Author: CNBC Online news

Tesla investor: There couldn’t be a better time for Apple to invest in Tesla

Bull and bear debate the trade in Apple
7 Hours Ago | 04:25

Apple should buy a stake in Tesla now for the sake of both companies, Tesla investor Ross Gerber told CNBC on Monday.

“This is [Apple CEO] Tim Cook's gift of all gifts,” Gerber said on CNBC's “Squawk Alley.”

Gerber, co-founder & CEO of Gerber Kawasaki, said a potential investment from Apple in Tesla could be hugely beneficial to both companies.

Tesla has faced extensive scrutiny in the past year for a wide array of issues, including a push to meet Model 3 production goals. CEO Elon Musk, who on Friday admitted the past year has been “excruciating” and “the most difficult and painful” of his career, has come under fire for erratic behavior. Most recently, Musk rattled markets after tweeting he was planning to take Tesla public when the stock reached $420 per share and that he had “funding secured.” The tweet hasinvited scrutiny from the Securities and Exchange Commission.

“If you look at actually what Elon's problems are every day, they are operational, which is why Tim Cook was hired by Steve Jobs back in the day. Cook is perfect for this role,” Gerber said. “In the past Apple and Tesla probably wouldn't have gotten along because Musk didn't need Apple, but it is clear he needs help [now].”

And what Tesla lacks in scaling and operations, it makes up for in innovation — which Gerber says is what Apple desperately needs long-term.

With a giant cash hoard and deep-running consumer loyalty, Apple became the first publicly traded U.S. company to hit a valuation of $1 trillion in early August. It has since continued its trajectory, hitting a fresh all-time high in intraday trading on Monday. Despite Apple's recent success, however, it has its own share of pressures. Some investors worry stagnating iPhone sales could spell trouble for the company in the future.

“My biggest fear with Apple is that they have fallen so far behind in the innovation curve, I don't see where they will be five years from now,” Gerber said. “I don't think phones are going to be the primary device in a decade,” he added.

Ivan Feinseth, chief investment officer at Tigress Financial Partners, agreed Tesla could present a decent investment opportunity for Apple but said the investment wouldn't make or break the tech giant.

“I don't think Apple is on the decline. It is still on the ascent,” Feinseth said.

He said wearables and Apple's voice assistant, Siri, still present big areas for growth and innovation.

But an investment in Tesla could present a unique opportunity for Apple to “get a foothold in the development” of Tesla technology, which it usually keeps in-house.

“Apple does have enough cash, with the $240 billion they now have. With that they could buy Tesla, Ford, Fiat, Ferrari, Harley Davidson — they could buy everything,” Feinseth said.

“Why would they want to tie themselves down with owning an automobile manufacturer? If they want to be involved with the manufacturing, especially the integration of technology, taking a financial interest in Tesla would make sense,” he added.

Gerber agreed mobility could be a huge opportunity for Apple in the future. And he said the iPhone maker's secretive self-driving car project, “Project Titan,” is “going nowhere,” so Tesla would be a surer bet. If Apple were to strike a deal with Tesla that put its operating system and app store in Tesla cars, that would open up a whole new avenue for Apple to market its services and applications to customers, he said.

“Apple should buy 5, 10 percent of Tesla just to get the iOS onto that Tesla screen. Part of the Tesla story is that screen in the middle of the car, and not having Apple on that screen is going to be a huge problem for them,” he said.

Whether or not Tesla ends up private, Apple should act now, while Musk is actively searching for partners, Gerber said.

Shares of Tesla closed up 0.96 percent at $308.44. Shares of Apple closed down 0.97 percent at $215.46, after briefly touching an all-time high of $219.18 in intraday trading on Monday.

Apple and Tesla did not immediately respond to CNBC's requests for comment.

After fatal accident, Uber’s vision of self-driving cars begins to blur

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An Uber self-driving car drives down 5th Street on March 28, 2017 in San Francisco, California.

SAN FRANCISCO — After Dara Khosrowshahi took over as Uber's chief executive last August, he considered shutting the company's money-losing autonomous vehicle division. A visit to Pittsburgh this spring changed that.

