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Buffett increases Chevron position by 14.4 % in Q4 2023 after reducing it earlier last year. Berkshire's CVX stake now worth more than the OXY position.

https://dataroma.com/m/holdings.php?m=BRK

The 2-3 hr lunch discussion between Mike Wirth and Mr. Buffett in September:

Mike Wirth: I do. I just had lunch with Warren a few weeks ago. First thing we talked about was football. He's a big Nebraska football game. I went to the University of Colorado.

Andy Serwer: Well, you have an interesting football team this year.

Mike Wirth: We do. And we had a big game against Nebraska just a couple of weeks ago, which we had a small ... Mr. Buffett and I had a small wager on. So that was what we began.

Andy Serwer: You're smiling with that.

Mike Wirth: We began our discussion talking about football. But we talk about the global economy. We talk about our industry. We talk about our company. He's got a wealth of obviously wisdom and perspective from not only the investments he's made over years, but the insights he has through all of his companies into various sectors of the economy. And he asks a lot of great questions about our industry. So I've been really thrilled to have him as a shareholder and sitting down and having lunch with Warren for two or three hours, it's a masterclass in leadership and in wisdom and really honored to have that opportunity.

https://www.barrons.com/podcasts/at-barrons/chevro...

Was it something Wirth said?

I'm sure no one is violating the spirit and intent of REG FD. https://www.investopedia.com/terms/r/regulationfd....

"I'm sure no one is violating the spirit and intent of REG FD."

Does REG FD apply to Warren? In any case, we schmucks all have the same access to company CEO's that Warren does.

"" In any case, we schmucks all have the same access to company CEO's that Warren does."" good morning, if that's what you think, since OPTIONS are now the hot topic on this board, would you like to buy a call option on the right to buy the Brooklyn Bridge from me, cheap ?

"I'm sure no one is violating the spirit and intent of REG FD."
...
Does REG FD apply to Warren?

Sure.
But it doesn't apply to this situation, for two reasons.

Mainly, there is no suggestion that anything was disclosed to someone-but-not-everyone, the essence of the rule. Telling the SEC doesn't count!
And of course none of these changes is material to the value of a Berkshire share. The test is "material non-public information".

To break the rule, Mr B would have to (say) sell the railroad to Amazon and tell his barber on the sly.

Jim

"" The test is "material non-public information". With all due respect, we weren't there. It isn't a great look,imo. Buffett should come eat in a Vegas Buffett with me, my info days are long past!!

With all due respect, we weren't there. It isn't a great look,imo. Buffett should come eat in a Vegas Buffett with me, my info days are long past!!

What the heck are you talking about, anyway?
Are you suggesting that Berkshire did something material? And then told some non-insider about it, but not everyone? Who?
What transaction are you talking about?

Unless you have answers to all of the above, I can't figure out why you're making accusations...? Did I miss a news item?

Jim

Jim have you hacked or is that you? 🍿☮️ I said it isn’t a good look, I didn’t accuse anyone of anything improper. https://twitter.com/kejca/status/17074749117053667...

Sorry, I'm totally not following you. Same thing.


it isn’t a good look

=

accuse anyone of anything improper



And why would **anyone** think that talking to another businessperson doesn't look good? Have you ever done business with anyone?

Sounds like you're trying to set yourself up as the world's best arbiter of propriety by looking for a stink where there isn't one.
That doesn't work.

Are you suggesting that Berkshire did something material? And then told some non-insider about it, but not everyone? Who?
What transaction are you talking about?

The question is, is the following an example of the transfer of some kind of 'insider information', prohibited by Rule FD?

"[Buffett] has got a wealth of wisdom and perspective — from not only the investments he's made over the years, but the insights he has through all of his companies into various sectors of the economy."

"He asks a lot of great questions about our [O&G] industry. I've been really thrilled to have him as a shareholder." $CVX

"Sitting down and having lunch with Warren for 2-3 hours is a masterclass in leadership and wisdom."

