Shares of Tesla (TSLA) jumped in early trading after Oracle (ORCL) founder Larry Ellison confirmed a stake in the electric carmaker worth $1B.
$1B STAKE: In a regulatory filing, Ellison, the founder of Oracle, said that he has a holding worth $1B in Tesla. Ellison indirectly owns 3M Tesla shares through the Lawrence J. Ellison Revocable Trust, according to the filing. The 1.75% stake makes him the second-largest disclosed individual shareholder after Tesla founder and CEO Elon Musk, who owns about a fifth of the company, according to data compiled by Bloomberg.
WHAT'S NOTABLE: On December 28, Tesla announced plans to add Ellison and Kathleen Wilson-Thompson, the global head of human resources at Walgreens Boots Alliance (WBA), to its board, boosting the size of the board of directors to 11. Ellison and Wilson-Thompson were added in compliance with an SEC settlement. In October, Ellison, a close friend of Musk's, disclosed that his second-largest personal investment is in Tesla. At the Oracle OpenWorld conference, Ellison commented that "I am not sure people know I am very close friends to Elon Musk and I am a very big investor in Tesla," adding that he thinks Tesla "has a lot of upside." At the conference, Ellison defended Tesla CEO Elon Musk, saying "You are telling me he is an idiot. I just want to know who you are so I know why I should believe you as opposed to my friend Elon."
Tesla and CEO Musk agreed in September to name a new chairman and two independent board members following an SEC lawsuit alleging that Musk misled investors with a tweet about taking the company private at $420 per share. He did not pursue any go-private deal and pulled back on those plans a few weeks later. The SEC would eventually charge him with securities fraud, with both parties reaching a settlement not long after, and Musk agreeing that his “communications relating to the company… including Twitter” would be overseen by his board. In a wide-ranging interview on CBS's "60 Minutes," Musk said his tweets are not approved by the automaker prior to publication. "The only tweets that would have to be reviewed, would be if a tweet had a probability of causing a movement in the stock. Otherwise, it's hello, first amendment. Freedom of speech is fundamental […] I want to be clear, I do not respect the SEC,” Musk said, adding that he uses his tweets “to express myself.” Musk previously relinquished his role as chairman of Tesla's board as part of the SEC settlement, being replaced by Robyn Denholm, and in November, both he and the company agreed to pay $20M penalties.
WEAK SALES: Last week, Tesla announced that it had delivered 90,700 vehicles during the fourth quarter, below Wall Street forecasts despite the electric carmaker's efforts to ramp up production. Production for Q4 grew to 86,555 vehicles, 8% more than its prior all-time high in Q3. Tesla also announced that it is reducing the price of Model S, Model X and Model 3 vehicles in the U.S. by $2,000 to partially absorb the reduction of the federal EV tax credit. Following the news, Bank of America Merrill Lynch’s Murphy pointed out that Tesla's reported fourth Model 3 production of roughly 61,000 units implies a weekly production rate of just over 5,000 vehicles, which was largely in line with the company's prior commentary of a 5,000 unit/week production run rate sustainability, but below its indication that it was on the path toward a 7,000 unit/week rate. Given the relatively slower than anticipated progress on the production ramp of the Model 3, the analyst told investors that he expects it will take some time before Model 3 production reaches mass scale. Baird analyst Ben Kallo told investors in a research note of his own that he continues to believe demand concerns are “overblown,” and thinks the company has several levers to drive additional Model 3 sales, including shipping to international markets and introduction of leasing options/lower cost variants.
PRICE ACTION: In morning trading, shares of Tesla are up 1.3% to $339.40.
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