Elon Musk thinks it’s a “good idea” to create a holding company above Tesla, SpaceX, Neuralinka and The Boring Company – at least that’s what the billionaire CEO is he said in response to the idea on Twitter. Such a holding company could simply be known as “X,” suggests longtime Tesla shareholder Dave Lee, nodding his head at Musk’s ownership of “X.com” from his PayPal days.
Musk notoriously entertains changes, big and small, in his Twitter companies in the public square. In 2018, he even suggested one so big (and mostly unfounded) – taking Tesla privately using “secured funds” from Saudi Arabia – that he ended up.
But the idea is not here so far beyond the realm of possibility. Just five years ago, Google surprised a similar persecution, creating the holding company Alphabet and splitting some of its larger and bolder projects into its own ventures along with the search giant, but still under that new umbrella.
If Musk is entertaining something similar after browsing Twitter, let’s consider what it might look like at all.
Repetition of the alphabet
The simplest way for Musk to create X could be to roughly follow that model of the alphabet. The big difference is that SpaceX, Neuralink and The Boring Company are separate entities that exist outside of Tesla, the only company that is publicly traded. Let’s start with Tesla, because most of the action will have to take place there.
Here’s how the Alphabet business is structured on hilarious paper: Google has created a wholly owned subsidiary of Alphabet. It created others a new subsidiary wholly owned by Alphabet called Maple Technologies. You then merged Maple and Google to create a new version of Google that was wholly owned by Alphabet.
Easy, isn’t it?
Regarding Google shareholders:
Each share of each class of Google shares issued and outstanding immediately prior to the merger of the alphabet will automatically be converted into an equivalent corresponding share of the alphabet, having the same designations, rights, powers and preferences and qualifications, restrictions and restrictions as the corresponding share of Google shares converted. Accordingly, once the alphabet is merged, the current Google shareholders will become shareholders of the alphabet. Google shareholders will not recognize a gain or loss for U.S. federal income tax purposes after the conversion of their shares in alphabetical merger.
In other words, Google basically said “sit tight while we change things, and when we’re done, you’ll now own a piece of the Alphabet worth just as much.”
The same could be done with Tesla. Create a Tesla subsidiary called “X”, create a merger entity below to, and then merge the merging entity with Tesla. Tesla’s shareholders are being transformed into Xa’s equivalent shareholders, as agreed.
Well, not so fast. X would then have to bring the other three private companies into a raid. Instead of just being able to redirect them, as Google has done with companies like Nest or Calico, X should probably buy SpaceX, Neuralink and The Boring Company.
It shouldn’t be also difficult because Musk is the majority owner of those companies. The trouble would probably be philosophical. The price of Tesla shares is currently very high because many people believe in the company. But how would people understand the value of X stock if they involve these other operations? Would X shares be subject to less dramatic changes, as the value of the company would be less dependent on Tesla’s performance? Things of that nature.
The combination of the four companies under X could help Musk further sell his futuristic vision (driving humanity to sustainable energy, inhabiting other worlds, etc.). Even more boring, it could help him consolidate the financial or human resources of different companies, which was the benefit that Google was looking for with Alphabet.
All right, let’s go weird now.
Musk buys Tesla
What really he doesn’t want to turn the alphabet to musk … a kind of contempt for Tesla being a public company. Here is what Musk wrote when he tried to take Tesla privately back in 2018:
As a public company, we are subject to wild changes in the share price, which can be a great distraction to everyone who works at Tesla, and who are all shareholders. The public also subjects us to a quarterly earnings cycle that puts tremendous pressure on Tesla to make decisions that may be right for a particular quarter, but not necessarily in the long run. Finally, as the shortest stock in stock market history, being public means that there are a large number of people who have an incentive to attack a company.
Tesla is now in a much better place financially, so he doesn’t have to worry so much about the second and third point there. But the overall message is still being followed. Musk would rather run his business with less curious eyes. Would he really expose SpaceX, Neuralink and The Boring Company to the same types of pressure by putting them into a public holding company?
Probably not, so how do you fix that?
Tesla is the only public company of these three, so … take it privately. Yes. Let’s repeat the whole experiment with secured financing, but forget to try to sell it to Saudi Arabia or Apple. Go weirder.
Musk is now the second richest man in the world, currently worth about $ 140 billion. He probably can’t think of all the money needed to buy Tesla at its current value north of $ 600 billion – especially since half of his shares in Tesla are already pledged as collateral. i the company’s board limited it to lending only 25 percent of the value of any additional shares. It is also unclear how much of his SpaceX stock is pledged as collateral. But using his ownership in all four companies as a basis for loans, one could be seen taking a hefty bite of that $ 600 billion price tag.
He would need more serious partners to join him in buying Tesla. Maybe billionaire and board member of Tesla Larry Ellison? It seems like the least Ellison could have done after Musk brought him into his lap after the debacle that secured funding and turned what was a modest investment into the current many billions of dollars.
Musk seems to love Tesla’s most loyal shareholders, to the extent that he tried to promise that they would continue to own part of the company during a failed private transaction in 2018 – an idea that confused experts – so he might find a way to get them involved. Whatever consortium Musk makes up, he could just stand up for X, acquire Tesla, and then lead other companies into a raid.
Musk creates one of the special purpose acquisition companies, or SPACs, that have been so hot this year and calls it X. He starts with a lot of his own money (probably from Tesla and SpaceX stocks with leverage) and the stock price goes up as soon as he starts to trade, because a) it is the SPAC and it is obvious that things are functioning just like that now, b) its existence as a means of brute force capitalism excites the masses, and c) it is Elon Musk. SPAC X becomes an empty check giant, uses it to buy Tesla and other companies,
Dissatisfied with the mere theorizing of what laws should be on Mars, Musk establishes the first Martian stock exchange. It models it according to national stock exchanges, but with adjustments to reduce some of its least favorite aspects (such as the quarterly reporting rules or that annoying securities and stock exchange commission). No one is quite sure if it is legal or “real”, but again, the Space Agreement did not last very long in terms of financial regulations, right?
Musk reveals that the creator of bitcoin is Satoshi Nakamoto, he sells all his coins and buys Tesla.
As you can see, Musk has several options if he really wants to create the kind of conglomerate that wins in a world that only appears in movies. It may be a long blow, but it is somehow his whole thing. No wonder he thinks it’s a good idea.