% of Tesla. So this essentially just gives him more power. It consolidates more of the influence into his hands. I think that that is his ultimate goal. And he said this before.

7. 23:00

   He says he doesn't like being a public company because it means he has to deal with shareholders and shareholder lawsuits. That's why he moved from Delaware to Texas. This is like his whole thing. So ultimately, what it means for Tesla shareholders, I think, is you're giving up your voting rights once you do this. And I think that's definitely going to happen. And then also, you're buying into a company whose $2 trillion valuation is extremely precarious right now.

8. 23:27

   And based on what I believe is a lot of financial manipulation.