Why Elon Musk Just Bought Twitter!
In today’s post, Elon Musk buys Twitter, Tesla hits record deliveries yet again, we get a first person view of the production line inside Giga Berlin and Tesla continues to outsmart the supply chain with resource supply deals. So let’s get going.
Elon Musk Buys $TWTR
Elon Musk has bought Twitter. OK, not the whole company but he did purchase a very large portion of it. Reports show that Elon Musk now owns 9.2% of all Twitter shares, making him the single largest holder of the company stock.
According to a regulatory filing on April 4th with a date of event on the 14th of March, Elon R Musk purchased 73,486,000,938 shares of common stock in Twitter. At the average price for the day of $33.3 USD, that would have cost him $2,447,115,000,35.40 USD.
That’s an awful lot of money to spend just to own a majority stake in an app that’s maybe top 5 in the social media space. Even for Elon Musk, that’s significant bank. Why would anyone do such a thing?
Well, you’ve probably seen this Twitter poll that Elon posted with the message, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?”
70% of the 2 million respondents voted “No” in the poll, which Elon followed up by tweeting, “The consequences of this poll will be important. Please vote carefully.”
There was a lot of speculation at the time about what Elon meant with these posts - most thought he might be interested in starting up his own social media platform or some crazy thing like that. Of course Elon knew something that we didn’t - that he just bought 2.5 billion dollars worth of Twitter.
As for what Elon plans to do with his new found assets, that’s a much bigger question. So, as of right now, he really can’t do all that much - even though Elon is the largest shareholder, he still owns a ‘passive stake’ in Twitter, which means that he takes no active part in running the company. In order to have an ‘active stake’ Elon would need to up his buy-in to take ownership of 10% or more of the company. By definition, a principal shareholder is a person or entity that owns 10% or more of a company's voting shares. As a result, they can influence a company's direction by voting on who becomes CEO. Elon could even insert himself as the Chair of the Board of Governance at Twitter - though that still wouldn’t make him the boss, Elon would need to have at least half of the other board members voting on his side. So, it’s some very complex business stuff going down here.
Obviously Elon could have bought that 10% if he wanted to, but he stopped short for a reason. Maybe he wanted to buy just enough to make his point without actually putting himself in the position where he would have to take an active role in yet another company. Like, he wants to accomplish his goal with Twitter without actually having to take charge personally?
Hard to say, but regardless of whether this was Elon’s plan or not, Twitter announced on April 5th that they will appoint Elon Musk to sit on their board of directors. Twitter CEO Parag Agrawal wrote in a Tweet, “Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board.” To which, Elon replied, “Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!”
Twitter definitely could use a bit of an overhaul on its algorithms, no one would argue with that - and a better mechanism to clean up the fake accounts and spam bots would be great. If Elon could get an edit button on Twitter that would be worth the whole 2 billion alone. It’s entirely possible he’s just frustrated with the user experience of the website that he spends so much time using and wants to clean it up with higher quality coding, smarter algorithms and greater transparency about how twitter works and what is or isn't allowed on it.
But it’s hard to imagine exactly what Elon Musk has in mind here, or how he could possibly find the time in his life to really do anything substantial with this. We wait and see.
Tesla Wins Again With Record 1st Quarter
Tesla has again done the thing that the rest of the auto industry just can’t seem to figure out - sold more cars than last year.
Despite shutdowns in its Shanghai plant, rising nickel prices, and the ongoing supply chain crisis, Tesla successfully delivered 310,048 cars worldwide in the first quarter of 2022. This represented a slight increase from the 309,000 it delivered in the previous quarter but a substantial increase of 68% over the same period in 2021.
First quarter numbers could have been substantially higher too, the capacity was there, but multiple COVID related shutdowns at their Shanghai manufacturing plant meant several days of lost productivity near the end of the quarter, when the factory would usually be making a final push for local deliveries. The company probably could have produced an additional 10,000 vehicles without those mandated shutdowns.
Tesla’s delivery achievements really go against the grain in the automotive industry, which has seen drastic reductions in output over the past two years. Supply chain issues have been affecting all car makers, Tesla included, but not all companies seem able to overcome the challenge enough to grow, or even maintain their pre-pandemic output.
