Tesla Jive Talkin’
Whoa, Elon Musk (Bam-ba-lam). Woah, Elon Musk (Bam-ba-lam).
Elon Musk had a stock (Bam-ba-lam). The damn thing gone wild. (Bam-ba-lam).
He said: “I’m worryin’ outta my mind.” (Bam-ba-lam). Taxes gone wild. (Bam-ba-lam)…
I know quite a few of you are Tesla investors, so I thought a little explanation of what in the wild, wild world of stocks went on with TSLA today. You see, over the weekend, Tesla CEO Elon Musk tweeted the following:
The man actually asked his 62.8 million Twitter followers if he should sell 10% of his TSLA holdings while framing the potential sale as a tax question. That takes some guts, as 10% of Musk’s TSLA holdings account for about 4% of Tesla’s total available stock — about $20 billion at current market prices.
So, why would Musk ask strangers on Twitter if he should sell that much TSLA stock? Is this some big-headed grandstanding moment where Elon tries to appeal to the masses to prove that he, in fact, does pay taxes … or is willing to pay taxes?
Yes. Yes, it is. But there’s more to this story than Elon is letting on.
Back in 2012, Elon Musk was awarded 22.8 million Tesla stock options as part of his compensation plan. In 2012, those options were awarded at a share price of $6.24.
With TSLA closing at $1,222.09 on Friday, Elon’s gain on those 2012 stock options is roughly $28 billion.
Now, those options don’t expire until August 2022. However, CEOs have a limited window in which to sell stock options.
Furthermore, Musk will have to pay taxes on those gains. And since stock options are considered an employee benefit or compensation, any gains will be taxed at a much higher level than investment income.
CNBC estimates a 37% tax rate plus a 3.8% net investment tax. Throw all the state and federal taxes together, and Musk is looking at a potential tax bill of $15 billion. Ouch.
Oh, boo hoo! Poor Elon Musk. The richest man in the world. I think he can handle paying taxes. I pay mine, damn it!
Agreed, my heart bleeds purple Kool-Aid too. Is that the world’s tiniest violin playing “My Heart Bleeds For You” I hear?
Anywho, nobody really cares about Elon’s taxes … only that he pays them. The reason I’m bringing this up at all is appearances and your portfolios — assuming you hold TSLA stock, that is.
If you didn’t know about Elon’s massive, looming tax bill, you might think the Tesla CEO just put the fate of TSLA stock in the hands of 62.8 million Twitter followers.
After all, 4% of Tesla’s total stock is nothing to sneeze at. Selling all of that at once would have a massive negative effect on not just TSLA shares but every single ETF, IRA, 401K, hedge fund, index fund and investor holding TSLA stock.
Elon may be crazy, but he isn’t stupid.
What I’m saying is that this was all planned, and the Twitter poll was staged. Elon was already going to sell TSLA stock to pay his tax bill … and probably pay down some loans while he’s at it. In fact, Tesla warned about this in its third-quarter filing with the SEC:
The bottom line here is that this is just one more point of volatility for TSLA stock … and potentially a ripple effect for the rest of the market. All in all, both Tesla and the broader market have bigger fish to fry than Elon Musk grandstanding on Twitter about selling TSLA stock.
Finally, TSLA stock rallied more than 51% in the past month. If you weren’t already prepared for some profit-taking … you haven’t been paying attention. So don’t let this next Tesla tale slip you by either:
A former Tesla employee released a brand-new innovation promising to make every EV out there instantly obsolete. Some call this man “Employee No. 7.” Even the “Godfather of the EV Revolution.”
He created the first working Tesla battery. Now he’s about to change everything again.
Going: McAfee’s Massive Attack…afee
Oh, McAfee (Nasdaq: MCFE)… Must our cybersecurity story end so soon?
OK, I’ll concede: McAfee is a cybersecurity company in as much as a goldfish is a wheelbarrow. Which is to say … it’s decidedly not the cybersecurity expert that many newbie PC owners are lured into thinking.
Actual digital sleuths like CrowdStrike (Nasdaq: CRWD) use active AI learning to detect threats both known and unknown … while McAfee barely alerts you to known threats. And in the ransomware age, lackluster cybersecurity just won’t cut it.
But to a private capital firm called Advent International, McAfee’s lackluster cybersecurity is apparently worth, oh say, $14 billion. The company announced it’s taking McAfee private at $26 per share — a 22.6% premium, all in cash.
To say I’m surprised is an understatement. Literally the only reason to follow McAfee was the antics of (now-deceased) founder-turned-tycoon-turned-fugitive-turned-crypto-peddler John McAfee. Seriously … you can’t make this stuff up.
But while the story of McAfee may be more interesting than McAfee the company, enough people are convinced by McAfee’s promises of protection that the company’s retention rates and price increases are appealing to some investors out there.
No matter what Advent International thinks, I still don’t believe that the McAfees and Nortons of the world are actual cybersecurity companies that can truly help keep your PC safe … and nothing’s convincing me otherwise.
So long McAfee, and thanks for nothing.
Going: Jesus, Take The Wheel Already
While many other big-box retailers still rely on people to deliver consumers’ home goods and grocery items (the nerve), Walmart is now using driverless trucks to deliver food and drinks for its online grocery business … at least in small-town Arkansas.
You see, Walmart teamed up with Silicon Valley startup Gatik to test out its fleet of self-driving box trucks, which are programmed to run on seven-mile loops for 12 hours a day.
Walmart tested the fleet in Bentonville, Arkansas, where the company’s headquartered … and where I have to imagine there are fewer people milling about for said self-driving denizens to run into.
The kicker? Walmart’s been testing Gatik’s fleet without any safety drivers present … and so far, the whole operation’s gone off without a hitch.