The poster seem to think this is not appropriate. If this catches on, it might be hard to recruit CEO: no more talking to people. It's not just that you can't disclose material events that haven't been announced to everyone and which might move the markets (the traditional understanding of Rule FD), it's that you can't talk to anyone, because talking to people means revealing information that might not be known to everyone (like your opinion on share repurchases vs capital investment in exploration and drilling, or whether you think there is a future in LNG exports, or what you think of competitors in your field). To make sure such relevant information is not disclosed, you would practically have to prohibit conversations of any kind, unless they are broadcast to the whole world.

Would bet many of us remember the 70's when OPEC was holding our feet to the fire!
This latest graphic from Visual Capitalist shows how far we have come, now the largest top-crude producer in the world.

https://www.visualcapitalist.com/visualizing-the-r...

The following link recalling the Oil Embargo from 50 yrs ago last Oct.
The photos in the article capture the time , I especially like the picture of a sign requesting motorists to turn off their motors and coast down the hill to conserve gas!

https://www.bakerinstitute.org/research/arab-embar...

ciao

The photos in the article capture the time , I especially like the picture of a sign requesting motorists to turn off their motors and coast down the hill to conserve gas!

Yep!! 55mph speed limit on Interstate. Odd license numbers could buy gas one day, even numbers the next. Fist fights as people tried to cut in line. Trying to even find out which stations had gas. Windfall profits taxes. EOR projects via CO2 injection and polymer flooding become profitable. On and on ........

Exxon starts spending billions on projects outside of O&G - coal, uranium, copper, even power plants. Studied wind and solar in depth. Found they brought nothing new to the party so passed on those. Big R&D projects on converting coal to liquid fuels, mining shale in Colorado, EOR using surfactants. One pilot test in Missouri cost $100 million, and failed. The surfactants did their job, but bacteria in the formation ate up the biopolymer used in the water bank to push the chemicals through the formation. Lee Raymond later divested all these diversifications and refocused the company on O&G.

Those were the days my friend, we thought they'd never end. But they did. And the diversification by the non-OPEC O&G industry came back to bite OPEC in the butt. I worked at the interface between chemicals and the upstream during all the above. Quite an education.

Want to know why Exxon isn't interested in wind and solar in now? They had already studied it in depth decades earlier. No competitive advantages.

But they did. And the diversification by the non-OPEC O&G industry came back to bite OPEC in the butt.

Not well worded. I should have said the expanded exploration by O&G - not diversification.

I remember Exxon's chief reservoir engineer for the US saying early on that the drill bit would turn out to be the best EOR. He was correct. That first showed up in new discoveries outside of the Middle East. Now it's showing up in spades with horizontal drilling. Of course improved exploration technology, enormously better computing, micro-electronics, better steels, many factors are all involved. But, at the end of the day, you've got to put a hole in the rock to know what's really there. And there has to be incentive to do so.

Changing the subject a bit.

Why did Mr. Buffett do an about face on Chevron? Selling down the Chevron position by a third earlier in 2023 only to reverse the trend and add to the position in Q4 2023.
https://www.fool.com/investing/2023/11/26/buffett-...

Was the decision to sell and buy based purely on stock price, or was it Chevron's decision to buy Amerada Hess in late October?

Based on the numbers below, stock price doesn't look to have been a significant driver.

Q1-23 Average Price: $167/share
Q2-23 Average Price: $160/share
Q3-23 Average Price: $162/share
Q4-23 Average Price: $151/share

I previously referenced a lunch between Mr. Buffett and Mike Wirth in September 2023. Surely Wirth would not have been able to disclose a pending Hess deal that had not been announced publicly.

Any other theories or ideas on why Buffett might have changed his mind?

Are there other instances of Buffett doing similar things with other Berkshire stock ownership positions - building a significant position- then reducing it significantly (in this case by a third) - only to increase the position again?

I'm too lazy to do the research. Not sure I could find an answer if I did.