In town for a leadership summit, Mr. Khosrowshahi and other Uber executives were briefed on the state of the company's self-driving vehicle research, which is based in Pittsburgh. The group was impressed by the progress its autonomous division had made in testing driverless cars in Pittsburgh and in Arizona, according to three people familiar with the ride-hailing company, who were not authorized to speak publicly. They left the meeting energized, convinced that Uber needed to forge ahead with self-driving cars, the people said.

But days after the summit, one of Uber's autonomous cars struck and killed a woman who was pushing a bicycle across a street in Tempe, Ariz. Video from the March 18 collision showed a distracted safety driver failing to react in time as the vehicle barreled into the pedestrian, Elaine Herzberg.

The accident threw Uber's autonomous vehicle efforts into flux, immediately forcing the suspension of its self-driving car tests in cities including Tempe, Pittsburgh and Toronto. Months later, Uber's executives are divided over what to do with the autonomous business, according to the people familiar with the company. While one camp is pushing Mr. Khosrowshahi to seek partnerships or even a potential sale of the unit, known as the Advanced Technologies Group, a rival contingent is arguing that developing self-driving technology is crucial to Uber's future, the people said.

Mr. Khosrowshahi remains undecided, the people said, though he has expressed a desire to partner with other companies on autonomous technologies. In recent months, Uber has started talking with a few auto manufacturers about potential partnerships, including supplying Uber's autonomous driving technology for use in Toyota's minivans, according to one person familiar with the talks. Toyota declined to comment.

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The internal debates are unfolding at a time when many companies can ill afford to pause on autonomous technology given stiff competition from carmakers and other tech companies. In recent months, top engineers have left Uber's self-driving project for lucrative opportunities elsewhere. Uber's self-driving cars recently returned to the road in Pittsburgh but with human drivers at the wheel, meaning employees are driving around like any other motorist — except their vehicles are carrying hundreds of thousands of dollars in technology.

The issue of whether to retain or sell A.T.G. is complicated by Uber's stated intention to go public by the end of 2019. The company, valued at $62 billion, has racked up billions of dollars in losses since it was founded in 2009 and needs to persuade investors that it can eventually create a sustainably profitable business. The self-driving efforts, which have been losing $100 million to $200 million a quarter, do little to help that case. And Mr. Khosrowshahi has been shedding money-losing businesses since he joined Uber.

At a meeting in Pittsburgh on Aug. 8, according to a person briefed on the event, Mr. Khosrowshahi did not address what he would do with the self-driving efforts but told employees there that it ''is a big-time hardware manufacturing, software problem at scale. Lots of tech companies out there are going after this problem, but I think there are very few companies who are taking this on end-to-end at scale the way we are.''

In a statement, Uber said: ''Right now the entire team is focused on safely and responsibly returning to the road in autonomous mode. That's our No. 1 objective, and we have every confidence in the work they are doing to get us there.''

Uber first made its interest in self-driving cars public when it hired about 40 researchers and scientists from the National Robotics Engineering Center at Carnegie Mellon University in 2015. At the time, the company's chief executive was one of the founders of Uber, Travis Kalanick, who had decided to bet big on self-driving vehicles. He wanted to prepare Uber for a future when fleets of driverless cars could move passengers efficiently and safely around the clock.

In 2016, Uber acquired Otto, a self-driving truck start-up whose founders had decamped from Google. The deal later spurred a trade-secrets-theft lawsuit from Google's onetime self-driving car unit, Waymo. The case briefly went to trial this year, generating headlines and embarrassing revelations, before Uber settled with Waymo in February.

In its rush to get on the road with driverless cars, Uber also ran afoul of regulators. The company started testing its autonomous vehicles in San Francisco in 2016, without a permit from California's Division of Motor Vehicles. The state agency ordered Uber to apply for a permit, but the company refused, saying permits were not necessary since safety drivers were monitoring the cars. The D.M.V. ultimately revoked the registrations for the 16 self-driving cars that Uber was testing in the city.

By early this year, Uber's self-driving division was preparing to ramp up development, pushing its testing cars in Arizona to tally more miles. The goal, according to internal documents reviewed by The New York Times, was for Uber to win regulatory approval to start testing a self-driving car service in Arizona before the end of this year.

But the crash in March — the first known fatality involving a pedestrian and an autonomous car — altered everything. Since then, Uber has steadily narrowed the scope of its autonomous vehicle operations.