In the United States, new vehicle sales fell about 12 percent in the first quarter compared with a year ago. General Motors noted that its sales were down 20% for the quarter, while Toyota’s sales fell by 15%. Stellantis, who owns the Chrysler group, had sales drop 14%. If we want to talk strictly electric vehicles, GM made a particularly bad showing with just 457 electric cars delivered in Q1 2022 - 99 were the electric Hummer pickup and the other 358 were just old Chevy Bolts that had been built last fall but were finally deemed safe for delivery after that whole ‘bursting into flames’ thing that happened.
Analysts are citing lack of inventory for plummeting vehicle sales - it’s not that people don’t want the cars, it’s just that there are not enough being made to fill the demand. I saw a statistic the other day, I can’t remember where, but it said that the vast majority of new cars in the US spend less than one week on the dealership lot before being purchased.
The wildcard here going forward for Tesla is really going to be China - this country has done an amazing job of controlling the pandemic for a very long time, but new variants are inevitably going to break through and cause massive spread. If China continues with their policy of total lockdown to manage case counts, then we might see a very drastic reduction in Tesla’s overall productivity, also remembering that Tesla China is currently supplying batteries to Giga Berlin, and will have to continue doing so until 4680 cell production is up and running in Germany.
Giga Berlin FPV Production Tour
Tesla has released a crazy FPV drone video that shows their entire vehicle manufacturing process in the new Berlin GigaFactory from start to finish. This is a crazy view of the alien dreadnought in action.
So we start off flying through the line of stamping machines with the drone maneuvering through the moving pieces like a retro video game. Everything is automated with robot arms and conveloy belts moving the parts forward through the line.
Next up we get an inside view of the Giga Press machine, which I think is a first ever. A giant robot arm goes in and plucks out a freshly pressed rear casting from the mold and moves that on to the next step.
We see the Model Y frame being pierced together and welded by an expert team of robot arms. It literally does look like an alien tentacle monster of robots, it’s freaky.
After assembling the body goes through quality control checks and finishing by some actual human beings before yet another giant robot arms hoists the vehicle up onto another conveyor belt that brings it into the paint shop.
Now we can see that the final stages of assembly are very much hands on with more humans doing the final polishing on the paint job, installing the last components like the brakes all while a conveyor belt keeps the cars moving down the line.
And lastly there is final inspection in that now famous light tunnel before these Model Ys are ready to ship out to the good people of Europe.
Tesla Beats Supply Chain With Nickel Supply Deal
Bloomberg News reported last week that Tesla has been signing deals with several nickel suppliers since 2021.These are all agreements made long before the conflict in Ukraine sent materials prices skyrocketing, and a great example of how Tesla’s forward thinking gives them the edge.
Among these new deals is Brazilian miner Vale (pronounced val-eh), which signed a multi-year supply deal with Tesla. While the agreement between Tesla and Vale is yet to be announced, the Bloomberg sources noted that the deal specifically covers nickel mined from Canada.
With Russia being one of the world’s leading suppliers of the top grade nickel needed to make electric car batteries, we are inevitably going to be entering a time of scarcity when it comes to nickel supply.
Tesla has been largely able to avoid some of these challenges due to its use of non-nickel batteries for its entry-level cars, switching the Standard Range Model 3 to iron based LFP cells. But they are still going to need a very large amount of nickel to support the mass manufacturing of the 4680 cell - this will be critical for the company to continue producing long range and high performance electric vehicles.
Elon Musk, himself has famously urged nickel miners in the past to mine more of the component. Elon promised nickel suppliers a “giant contract” if they could mine nickel efficiently and in an environmentally sensitive way. At the same time the Canadian government has been making huge pushes towards marketing our country as a source of all the necessary metals to produce electric car batteries, from nickel to cobalt to lithium, we’ve got it all in the Northern areas of Ontario and up into the arctic territories. And so far our government has been pretty good about approaching this in a sustainable way that doesn’t cause too much environmental impact. So it’s a really good sign to see companies like Tesla moving in to take advantage of these resources.