" Any other theories or ideas on why Buffett might have changed his mind?" Bingo, you get it. Obviously, Buffett read something in a CVX filing or a press release and went from big seller to big buyer. Meeting a key person from CVX during that time period was a terrible idea, NOT a good look. He could have met the guy after his buying was completed. NOT a good look doesn't imply fraud, or any criminal behavior, it means what I said, it doesn't look good, period.

Meeting a key person from CVX during that time period was a terrible idea, NOT a good look.

He apparently had lunch with Wirth in early September - so Q3, not Q4.

It would be interesting to know when the Q4 CVX purchases were made. If they all followed the public announcement of the Hess deal (October 23) then I wouldn't see any issues.

That said if I cold called Mike Wirth and asked if he could spend 2-3 hours to meet with me over tacos to talk about Chevron's future prospects I'm guessing he might hang up immediately and call security.

To me “a good look” is top management doing everything they can to be informed about the places they invest my money. I would certainly hope they would have more sources, more opportunities than others. That is their job.

Stake Increases:
Chevron Corp (CVX): CVX is a large (top five) 5.41% of the portfolio position purchased in Q3 2020 at prices between ~$72 and ~$91. Q1 2021 saw a ~50% selling at prices between ~$85 and ~$112 while in Q3 2021 there was a ~25% stake increase at prices between ~$94 and ~$106. That was followed with another one-third increase next quarter at prices between ~$102 and ~$119. Q1 2022 saw a whopping ~315% stake increase at prices between ~$119 and ~$171. The last three quarters saw a one-third selling at prices between ~$150 and ~$188. There was a ~14% stake increase this quarter at prices between ~$142 and ~$169. The stock currently trades at ~$151.

Note 1: Berkshire has a ~6.2% ownership stake in the business.

Note 2: Berkshire likely avoided disclosing these stakes in the Q3 2020 13F filing by making use of the “section 13(f) Confidential Treatment Requests”. An amendment filed later disclosed the activity.

Q1-23 Average Price: $167/share
Q2-23 Average Price: $160/share
Q3-23 Average Price: $162/share
Q4-23 Average Price: $151/share

The stock went over $170 multiple times in Q1 and Q2.

The stock dropped suddenly from $170 to $145 at the end of October when Chevron announced it was buying Hess.

Maybe Buffett thinks the market is wrong about Chevron not knowing how much to pay for Hess.

"Some people can read War and Peace and come away thinking it's a simple adventure story. Others can read the ingredients on a chewing gum wrapper and unlock the secrets of the universe" - Lex Luthor

Buffett has been famously able to glean more actionable information from publicly available data than the average investor. He hasn't always been right, but fortunately Chevron is not an Airline.

At least so far, this kind of competence has not been outlawed. But given the Delaware Chancery Court taking away Musk's $3 billion pay package 6 years after it was approved by ~80% of stockholders because he only had to increase TSLA Market Cap by $550 billion to earn it, I would expect outsized competence to become a capital crime sometime soon, at least when practiced by billionaires. Will HCLasVegas be joining the Delaware Chancery in leading that charge? Will BreckHutHigh?

Yes, I am inferring WAY TOO much badness from these two posters from extremely limited data. My bad.

R:)

" But given the Delaware Chancery Court taking away Musk's $3 billion pay package 6 years after it was approved by ~80% of stockholders because he only had to increase TSLA Market Cap by $550 billion to earn it,"" To Da Moon Ralph, funny you would bring that up. I was very surprised the SEC allowed TSLA to structure Musks pay package in that way, based on stock performance. In the late 80s I tried to structure compensation, based on stock performance and the SEC wouldn't allow it. The SEC was concerned that pay structure would incentivize insiders to be overly promotional, to be kind. To be honest, I agreed with the SECs opinion, and we didn't do it. However, once the SEC allowed the TSLA package to be approved and once tsla shareholders approved it, he should have been allowed to keep it. It was fully disclosed, I remember being very surprised , but if you didn't like the agreement, don't buy TSLA simple. Musk was right to move the company's state on incorporation. Second, the SEC looks for consistency and clear patterns. IF Buffett has a history of aggressively buying and selling Coke, Amex, Apple, large positions etc, then his pattern of transactions in CVX shouldn't set off any alarms. BTW, does Alice handle the family finances?

