More and more details to Tesla's bailout of SolarCity are becoming clear. And the more details we get, the uglier things look.
The latest addition to the story was yesterday, when one well known Tesla skeptic took the time to lay out, in wonderful detail, the financial pressure that SolarCity's tanking stock price was putting on the company's directors - specifically, Elon's brother Kimbal Musk - who faced multiple margin calls prior to the merger.
Using Kimbal Musk's recently released deposition from the SolarCity lawsuit, the short seller known only as @TeslaCharts on Twitter, reconstructed the days leading up to Elon Musk pitching the SolarCity acquisition to the Tesla board. They detail a panicked Kimbal Musk, cursing about Tesla and blowing out his SpaceX shares to cover his SolarCity margin call - all while maintaining that he had zero conflict of interest in Tesla's eventual bailout of SolarCity.
@TeslaCharts starts by layout out the context, reminding readers that Kimbal Musk was a large shareholder in SolarCity, as well as a board member of both Tesla and SpaceX at the time.
2/ A friendly reminder. At the time $TSLA is considering acquiring SolarCity, Kimbal is:— TeslaCharts (@TESLAcharts) October 29, 2019
*A very large shareholder of SolarCity
*On the board of Tesla
*On the board of SpaceX
*CEO of The Kitchen
He is also Elon's brother and cousin to Lyndon Rive, the CEO of SolarCity. $TSLAQ
He then makes note of Kimbal's reasoning for not recusing himself regarding matters involving SolarCity. The only person who didn't seem to think Kimbal had a conflict of interest was Kimbal himself.
3/ The attorney, who does a brilliant job, begins by asking Kimbal about why he didn't recuse himself from the SolarCity deliberations. He also mentions the $TSLA code of conduct. Kimbal doesn't know much about the code, but quickly denies he has a conflict of interest. $TSLAQ pic.twitter.com/woG0uhHcL9— TeslaCharts (@TESLAcharts) October 29, 2019
He continues down this line of logic, noting that despite owning 141,541 shares of SolarCity, Kimbal still did not think he had a conflict of interest because he was representing "the best interests of the shareholders of Tesla".
From there, @TeslaCharts starts to lay out a timeline. First, October 20, 2015, when Kimbal is facing a margin call due to SolarCity for the first time.
6/ On October 20th, 2015, SolarCity stock is starting to fall, and Kimbal is facing a potential margin call. He is asking Elon for a loan or considering selling SpaceX stock. He knows he is going to sell some $TSLA stock in November via his predetermined 10b5-1 plan. $TSLAQ pic.twitter.com/nmJt2I0bpp— TeslaCharts (@TESLAcharts) October 29, 2019
He then also lays out that many members of the Tesla and SolarCity boards are also on the Board of Directors of Kimbal's company, the Kitchen.
7/ The SolarCity stock decline comes at a bad time for Kimbal. He is in the middle of a raise for his true passion, The Kitchen. Turns out, many members of the SolarCity and $TSLA boards are also investors in The Kitchen. No conflict there, right? $TSLAQ pic.twitter.com/bhmX4fElfW— TeslaCharts (@TESLAcharts) October 29, 2019
In fact, when Kimbal is seeking financing for his own company, SolarCity's CEO tells him that he can't participate because he is also facing his own margin calls. SolarCity is "seeing its ass", CEO Lyndon Rive tells Kimbal. Of course, "seeing its ass" doesn't appear in any SolarCity public filings around that time - this was information just for Kimbal.
8/ We are still on October 20, 2015. The CEO of SolarCity regretfully informs Kimbal that he can't participate in this funding round of The Kitchen. Why? He has his own margin loans to worry about, of course! "SolarCity is seeing its ass" - didn't see that in any filings. $TSLAQ pic.twitter.com/2nsUPj5ysk— TeslaCharts (@TESLAcharts) October 29, 2019
Then Kimbal winds up in a back and forth with the questioning attorney about the definition of a margin call, which he clearly doesn't understand. The deposition shows that Kimbal used his Tesla line of credit to cover his SolarCity line - symbolic, of sorts, isn't it?
9/ Apparently, Kimbal doesn't know the definition of a margin call. Just because you can meet that call doesn't mean it didn't happen. Surreal. Oh, and he uses his $TSLA line to cover his SolarCity line often. He is keenly interested in the price of both stocks. $TSLAQ pic.twitter.com/n6utsAONIs— TeslaCharts (@TESLAcharts) October 29, 2019
Kimbal then faces a margin call on October 29, 2015 and uses his Tesla stock to again cover it.