In May, Uber announced that it was shutting its driverless testing hub in Arizona and laying off 300 employees. A day later, preliminary findings from federal regulators investigating the crash confirmed what many self-driving car experts suspected: Uber's self-driving car should have detected a pedestrian with enough time to stop, but it failed to do so. Uber has begun a safety review and plans to publish its assessment in the coming months.

Mr. Khosrowshahi has started to subtly de-emphasize the company's role in developing driverless technology.

At a conference last year, he said it was a ''huge advantage'' for Uber to have its own autonomous technology while operating a global ride-sharing network. But this May, Mr. Khosrowshahi said that while Uber needed to have access to autonomous technology, it aimed to be ''neutral.'' He said Uber would be open to licensing its own technology or building around alternatives from other companies — a stark contrast to the company's previous approach of owning and operating the entire self-driving ''stack'' of technology and hardware.

And in July, Uber announced that it was closing its autonomous trucking business. The company instead said it would focus exclusively on building self-driving cars.

''For now, we need the focus of one team, with one clear objective,'' Eric Meyhofer, who leads Uber's driverless car efforts, wrote in an email to employees.

In the preceding months, some senior engineers and executives with expertise in self-driving vehicles had already left. One of those was Don Burnette, one of Otto's founders, who became the chief executive of a new self-driving company called Kodiak, which focuses on long-haul trucking.

''I really wanted to focus on the trucking problem, and there was not as much focus on that at Uber,'' Mr. Burnette said.

He added that Uber would most likely continue to pursue its vision of driverless cars because it and other companies ''have been working on it for so long, promising this for so long, and they have a tremendous amount of money behind them.''

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Tesla pares losses in volatile trading after falling below $300

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Elon Musk

Tesla's stock price fell below $300 per share at one point on Monday as investors in the electric car maker continued to doubt the validity of a privatization proposal by founder Elon Musk.

Shares of the Palo Alto, California-based company fell as low as $288.20 before rebounding shortly after the open of trading. The stock was down 0.6 percent at $303 as of 10:43 am ET.

Earlier Monday, J.P. Morgan slashed its projections for the carmaker, telling clients that while it originally took chief executive Elon Musk's proposal to take the company private at $420 per share seriously, the funding to do so “appears to not have been secured.”

The firm pared its year-end price target for Tesla shares back to $195 from $308, representing 36 percent downside to Friday's close.

But while the bearish J.P. Morgan note may have weighed on the stock Monday, investors have had plenty of reason to question the CEO over the past few weeks.

Shares also fell after news broke that PIF, the Saudi Arabian sovereign wealth fund that Musk has said could help him fund an offer to take the car company private, is in talks to invest in rival Lucid Motors, Reuters reported cited sources.

The Securities and Exchange Commission, meanwhile, reportedly served Tesla with a subpoena early last week after Musk's now-infamous privatization tweet.

What Tesla would have to raise to go private
2 Hours Ago | 01:50

Earlier reports said the SEC had intensified scrutiny of the automaker after the Aug. 7 tweet. A subpoena would be one of the first steps in a formal inquiry.

The SEC declined CNBC's request for comment on the subpoena.

Musk admitted last Thursday in an emotional interview with The New York Times that the past year has been taxing for him, blaming so-called short-sellers — investors betting against the company — for much of his stress.

He told the newspaper he's overwhelmed by the job, has been working up to 120 hours per week and takes Ambien to fall asleep on occasion.

Tesla shares tumbled 9 percent to $306 the day following the interview.

Columnist and businesswoman Arianna Huffington later called on Musk to adopt a healthier work-life balance in light of the interview, but he said that's not a viable option.

Musk told the Huffington Post founder in a tweet Sunday morning that his car company and Ford are the only two American automakers that have avoided bankruptcy. He then added, in an apparent reference to his long workweek: “You think this is an option. It's not.”

WATCH: Is it game over for Elon Musk?

Tesla's in turmoil, is the game over for Elon Musk?
5:20 PM ET Fri, 17 Aug 2018 | 07:59

Citi Research says Tesla should raise capital to prevent a negative confidence ‘spiral’

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Elon Musk

Tesla's finances may be hurt by the negative ramifications of CEO Elon Musk's controversial plan to take the company private, according to Citi Research.

