Furious investors slam the brakes on Tesla’s buyout bid
ELON MUSK’S Tesla buyout plan has hit the skids after investors criticised the billionaire for trying to take it private on the cheap.
One leading shareholder said the company could be worth four times more than Mr Musk said he was planning to bid. “When you are investing on a 10-year timeline you can’t put a single value on something … If Tesla does become dominant in autonomous driving or electric vehicles, the value could be three or four times $420,” the investor said.
One source with knowledge of several investors’ thinking said: “They are extremely angry at $420. They’re frustrated because they have held on and believe Tesla could be worth as much as $800.”
Mr Musk’s surprise decision to reveal the plan on Twitter also raises legal concerns, with US regulator the Securities and Exchange Commission understood to be investigating whether he breached rules in a way that could be seen as market manipulation.
Doug Davison, a lawyer at Linklaters, said: “There are a lot of governance issues. If it was a legitimate significant material development, Tesla would be required to file [regulatory documents] within four days. No one is sure if he has funding secured.”
Individuals and institutional investors own more than 70pc of the shares. Mr Musk has 20pc.
All infrastructure spending is a question of choice. There are any number of worthy recipients, but finite resources mean that not all of them can be chosen. Sometimes the Government gets it right, more often wrong. A case in point would seem to be the emerging white elephant of High Speed Two.
A recently leaked report for the Government’s Infrastructure and Projects Authority found the whole thing to be “fundamentally flawed” and warned that it could overshoot its already jaw-dropping budget of £56bn by as much as 60pc.
This might seem bad enough, but the fact that the report was submitted two years ago – months before Parliament approved the scheme – but was kept under wraps, makes the whole thing doubly scandalous.
Lord Mandelson has admitted that the evidence for backing the project always looked “flimsy”, and that Labour ministers originally gave it the go-ahead only as a way of upstaging the Tories. Some £3bn has already been spent on preparations and buying up land, so there is a sense in which the train has left the station and cannot now be stopped.
Yet the misplaced sense of priority is still quite gobsmacking. It is estimated that £30bn of investment is required to upgrade Britain’s telecoms network to full fibre and thereby put it on a competitive footing with Japan, South Korea and others that have already made the leap.
The Government is relying on commercial investment to do the job, but it is going to take a long time, and even then taxpayers are going to have to cough up roughly 10pc of the cost to wire up areas incapable of paying for themselves. Digital infrastructure is central to the future of the UK economy, Jeremy Wright, the new Culture Secretary, said in the Government’s recent Future Telecoms Infrastructure Review. Indeed it is; it’s hard to impossible to make the same case for HS2, which merely knocks half an hour off journey times between Birmingham and London using what is already a fast-ageing technology.
People can never agree about inflation. I don’t mean its causes and impact. That debate requires an entire library of research papers all to itself.
Instead, I am talking about how it should be measured. Everyone experiences their own personal rate of inflation, depending on how they spend their money. Official rates, which are aggregates based on aggregates, will never exactly reflect anyone’s experience.
One thing chancellors since Gordon Brown do seem to agree on, however, is that the retail prices index is a jolly poor measure of it. “The evidence suggests it is likely to overstate inflation,” the Office for National Statistics said in a recent analysis.
Mark Carney, the Governor of the Bank of England, said six months ago that the time may finally have arrived to “transition away” from its use. This has prompted the House of Lords economic affairs committee to launch an inquiry into whether it should be abolished entirely, expected to report in the autumn.
The answer to this question is no, as indeed the national statistician concluded after a consultation six years ago. But its continued use should certainly be moderated.
Without going into the detail, let’s accept the general consensus that the RPI isn’t a good measure of inflation. So be it. But this doesn’t automatically mean it should be junked. In any case, we have been “transitioning away” from RPI for many years.
Brown began the process by elevating the consumer prices index – which complies more fully with the European standard – to the official measure for inflation targeting purposes. This was basically a wheeze, because the CPI pretty consistently comes in quite a bit lower than the RPI – CPI inflation is currently 2.3pc, while RPI inflation is 3.4pc – and it therefore allowed interest rates to be lower than they perhaps otherwise would have been. CPI also took no account of soarway house price inflation, so it was an altogether more convenient yardstick politically.
This mindset has instructed the way the Treasury has used the indices ever since. Most things that cost the Government money have for indexing purposes been progressively shifted on to the lower CPI measure, thereby notionally saving money. Where the RPI is capable of flattering the public finances, however, such as the usary of student loans and train fares, it has tended to be kept. The big exception to this approach is index linked gilts, which by convention, have remained firmly indexed to RPI.
Ministers cannot change the terms on the existing stock of index linked debt, even if they might like to, as this would amount to a default.
One of the few things UK governments have consistently got right down the centuries is that they don’t default. That may be coming, by the way. But they could potentially save themselves billions over time by shifting new issuance to CPI.
The saving would however be largely illusion, because markets would merely adjust the price they demand to reflect the lower coupon.
By all means, let’s get rid of RPI for the purposes of student loans and train fares, but best not to meddle with the Debt Management Office.
You really do have to pinch yourself as a reminder that we still have a Conservative government. The Treasury’s latest plan for revenue raising is a special tax on online sales.
This might help level the playing field with bricks and mortar retailing, Philip Hammond, the Chancellor, said on the day House of Fraser went into administration. As is generally agreed, House of Fraser’s demise is mainly a story of self-harm rather than online competition, but its plight has scarcely been helped by high business rates.
As this revenue declines, Hammond seeks alternatives from imagined free-riders online. That the correct approach to levelling is to cut taxes on physical retailing, not stifle the growth of online, is being wilfully ignored.
‘There is a sense in which the train has left the station and cannot now be stopped’
An artist’s impression of the new HS2 station at Euston. Should it be a priority in infrastructure spending?