It was fully disclosed, I remember being very surprised, but if you didn't like the agreement, don't buy TSLA simple.

Sounds good, but it's not a good enough excuse.

Recall that the issue that the Chancery had with the deal wasn't that it was too much pay, but that the compensation committee was in effect negligent of their duty in failing to negotiate the deal--that they were acting “almost as an advisory body” to Musk rather than as an independent negotiator. Paraphrasing, they ruled that the board was supine and in effect controlled by Mr Musk, therefore there was no counterparty when the deal was "negotiated". The key smoking gun was the quote from the head of the comp committee, included in the judgment twice: “We were not on different sides of things. We were trying to make sure if we were going to go through this exercise that he was on board.” In short, it was a stitch-up.

If the board didn't do its duty and an agreement was not properly negotiated, it doesn't matter who later does or does not take issue with it.

Most especially if they are not fully informed. Part of the precis from Denton's:
"The Chancellor faulted the Compensation Committee and the board for not considering alternatives, failing to conduct a customary benchmarking analysis, and not assessing whether the grant was necessary to meet the company’s purposes. She also found that the burden of proving entire fairness remained with the defendants despite a vote of the stockholders approving the grant, because the relevant proxy statement was deficient for failing to disclose, among other things, the relationships of a majority of the board with Musk that called into question their independence and projections showing that the company expected to meet the milestones for Musk’s compensation. Without such information she found the stockholder vote was not fully informed."
(emphasis mine)

The ruling wasn't "your pay was too high", more like "your board is a joke, so the process was too".

Oddly enough, my beef with the deal is rarely mentioned. Assume for a moment that the pay deal was OK for compensation of the boss of a big company.
But Mr Musk only has a part time job there!

Jim

" If the board didn't do its duty and an agreement was not properly negotiated, it doesn't matter who later does or does not take issue with it." good morning jim, I suspect once again we will agree to disagree. Do you believe the brk BODs is independent and uncle Warren answers to them ? Was it appropriate for Buffett to buy and promote IBM, rather than buy and promote brk? Did Ginny disgorge any of her comp for over promising and under delivering for years? During the banking crisis which key employees disgorged compensation for bankrupting many of our largest banks ? Did any banking idiots disgorge their pay for buying 30 year treasuries yielding 3 percent? The SEC, state of Delaware division of securities etc, ALL agreed the pay package was fairly DISCLOSED, and allowed it to become effective. AFTER he earns it, they should take it away ? Sorry pal, no way. Do you follow American politics much, old friend? MUSK may have F U money, but that doesn't mean the , usual suspects, aren't going to try and Fk him out of half of it, or more. BTW, you disclosed you were an insider in several public companies but that wasn't what I asked. Have you ever been an insider of a public company regulated by our SEC, nasd, in the USA, etc? I have no idea how the security regulators act in Australia, Peru, etc. Thank you. BTW, as a Vegas guy for over 50 years , I'm laying 2 to 1 your response gets over 28 recs, what do you think ?

" If the board didn't do its duty and an agreement was not properly negotiated, it doesn't matter who later does or does not take issue with it." good morning jim, I suspect once again we will agree to disagree.

You're entirely welcome to disagree, but it's not me you're disagreeing with, it's the Delaware Chancery's interpretation of the law. They are generally considered to be the best corporate jurisprudence people in the world, for good reason.

The deal was written by the beneficiary, and his approval was the only one sought prior to its signature--see the comp committee quote. Then the relevant facts weren't given to the shareholders before they were asked to vote on it. Smells like three day old fish, but then, one could hardly call any of that out of character.

