Elon Musk goes Off the Rails

When you’re rich they just let you do it.

Yeah you have to pay attention to severance plans - a reduction is pretty much a sign your employer is going to fuck over plenty of people.

Judge Thompson found that the Twitter severance plan did not qualify under ERISA because they received notice of a separate payout scheme prior to the layoffs. Instead, she dismissed the case, ruling that the severance program adopted after Musk’s takeover was the one that applied to these former employees, rather than the 2019 one the plaintiffs were expecting.

Dude’s just a huge jerk. While $500M seems like a lot it’s pocket change to Musk. It’s a big deal to people out of work.

He could sell a half percent of the payout he got and make all these people good.

This seemed insane. If you can just announce that the severance plan has been cancelled or gutted and then immediately lay people off, what value do those plans have?

But reading the ruling, I don’t think the quoted summary in the article is accurate. There’s nothing there about “receiving notice of a separate payout scheme before the layoffs”. I actually have no idea where the journalist got that bit from.

What seems to have happened is that the suit was filed based on a federal law applying to to things like pension plans, and the severance packages (whether the ones promised before Musk bought Twitter, or the ones ) do not meet the basic requirements for the law to apply. So this has nothing to do with the scheme changing, it’s that they filed a case using a law that just doesn’t apply. The case was (intentionally, by the ex-workers) scoped to just this law, so when the court found the law didn’t apply to their severance plan, there was no case at all left.

It looks like the ex-workers have more than one class action lawsuits going (which is why this one was so narrowly scoped), so Musk hasn’t gotten away with this yet. I’m going to guess that the other cases have a stronger foundation than this one, which seems to have been very optimistic.

You’re telling me a journalist didn’t understand the basic legal foundations of the case on which they were reporting? I’m shocked, sir! Shocked I say!

I found out yesterday that apparently Tesla carry all the cars they sell on lease as appreciating assets on their books, basically ever since Elon Musk said owning a Tesla is an investment back in 2018/9 due to future FSD release?

Then they package those leases as asset backed securities and sell them to investors for a return on the lease income?

Isn’t that some totally whack, GFC sub-prime morgate accounting fuckery going on?

https://www.reddit.com/r/RealTesla/comments/1droldn/teslas_asset_backed_securities_business_is_like_a/

Can’t really comment on the appreciating asset side of things without digging into Tesla’s accounts, though I’d be surprised (maybe they account for them at fair value rather than amortised cost?).

On the ABS side of things, while it’s true that the lease-backed bonds have a lot of exposure to residual value, and if second hand prices fall, that’s a problem, it’s not like they just take Tesla’s word for what that residual value is.

Eg:

Was about to say something similar. The reddit post is almost like reading a half-ass short play hypothesis in the pre-research stage. It’s all plausible except for the idea that the range lawsuits are going to expose US ABS fraud which seems to be a leap into the wild. However, without looking at the ratings, etc. it is hard to know what’s truly going on.

Yeah, the connection to the range lawsuits is just silly. If that post is where the appreciating asset info is coming from, I would assume it’s bollocks. I would also note that VW had and has a shit-ton of lease ABS and there was basically no (credit) impact on it from the emissions scandal, and only a short-term price impact. There are technical differences between the transactions, though, and the electric RV issue wasn’t in play, so it’s not a direct comparison.

The appreciating assets thing is from this thread. Can’t find a ‘part 1’, as I am not on twitter and Thread Reader seems to lack the history/search. Mostly seems to be about maybe not correctly listing lease buy-backs as a liability, or at least undervaluing that liability.

Fully get how it may not matter so much for the bonds as risk may be baked into the trading price.

To some extent this is all funny money to me, I confess.

I mean, it still seems like bollocks to me, and there’s certainly no connection to the ABS, as that thread is entirely about the accounting treatment of some international leases, and Tesla has only securitised US leases to my knowledge.

I don’t have the time to go through all the detail now, but I would note that it keeps throwing around the phrase “TSLA declares cars appreciating assets” or the like. What actually happened is Musk said something stupid in a presentation, once. Should he say stupid shit as CEO of a public company? No. Does that mean Tesla’s accounting is actually based on that stupid shit? Also no.

And loads of the so-called “red flags” are nothing of the sort. Indeed some are the opposite.

Great, appreciate the insight!

I should note, however, that it is certainly possible for there to be fuckery around repo accounting and true sale, particularly when differentiating between US and international treatment. That’s what enabled Lehman to hide its liquidity issues for as long as it did for instance. That said, the rule changes that came into effect as a result presumably make it much harder to get away with such fuckery nowadays, and also auditors are going to be much more careful in their scrutiny of such accounting (hence, presumably, the labelling of the reclassification as a critical audit matter - like I say, the opposite of a red flag).

I am no accountant, but I’d think it would be almost impossible to find internal accountants or outside auditors that would sign their name to this appreciating asset situation. That said, I’m sure people said similar stuff about Enron and Arthur Anderson back in the day.

Plus the credit rating agencies who often do deep dives on the financials independently. They’d certainly be giving an opinion on the risk they see of such a practice.

Ew no thanks says Mars.

A planet filled with little Elons sounds like a good premise for a horror movie.

Gary? GAAAAARY!

A mob of little Elons arguing over who has the conch shell and chanting kill the pig, cut her throat, spill her blood.