Monday 01/10/18

  1. In TESLA NEWS, we look at the potential impact of the SEC’s decision over the weekend NOT to oust Elon Musk
  2. In IPO NEWS, Gangfeng Lithium’s pioneering move could embolden others and Aston Martin nears a chunky valuation
  3. In INDIVIDUAL COMPANY NEWS, Facebook faces the prospect of a rather large fine
  4. In OTHER NEWS, I bring you an interesting idea for promoting public health. For more details, read on…



So it looks like everyone got what they wanted re Musk and Tesla apart from the short-sellers…

Musk move set to boost Tesla shares (The Times, James Hurley) suggests that Tesla shares will be rebounding in trade today as the SEC’s decision not to completely oust Elon Musk from his own company will provide huge relief for Tesla shareholders who have been having a rollercoaster ride of it recently. Basically, he’s going to stay on as chief exec but step down as chairman. Tesla is going to hire an independent chairman and two Non-Executive Directors as part of the deal struck with the regulator and some believe that Al “Inconvenient Truth” Gore, ex vice-president of the United States and a director of Apple, could be in the frame for the role.

Musk issued a rallying cry to staff in the wake of the SEC decision in Musk: Tesla near profitability (Daily Telegraph, Joseph Archer), where he sent an e-mail saying “We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well”. However, if you want a more comprehensive analysis of what went on leading up to the SEC’s decision, Elon Musk to step down as Tesla chairman, CEO (Wall Street Journal, Tim Higgins and Dave Michaels) does an excellent job.

* SO WHAT? * You do wonder what the SEC would have done had it been anyone other than Elon Musk sending a Tweet that blatantly lied, with information that had direct impact on the share price! It turns out that Tesla and Musk each have to pay a fine of $20m, he’s barred from being chairman for three years and he got to neither admit nor deny wrongdoing as part of the settlement. Mind you, if you take a step back, I’d say that everyone got what they wanted. The SEC got a big scalp of sorts (although they didn’t force him to admit wrongdoing), a bit of pocket change in fines – but more than that, they have made Tesla split the roles of CEO and Chairman. This dual role is quite common in American companies, but is deemed by many to be undesirable as it concentrates too much power in one person. There had been previous attempts to do this at Tesla, but they failed. Given Musk’s mercurial and increasingly erratic behaviour (remember what he said about the British cave diver?), I think this is a good outcome for the regulator, Tesla itself (because it reins Musk in a bit) and Musk, for that matter. If he was kicked out, I think that there would have been a very real chance of the company collapsing given his huge influence. The only ones to suffer now will be the hedge funds who hold short positions in Tesla – but still, even they will have made a lot of money along the way. Short-sellers filed a lawsuit against Tesla/Musk alleging that his Tweet amounted to price manipulation a while back, but I’m not sure what influence this SEC decision will have or whether it will be treated completely independently. I’ll let you know when I find out!



In IPO news, everyone will be watching Ganfeng Lithium’s flotation as an indication of what is to come and Aston Martin hunkers down for a stellar valuation…

In Ganfeng Lithium listing to test appetite for key metal (Financial Times, Henry Sanderson) we see that the Hong Kong IPO this week of one of China’s biggest lithium ion producers will show not only current investor appetite for this wonder-metal, but also potential future appetite. Pricing will be fixed on Wednesday this week with trading commencing next week. * SO WHAT? * Demand for this white metal, that isn’t traded on any exchange, has been increasing over the last few years due to its use in rechargeable batteries and hopes for the future of electric cars. However, lithium prices have fallen by 17% so far this year as more investors express concerns that there is 

going to be oversupply, especially given that China is developing its own deposits in Qinghai. Gangfeng competitors Tianqi Lithium and Livent are due to list in October, so they will be monitoring investor demand particularly closely.

Excitement is revving up in Float places Aston Martin boss in driving seat (The Times, Robert Lea) as the maker of James Bond’s best cars (apart from that Lotus that goes underwater, obviously) eyes a top-of-the-range £5bn valuation when it floats on the London Stock Exchange this Wednesday. * SO WHAT? * CEO Andy Palmer has done a great job of turning the company around and seems to have the skills to further its development. The subsequent success will depend on the popularity of its new models – like the new SUV and Rapide E – but particularly on how many rich people want to buy its cars! It says that there are 17 million super-rich in the world that will rise to 25 million by 2025 and is targeting a decent share of the market for the 50,000 super-luxury vehicles out of the 85million cars sold each year! Still, £5bn is a very chunky valuation and Palmer will have to pull out all the stops to justify it.



In individual company news, Facebook could be facing a massive fine over last week’s data breach…

Facebook faces potential $1.63billion fine in Europe over data breach (Wall Street Journal, Sam Schechner) cites the potential consequences Facebook could face after the data breach announced on Friday where hackers accessed the accounts of over 50 million users if European regulators find it has breached the new General Data Protection Regulation. Ireland’s Data Protection Commission, which is the company’s main regulator in Europe has demanded more information about

the nature and scale of the breach. * SO WHAT? * This is going to be a major test of the new regulation which states that companies who don’t do enough to protect their users’ data risk a maximum fine of €20m or 4% of a company’s global annual revenue for the previous year, whichever is higher. GDPR also demands that companies notify regulators of breaches within 72 hours, or face a maximum fine of 2% of global revenue, so the overall effect of this legislation thus far is to force companies to disclose breaches more quickly and more publicly than they have done previously. This is the biggest potential breach of GDPR since it was introduced earlier this year and will be monitored very closely. Facebook says that it will respond to regulator requests, but it’s definitely bad PR for the social media giant that has been mired in various privacy and security issues of late. 



…And finally, in other news…

I thought I’d leave you with a story about a novel way of  getting  free rail ticket in Moscow in Do 30 sit-ups, get a metro ticket (NTV Telugu, The English in this article isn’t perfect but I think you’ll get the idea!

As always, thank you for reading Watson’s Daily!