The only surprising thing is that he got called on it. Normally all the US courts and regulators give him the "rich guy", "famous guy", and/or "genius guy" get-out-of-jail-free card whenever he breaks the law.

Jim

" The only surprising thing is that he got called on it. Normally all the US courts and regulators give him the "rich guy", "famous guy", and/or "genius guy" get-out-of-jail-free card whenever he breaks the law." Again, you might not follow American politics that closely. MUSK is being punished, google the twitter files, to start you off, they are sending a very strong message to corporate America, don't FK with team DEM , comprende?

hclasvegas, re: post # 6002

Your posts are very hard to read. It's just a wall of words. Break it up into paragraphs, please. Or newlines every once in a while.

MUSK is being punished

Well, yes, for not following the rules. A pretty good system when it works.

I don't argue that it's an imperfect system--like you, I perceive that US courts (like others) are not always perfectly unbiased. But in this case it's all in the other direction. Thousands of people are convicted or barred from directorships or contract bidding for transgressions *much* more modest than his litany.

I suppose that the Twitter fiasco might well have had an effect on the biases in "the system", but if so it would likely have been moderating the breathtaking level impunity he has long enjoyed. Fewer people drinking the Kool-Aid. So, good news all around.

Jim

" I suppose that the Twitter fiasco might well have had an effect on the biases in "the system", but if so it would likely have been moderating the breathtaking level impunity he has long enjoyed. Fewer people drinking the Kool-Aid. So, good news all around." Musk wasn't invited to the white house on a day they were celebrating the EV space. Think that may have been political ?

and Musk is none of the 3 you describe above. H'es the Trump of the Business world.

Assume for a moment that the pay deal was OK for compensation of the boss of a big company.
But Mr Musk only has a part time job there!


Further to this point, the justification for this amazingly lucrative deal was to keep Musk’s focus on Tesla. But nothing required him to reduce his activities with SpaceX, Neuralink, etc. Or even to hang on to these ‘focus-enhancing’ shares. On the contrary, he went and sold a bunch of Tesla shares to buy another distraction with Twitter! And now he wants more Tesla shares to keep him from focusing too much attention on SpaceX, Neuralink and now Twitter/X too.

"Again, you might not follow American politics that closely. MUSK is being punished, google the twitter files, to start you off, they are sending a very strong message to corporate America, don't FK with team DEM , comprende?"

LOL

That is some nutty conspiracy stuff Harold.

I am looking for some entertainment though so I will pretend you are serious. So which Democrat is driving this plan? Which Democrat is the person who decided they were going to go after Musk and "send a message to corporate America"? How many other people are in on the plan to send a strong message to corporate America? Does it go all the way up to the top of the national party, or is it just a local Delaware Democrat plan? What incentive did they provide to a Delaware judge in order to get her to go along since this decision will be on her judicial record? Also, if it wasn't a good judicial judgement, why wasn't it appealed? Are the higher courts in on the plan as well?

These should be easy questions to answer if your conspiracy is true, but I doubt you are going to be able to answer any of them and will likely just wave it all away as me being naive (unintentional irony by you of course....).

Here is a lesson for you to help you choose better information sources. One's that inform you rather than make you look silly and conspiratorial.

The lesson is: It is easy to concoct a nutty conspiracy by not using vague details or undefined groups. This means using words like "They", "Them", "Dems", or "The government" when talking about the conspiracy. Those vague details allow the believer to fill in their own details in their mind and make it exist as a kind of fantasy world. However, those conspiracies quickly fall apart whenever specific details are asked for because asking for specific details forces a person to bring the conspiracy into the real world and it cannot stand up. So whenever your poor sources give you a story that uses vague details you should question that vagueness.

So when you hear ""They are implanting microchips in everyone when they get a vaccine." You can ask who "they" is and what is their specific purpose for doing so and think about who else would have to know and why they would go along with it. Same logic when it has to do with ill-defined groups such as "Dems". Every decision ultimately comes from either one specific person in charge or from a committee with specific people who vote on it.