The firm reiterated its “neutral/high risk” rating for Tesla shares, citing the company's deteriorating balance sheet.

“Ultimately, credit risk is a function of confidence, without which a company's financial position can quickly spiral into distress. Though we don't think Tesla has necessarily entered such a spiral, the current state of affairs heightens the focus,” analyst Itay Michaeli said in a note to clients Monday. “If a go-private transaction is looking less likely, we think it'd be wise for Tesla to at least try to raise significant new equity capital sooner rather than later.”

The analyst said if Musk's plan to take the company private doesn't happen, the company's cash position may be “pressured” from class-action lawsuits.

Tesla shares fell 0.5 percent Monday after the report.

Tesla's skeptics have called into question the state of the company's financial position. It lost nearly $2 billion last year, and through the first two quarters this year it has burned through about $1.8 billion in cash after capital investments. The company had $2.2 billion in cash at the end of the June quarter.

“When a company's balance sheet is fundamentally weak the outcome can become self-fulfilling — and that's really the risk we see with Tesla right now,” he said.

Michaeli reaffirmed his $356 price target for Tesla shares, representing 16.5 percent upside to Friday's close. The company's stock is down 2 percent this year through Friday versus the S&P 500's 7 percent gain.

Tesla did not immediately respond to a request for comment.

Disclaimer

Elon Musk says Tesla could produce $25,000 car in ‘maybe’ 3 years, but cites industry challenges

Yuriko Nakao | Bloomberg | Getty Images
Elon Musk, co-founder and chief executive officer of Tesla

Elon Musk suggested it could take Tesla “maybe” three years to come up with a low-cost version of a car, even as he admitted it was “really tough” to do given the auto sector's economics and competition.

Amid recent turmoil surrounding Musk's stated goal to take Tesla private, the CEO sat for an interview with YouTuber Marques Brownlee to discuss the future of electric cars. Musk explained that Tesla's comparatively smaller scale made it hard to compete against major producers like General Motors or Ford, given their massive scale in an “insanely competitive industry.”

Musk told Brownlee that Tesla was “really focused on making cars more affordable, which is really tough. In order to make cars more affordable, you need high volume and economies of scale,” he said. When asked if Tesla could eventually make a cheaper vehicle with higher quality, Musk responded in the affirmative.

“I think in order for us to get up to…a 25,000 car, that's something we can do,” he said. “But if we work really hard I think maybe we can do that in about 3 years,” Musk added, saying it depended on both time and scale. He compared car making to the early years of the cellphone, which were bulky and lacked functionality.

“With each successive design iteration, you can add more things, you can figure out better ways to produce it, so it gets better and cheaper,” Musk said. With “natural progression of any new technology, it takes multiple versions and large volume to make it more affordable.”

Currently one of the top trade-ins for a Tesla Model 3 is a Toyota Prius, according to statements Musk made during an August earnings call. The Prius, which starts at $23,475, is roughly half the cost of the $49,000 Model 3 starting price.

Musk boasted that Tesla shells out virtually nothing on advertising and endorsements, and relies heavily on word of mouth.

“Where I put all the money into and all the attention into is trying to make the product as compelling as possible,” Musk says. The key to selling a product is having something people love and will talk about, he added.

“If you love it, you're going to talk and that generates word of mouth,” he told Brownlee. That's Tesla's business model: rely mainly on word-of-mouth. The company isn't spending on advertising, according to Musk. And no discounts. Musk said even he pays full retail price on his Tesla cars.

Musk's sit-down was published on YouTube in the wake of an unusually personal New York Times interview, in which Musk displayed rare moments of emotion as he described the pressures of meeting a recent Model 3 production milestone. The bombshell report sent Tesla's stock reeling in Friday's trading, and laid bare concerns among Tesla board members about Musk.

The NYT article landed at a turbulent time for the electric carmaker. Musk upped the ante in his battle against investors betting against Tesla's stock, tweeting recently that he had “funding secured” to take Tesla private at $420 per share. That sent shares soaring, and ultimately prompted the SEC to open a probe, according to reports.

Correction: This version corrects the spelling of Tesla's name.