10/ Having just testified that he doubted ever receiving a margin call, we find out that on October 29, 2015, Kimbal gets a margin call from Morgan Stanley. His loan collateralized by pledged $TSLA stock comes to the rescue again. $TSLAQ pic.twitter.com/QGQcillK6A— TeslaCharts (@TESLAcharts) October 29, 2019
Kimbal is then rebuffed by Elon after he hits Elon up for a loan to try and bail himself out of his margin call. "You know that I don't actually have cash, right?" Elon says to his brother.
11/ Apparently Elon isn't happy about being hit up for a loan by his brother. I can understand that. Pesky family members and all. Interesting that Elon had no cash all the way back in the fall of 2015. Kimbal better sell some SpaceX, I guess. pic.twitter.com/jk2gU0RKg8— TeslaCharts (@TESLAcharts) October 29, 2019
So Kimbal shifts his attention to potentially selling some of his SpaceX stock to cover the call. It is also noted that Elon Musk had a LTV of just 5% for his SpaceX shares at Goldman.
12/ But Kimbal doesn't want to sell his SpaceX stock. Why? Because stocks always go up and to the right. Maybe a pledged loan of his SpaceX shares? Elon only got a loan-to-value of 5% at Goldman for his SpaceX stock. I believe this is the first confirmation of that fact. $TSLAQ pic.twitter.com/8Rz1e46dUn— TeslaCharts (@TESLAcharts) October 29, 2019
By February 8, 2016, all hell is breaking loose. SolarCity's stock is still falling and Kimbal is forced to offer some SpaceX stock at $110.
13/ On February 8, 2016, the SolarCity stock price is still cratering, and the margins calls are piling up. Time to sell some SpaceX at $110 a share. Is Elon getting margin calls too? Unclear. $TSLAQ pic.twitter.com/no3x8YFPDm— TeslaCharts (@TESLAcharts) October 29, 2019
On February 9, 2016, there's a clear sense of urgency when SolarCity dips to $18 per share. Kimbal yanks the offer on his SpaceX stock from $110 to $95 over the course of just one day.
14/ Things get way worse on February 9, 2016. SolarCity dives to $18 a share. Kimbal is in deep now. Reduces his asking price on SpaceX shares to $95. Deep margin calls coming. What do Elon's loans look like? $TSLAQ pic.twitter.com/kIJx56eCxB— TeslaCharts (@TESLAcharts) October 29, 2019
Kimbal then, frustrated, e-mails the CFO of his company, the Kitchen. "Motherfucker," he says after describing Tesla's 50% fall.
So the next day, his brother Elon goes online and pulls forward the date for Model 3 reservations, announcing that more information on the unveil would be coming soon. Tesla stock moves higher and "margin loan pressure undoubtedly eases," @TeslaCharts says.
16/ In the mother of all coincidences, the VERY NEXT DAY, Elon takes to twitter, surprises his team, and pulls forward the Model 3. The $TSLA stock price roars, margins loan pressure undoubtedly eases, and all is good for now. $TSLAQ pic.twitter.com/ARu0IAjsRH— TeslaCharts (@TESLAcharts) October 29, 2019
And just two weeks later, Elon calls a meeting to pitch the idea of acquiring SolarCity. To nobody's surprise, the Board doesn't even discuss Kimbal Musk's potential conflict of interest.
17/ Fast forward two weeks later. Elon calls a special meeting of the $TSLA board on February 29, 2016, to press for the SolarCity acquisition. Does Kimbal recuse himself? No. Get this. THE BOARD DOESN'T EVEN DISCUSS HIS OBVIOUS CONFLICTS!!!!!!! $TSLAQ pic.twitter.com/Ue12sUWgKr— TeslaCharts (@TESLAcharts) October 29, 2019
The thread ends with @TeslaCharts saying what everyone else is thinking:
"The only thing surprising about this giant self-dealing Ponzi scheme is just how egregious it all is."
The thread, in its entirety, can be read here. @TeslaCharts also appeared on a podcast on Sunday to lay out his thoughts both on Tesla's recent quarterly results, and on the company's claims about its "Version 3.0" of its solar roof tiles.
Recall, we noted yesterday that despite the company's "headline" Q3 numbers, its U.S. sales actually plunged 39% in the quarter.