My all-time favorite ill-defined group is "The government". Conspiracy nuts like to use the government as a foil since it can seem like this big powerful entity. In reality though the government isn't one entity. It is made up of hundreds of thousands of individual people (millions if you include local governments and the military in that ill-defined group). Furthermore, it is made up of different groups that have different roles and responsibilities. Roles that are often at odds with each other. Again, each decision "The government" makes is made by either one specific person or a committee of specific people. Why not use those specifics instead? Furthermore, most of the people working for the government do not have a political axe to grind. They are career bureaucrats following the policies and procedures they are supposed to follow. Anything decision "The government" makes requires many of these bureaucrats in order to get executed. Why would these career bureaucrats go along with an illegal, nutty conspiracy?

I hope this helps you get past some of the nutty stuff your sources of information give you so you can be better educated and make better decisions.

'Musk wasn't invited to the white house on a day they were celebrating the EV space. Think that may have been political ?"

Of course an invite to the White House ceremony is political. I cannot imagine someone arguing otherwise.

But you are a long way from Musk not being invited to a political White House ceremony due to his nutty politics and multiple judges ruling against him based on the law and him not appealing any of it. That isn't even apples and oranges, That is apples and black holes.

However, once the SEC allowed the TSLA package to be approved and once tsla shareholders approved it, he should have been allowed to keep it. It was fully disclosed, I remember being very surprised , but if you didn't like the agreement, don't buy TSLA simple.

I don't want to pile on too much, but one of the court's findings was that the board concluded internally that many of the financial targets were already on track to be achieved. But then told shareholders meeting the targets would be very difficult.

" I don't want to pile on too much, but one of the court's findings was that the board concluded internally that many of the financial targets were already on track to be achieved. But then told shareholders meeting the targets would be very difficult." Sadly, this year Munger will not be able to opine, perhaps someone will ask Buffett his opinion ? Were any TSLA BOD members aggressively buying the stock? Have you looked at the tsla chart? The SEC allowed that pay package, it was fully disclosed, who lost money as a result of tsla meeting the milestones, shorts? Thank you.

Sadly, this year Munger will not be able to opine, perhaps someone will ask Buffett his opinion ? Were any TSLA BOD members aggressively buying the stock? Have you looked at the tsla chart? The SEC allowed that pay package, it was fully disclosed, who lost money as a result of tsla meeting the milestones, shorts? Thank you.

Paraphrasing (grossly) Munger, just because you can make money killing someone with an axe doesn't mean it a good thing to do. I have exactly zero dogs in this fight but I thought the judge's ruling was very lucid and had nothing to do with the SEC or if the BOD was buying stock or not. The board said the gargantuan compensation package was necessary to keep Musk engaged with Tesla--but the package had no provisions to actually keep him engaged with Tesla. And in fact, he didn't stay engaged with Tesla as witnessed by all the time he spent on Twitter. Which means the board didn't do their jobs.

Who lost money? The shareholders who overpaid for executive compensation and didn't receive what they were promised. Again, zero dogs in this fight but I can't see any version of this where the board did their jobs.

" Who lost money? The shareholders who overpaid for executive compensation and didn't receive what they were promised. Again, zero dogs in this fight but I can't see any version of this where the board did their jobs." I never owned tsla , directly, either. Plus, I never believed a word Musk said because of the way the pay package was structured and disclosed , my choice. However, IF, a pay package is based on stock price or market cap, once it's achieved how can longs be damaged ? By definition , if he met the hurdles to earn the pay, all longs win too, no ? Today, if brk discloses that Buffett will be awarded a , 25 billion lifetime achievement bonus, to give to his charities once brk reaches a market cap of a trillion, it's ok by me. If you don't like it sell, simple. Don't wait until brk reaches the milestone and then bitch Buffett cherry picked the BODs and they gave him a sweetheart deal. Follow?