No ‘sound investor’ would want Elon Musk to remain CEO of Tesla, says former GM exec Bob Lutz

If Elon Musk left Tesla, the stock would go up: Expert
4 Hours Ago | 06:14

For the good of Tesla, Elon Musk should step aside, former vice chairman of General Motors Bob Lutz told CNBC on Friday.

“I can't imagine any sound investor who has money in the company or any independent board member would want him to remain as CEO in light of recent performance,” Lutz said on CNBC's “Closing Bell.”

The New York Times published an extended interview with Musk on Friday in which he said the past year has been “excruciating” and “the most difficult and painful” of his career. The interview follows months of erratic behavior on Musk's part, both on and off social media. Most recently, the CEO tweeted that he would take Tesla private at $420 per share and had “funding secured,” which has invited scrutiny from the Securities and Exchange Commission.

Musk took to Twitter in July to call a British cave diver who assisted in the rescue of a Thai boys soccer team a “pedo guy.” During Tesla's first-quarter earnings call in May, Musk dissed analysts, cutting off Sanford Bernstein's Toni Sacconaghi because of what he called a “boring, bonehead” question. Musk later apologized to Sacconaghi and to the diver, Vernon Unsworth, for his comments.

“Elon is tired, he's worn out. He's obviously got some emotional problems. He's self medicating. He has shown some disturbing signs of being somewhat volatile and unstable,” Lutz said. “I think the right solution for Tesla at this point is to move him aside from day-to-day operation.”

Lutz, an automotive industry veteran who has also served in top roles at BMW, Chrysler and Ford, has been a huge critic of Tesla in the past. In November of last year he said Tesla is “going out of business.” Although he wasn't quite as critical this time around, he did raise some of the same issues, saying Tesla was “bleeding” profitability and “will probably have to go back to the capital markets for more money.”

“In my personal judgment, the board should take action and find a CEO. Not get rid of Elon — keep him as the visionary, keep him as the titular head of the company, and give him the honor and respect the founder of the company deserves,” Lutz said. “But that company needs professional management, and it needs it now.”

J.P. Eggers, associate professor at New York University's Stern School of Business, agreed, saying it is likely there are many other things Musk would rather spend his time on than Model 3 production goals.

“We see this all the time with … start-up founders or early leaders in these firms, where what they really want to do is do the vision, do the growth, build the … reputation of the company. And when it comes to actually executing on the vision, they aren't always the best ones for that,” Eggers said Friday on “Closing Bell.”

As much as it might be better for Tesla — and its stock price — were Musk to step aside as CEO, Eggers said, he's not so sure Musk would be willing to stay on with the company in a secondary role.

“I have a hard time seeing him doing anything other than being completely involved or walking completely away. He's tenacious; that's what's made him successful to this point,” Eggers said.

For Tesla, ‘going dark’ might not be as easy as just turning off the lights

Simon Dawson | Bloomberg | Getty Images
Elon Musk, billionaire, co-founder and chief executive officer of Tesla Motors Inc.

Elon Musk still hasn't made a formal proposal to take Tesla private, an idea he floated last week in a series of tweets he has since attempted to clarify.

Many questions remain about his plan, chief among them how he would pull off taking private a $60 billion publicly traded company.

Lawyers and advisors tell CNBC it's not going to be as simple as “going dark,” as smaller companies have done in a big wave in the decade since the financial crisis. In order to pull that off, a company has to have fewer than 300 shareholders (or 500 in some cases). The process involves filing a few forms with the Securities and Exchange Commission and removing the shares from the exchange where they were listed.

It has been an escape for hundreds of companies over the last decade that found themselves crippled by the pressures of having to meet rigorous public financial disclosure requirements. But Tesla is a big company, and removing itself from the public market is a lot more complicated.

“No one has done it on this large a scale,” said Peter Bible, chief risk officer of EisnerAmper and a former chief accounting officer of General Motors.

Usually, the investing public waits impatiently for the next hot initial public offering, but Silicon Valley's tech elite has been disappointing those expectations lately. Many are content to stay private. CB Insights counts 260 $1 billion-plus “unicorns” with a combined private valuation of $840 billion. Last year, there were 160 IPOs versus 486 in 1999 at the height of the dot-com frenzy, according to Statista.