Obvious safety concerns aside, Gatik’s vehicles could potentially lower Walmart’s operation costs and help the company combat the ongoing labor shortage — because robots haven’t replaced enough of the workforce already.
More importantly, it can help Walmart achieve the hub-and-spoke distribution model it so desperately wants to adopt:
The old architecture of delivery where you have a giant distribution center four or five hours away from the end consumer does not work anymore. Grocers are forced to set up these fulfillment centers close to the customer, and once you get close to the customer you have to shrink the size of your warehouse.
As the size shrinks, there is a growing need for doing repeated trips from the fulfillment centers to the pickup points. That’s where we come in. — Gatik CEO Gautam Narang
But that’s not to downplay Walmart’s profit potential should the company choose to make its entire distribution channel autonomous somewhere down the line. Now if only WMT investors were as jazzed about today’s announcement as Walmart itself…
Gone: Canopy’s All Cashed Out
After stepping into the earnings confessional on Friday, Canopy’s second-quarter financials failed to measure up to Wall Street’s lofty expectations.
The cannabis company reported an adjusted loss of $0.03 per share, or C$16.3 million. But that’s still way less than the C$96.5 million mishap Canopy reported a year ago … so I guess there’s a silver lining somewhere in here if you really squint hard enough.
To make matters worse, Canopy says that revenue in the second half of fiscal 2022 could increase, but the “magnitude and pace of improvement is expected to be more modest than previously anticipated.”
And that coming from a company that’s already been slow to penetrate — and make a profit from — the U.S. pot market. Can you say: Not great, Bob! Sure, you can.
Clearly, analysts on Wall Street have had enough of Canopy’s cashed-out earnings reports. Following its weak second-quarter outlook, investment firms Cowen and Canaccord Genuity downgraded Canopy, with the latter moving CGC stock from hold to sell.
While CGC tumbled nearly 14% on Friday — marking a 54% decline since the start of the year — investors got too blazed to remember why they ever sold Canopy Growth in the first place.
CGC stock is up nearly 8% on the day … and getting higher by the minute. Now if only Canopy’s shareholders could puff-puff-pass that feel-good sentiment Walmart investors’ way.
Are you down with ESG? Yeah, you know me!
How can I explain it? I’ll take you frame by frame it.
ESG — it means environmental, social and governance. It’s how individual and institutional investors alike judge prospective companies by various environmental, social and governance criteria.
Uhh … run that by me one more time?
It’s investing with harmony — environmental corporate synergies, and all your other favorite stock-marketing buzzwords.
Basically, environmental criteria weigh a company’s natural impact. Is such-and-such company reducing its carbon footprint? Or have this hypothetical company’s plastic products helped spawn an Earth-shattering microplastic crisis?
Social criteria pertain to the company’s impact on society — its customers, employees and the communities where it operates.
Governance criteria judge the company’s internals — how its management steers the ship, does right for its investors, and stays honest with its accounting.
In other words, it’s a way to find out which companies are simply naughty by nature … and to nature.
Sound new? It shouldn’t — Wall Street has been inundated with ESG-investing products over the past few years. And it’s not just from the ARK fund fandom’s starry-eyed bullishness, either.
For better or worse (and we’ll get to the negative Nancies in a sec) Wall Street is sold on ESG. The amount of crisp, digital cash flowing into ESG funds is now brimming over.
Take a look at the rise in ESG investing in our new Chart of the Week:
2018 was the point of no return, with the ensuing bull market injecting nearly $200 billion in fresh, environmentally friendly funds right into ESG coffers.
Think about that: In the past decade, the amount of cash invested in ESG funds more than tripled. Many fund operators now incorporate ESG criteria in their stock selection process.
But while some fund managers soak up the socially conscious sunlight from their investors, other fund runners have a more pessimistic outlook on the sharp inflow of cash to ESG-oriented funds.
Their reasons? ESG funds can give investors the illusion of helping direct social consciousness — not in the WeWork kinda way, mind you — while making little material impact on decarbonizing the world.
Previously the Chief Investment Officer for sustainable investing at BlackRock, Tariq Fancy left the ESG industry with similar criticisms.
To Tariq Fancy, ESG investing is merely a “dangerous placebo” as far as environmentalism goes — that true sustainability still needs to come from global governments alongside the corporate world’s relatively short-reaching actions.
I smell a bonus Quote of the Week in the works. Here’s your one chance, Fancy don’t let me down:
Are there a few isolated areas where ESG can create win-wins? Sure. But overall, the ESG industry today consists of products that have higher fees but little or no impact and narratives that mislead the public and delay the government reforms we need.
The small wins … are nowhere near sufficient to rapidly decarbonize our economy on the timeline required, which only governments can catalyze through rapidly adjusting the incentives of all the players in the system, for example through a price on carbon.
Wow, tell us how you really feel, Fancy. (You already knoooow.)
Don’t worry, we’re not going that far down the decarbonization rabbit hole today. But do bear in mind: ESG investing — using these specific socially conscious criteria to pick stocks — is here to stay on Main Street too.
All those electric vehicle and hydrogen power stocks in the Great Stuff Picks portfolio? Yeah … that’s ESG investing, technically. Whether you’re invested in stocks like Plug Power just for the sick gains or to help spread mainstream awareness of environmental issues … you’re a part of ESG now.
How do you personally feel about using environmental, social and governance criteria to invest? Do you think the ESG investing trend isn’t enough to spur worldwide decarbonization … or can investor awareness help spur mainstream/government action?
Let me know in the inbox right here. We’d love to hear from you — yes, you there, don’t think I don’t see you skimming on by. Don’t forget to write in! In the meantime, here’s where else you can find us:
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Until next time, stay Great!
Editor, Great Stuff