I never owned tsla , directly, either. Plus, I never believed a word Musk said because of the way the pay package was structured and disclosed , my choice. However, IF, a pay package is based on stock price or market cap, once it's achieved how can longs be damaged ? By definition , if he met the hurdles to earn the pay, all longs win too, no ?

Actually no. First, some the metrics were based on EBITA (earnings before everything that matter) hitting those targets didn't necessarily help the longs. But more importantly, Musk's stock grants diluted the value of existing shares, and by a non-trivial amount too. So they absolutely reduced the value of the longs' investment.

"I don't want to pile on too much, but one of the court's findings was that the board concluded internally that many of the financial targets were already on track to be achieved. But then told shareholders meeting the targets would be very difficult."

It's still absurd. Because everyone, every analyst and almost every "man on the street", and most of the shareholders, thought that the compensation deal was insane ... insane because 8 or 9 out of the 10 targets were "impossible" to achieve. I saw plenty of folks that wrote at the time "Musk is going to work for free for the last 4 or 5 years of the agreement".

Just because the board also had wacko internal projections doesn't mean that anyone actually believed that those projections were possible.

skyesix:
Actually no. First, some the metrics were based on EBITA (earnings before everything that matter) hitting those targets didn't necessarily help the longs. But more importantly, Musk's stock grants diluted the value of existing shares, and by a non-trivial amount too. So they absolutely reduced the value of the longs' investment.

Sorry, simply incorrect. EVERY milestone required a combination of production, earnings, AND STOCK PRICE to be met. It was not possible for Musk to meet and collect on a milestone without the longs having earned, collectively, something like 10X as much as Musk earned for meeting that milestone.

Further, Musk was precluded from selling any of the shares he earned for 5 years. So to the extent he did some Micky Mouse BS to meet the milestones, the stock price would long since have fallen back to earth after 20 quarters had gone by. What do they say the stock market is in the long run? (A weighing machine for those of you new to this.)

In any case, in the actual event, when this ruling was made, actual real stockholders who owned actual real shares in TSLA in 2018 when the compensation agreement was agreed to are sitting on a 10X gain as the Delaware Chancery is ruling that 2018 deal as having not been sufficiently in the stockholders' interest to pass muster as something the board could have or should have recommended. The emperor has no clothes. I am shocked, shocked I tell you to discover that CEOs who lead their companies to $550 billion of higher market cap might be worth being paid $55 billion.

And the stupidity of the ruling, the reporting, and the analyses! Here is a partial list of The Greatest Misses on this whole topic:

1) WRONG: The board agreed to pay Musk $55 billion for $550 billion of Market cap improvement. The value of the pay package, the options, that were assigned to Musk that he might pick up if he met every milestone, was $2.8 billion in 2018. If it had taken TSLA 5 years to double its Market Cap under Musk, his pay package would have "cost" 2018 TSLA only $280 million, or $56 million per year. And for that money, the longs in the company would have seen their net worth increase by about $55 billion. But of course Musk did 10X better than that, as it turns out. And no one but the "fan boys" thought that was possible.

2) WRONG: Musk was already making 20% of any stock price gains he made so he didn't need to be compensated at all to work on Tesla. The Judge literally said in her ruling that the board was so in Musk's pocket that they paid him $55 billion when they could have paid him nothing, he still would have been motivated to do the work. How stupid do you have to be to take that seriously? If the board had offered him nothing to work at Tesla, Musk would have STILL made 20% of any TSLA stock price rises without having to show up in Fremont for even an hour! He did not need to sleep in a conference room while getting the production line to build 3's and Y's by the thousands per week. Its not like he didn't have other opportunities. THIS the judge uses as evidence that the board was not properly negotiating with Musk. Idiot.