Constant pressure from shareholders and analysts about near-term performance was enough to drive companies like Dell and Tibco to move in the opposite direction and go private, but through the traditional buyout route where shareholders are cashed out.

Tibco, a business intelligence software maker, delisted from Nasdaq in 2014 and went private through a $4.3 billion deal with Vista Equity Partners. “Private provides you with the leeway you do't have in a public setting,” its chief technology officer told Britain's CIO magazine at the time.

Tesla debuted on the Nasdaq in 2010, raising $226 million as its shares jumped 41 percent on their first day of trading, and it has returned to the market several times since then issuing more shares. Musk's personal stake in the company has risen in value from $512 million at the time of the IPO to $12.8 billion.

But the electric car company's founder and CEO has complained that being publicly traded invites distracting focus on short-term financial goals and makes Tesla the target of traders who attack the company in order to profit from a decline in its shares.

How it's done

Simply going dark is a multistep process. The exchanges need several days notice of the plan, and the public has to be informed at the same time. Then forms are filed with the SEC, one to notify it of the delisting and another to deregister the shares if the company has 300 or fewer shareholders. But if the shareholders aren't bought out with cash, the shares continue to trade, moving over to the more thinly traded over-the-counter market.

Going private requires cash to buy out the minority shareholders, usually through a merger, tender offer or reverse stock split.

But Musk's proposal adds a complicating factor.

He has said he wants to preserve a broad ownership of Tesla as a private company. That might be impossible for the mom and pop investors in the stock now who don't qualify to invest in private companies as accredited investors. If they want to keep their ownership, it might have to be through a special purpose fund, something Musk has mentioned.

And that special purpose fund might have to be publicly traded, Morningstar's David Whiston said.

“Issues around regulatory approval come to mind because it is unclear how Tesla will allow retail investors who are not accredited investors to own stakes in a private Tesla,” he wrote in a note this week. “That issue is why we think the special-purpose vehicle Musk pointed to in the Aug. 7 email may have to be publicly traded.”

Tesla said Tuesday its board has set up a special committee to examine Musk's idea. Lawyers for the committee and the company have been hired, and Musk has tweeted that he has his own advisors, including the private equity firm Silver Lake, which is said to be interested in a possible investment.

The special board committee, including directors Brad Buss, Robyn Denholm and Linda Johnson Rice, hadn't reached any conclusions about “the advisability or feasibility” of a transaction and that it could consider alternatives, Tesla said Tuesday. Shareholders would also have to vote on a transaction, lawyers and advisors said.

That's another complicating factor, lawyers said. There's no guarantee that enough shareholders will agree or that enough will want to sell their shares at Musk's suggested $420 price to get Tesla's shareholder count low enough to deregister the shares. Whiston estimates about 40 percent of the shareholders might take the money, and that would cost about $28.7 billion.

Depending on state law, he'd have to get a super majority of shareholders (in Delaware, it's 90 percent) to be able to squeeze out any holdouts, lawyers said. But Musk has said there will be no forced sales.

Its biggest investors, aside from Musk himself, are mutual funds and money managers in addition to China's Tencent and Saudi Arabia's sovereign wealth fund. Collectively this group holds about 66 percent of the shares. About 17 percent are owned by investors who are too small (either in the amount of Tesla they own or the size of their portfolios) to have to report their stakes. Musk has said he believes two-thirds of Tesla's shareholders will stick with it as a private company.

The deal could turn out to be as unique as the collection of space transportation, electric automobile, high-speed transportation and solar power generation projects Musk has cobbled together in his business empire.

“There is a recipe for going private, but like everything else, Elon Musk does it his own way,” said Barry Genkin, a partner at law firm Blank Rome. “He hasn't put any meat on the bones and everyone is scratching their heads about what he means.”

A choked up Elon Musk says his health has suffered and that he believes ‘the worst is yet to come’

Elon Musk was at home in Los Angeles, struggling to maintain his composure. “This past year has been the most difficult and painful year of my career,” he said. “It was excruciating.” The year has only gotten more intense for Mr. Musk, the chairman and chief executive of the electric-car maker Tesla, since he abruptly… Continue reading A choked up Elon Musk says his health has suffered and that
he believes ‘the worst is yet to come’