3) WRONG: Musk was not giving Tesla 2X as good a deal as the typical Hedge Fund manager since Hedge Fund managers charge 20% of the gains they supervise while Musk's agreement ultimately gave him 10% of the gains TSLA made when the Market Cap increased by $550 billion. The judge literally said Musk was paid 20% of the gains he made because he already owned 20% of the company, so the board did not need to pay him at all to keep him adequately motivated to work at TSLA. This is her evidence that the board was in Musk's pocket. But seriously, none of her clerks, hell the goddamn bailiff could have figured this out, was able to tell her what happens when a hedge fund manager owns 20% of her own fund? Even though the managers 20% ownership guarantees the manager will make 20% of all gains, SHE STILL CHARGES YOU 20% OF YOUR GAINS IF YOU INVEST WITH HER. If, as the judge seems to think is possible, the board was able to hire somebody else to bring TSLA from $55 billion to $600 billion in market cap, then MUSK would have made 20% of that gain without having to do any work! And he could have put his time in on other ventures, its not like he didn't have other choices.

4) WRONG: The fact that the Board characterized their task as fashioning a pay package that suited Musk to keep him working at TSLA "proves" that the board was not independent. If I am charged with getting a job done, and I find a candidate who can do the job, and I can't find another candidate that I think can do the job, and the job is worth from $60 billion up to possibly $550 billion to me and my stockholders, what do I do? I spend 6 months negotiating with that guy, wooing him, telling him how great he is, and seeing if I can POSSIBLY get this guy on the hook for $2.8 billion current value of options which I will only have to give him if the job gets done to the tune of being worth $550 billion more than when he started. That doesn't mean I am in the guys' pocket, it means I am a savvy negotiator able to close deals that will make me and my stockholders' rich.


Well that felt good. You don't have to like Musk or think it was smart to invest in Tesla. You only have to wonder about a judge who wishes to cure the harm of the stockholders whos harm consists of "only" having a 10 bagger since 2018. You have to know THE FIX IS IN, when the board and the CEO can be punished because the CEO got rich off of making everybody else rich, those poor victims.

I am one of those stockholders and I do not feel HELPED AT ALL by the Delaware Chancery Court. I am outraged in fact. EVERYBODY who has started a car company since 1945 has failed, EXCEPT TESLA. Oh help me! I only made 1000% on my stock!

Idiots.

R:)

hclasvegas said:
BTW, does Alice handle the family finances?

Alice, unfortunately, has been on the moon for the last few decades. She is, however, looking forward to being picked up sometime soon and brought to Mars by Elon Musk.

R:)

Ralph, well stated bud, you get it, hence, you might be lost here ☮️

Jim wrote:
The key smoking gun was the quote from the head of the comp committee, included in the judgment twice: “We were not on different sides of things. We were trying to make sure if we were going to go through this exercise that he was on board.” In short, it was a stitch-up.

Suppose you were on the board and chaired the compensation committee at Berkshire Hathaway. You have been sued by a Berkshire Hathaway shareholder for not properly representing her interests in agreeing to pay Buffett $100,000/year. After your shock that a Delaware Chancery Judge would take such a ludicrous and useless case, you were called to testify. Which would you be more likely to say:

A) “We were not on different sides of things. We were trying to make sure if we were going to go through this exercise that Buffett was on board.”

or

B) "We determined that due to his stock holdings that Buffett was already sufficiently motivated to work for free. As such, it would be wrong of us to pay him $100,000 a year just because he refuses to sell any of his shares to pay for his McMuffins. Who does he think he is? We are not his lapdogs."

Musk was granted options that were valued at $2.8 billion in 2018, but which were ultimately worth $55 billion AFTER the market cap of TSLA was increased by $550 billion. Neither $2.8 billion nor $55 billion are $100,000 a year, so that might be material.

On the other hand, the idiot judge literally wrote in her idiot decision that Musk was adequately motivated to work without being paid due to his 20% ownership of Tesla, and that the compensation board agreed to a compensation plan that gave Musk as much as 10% of the value increases he presided over was proof that the board was not independent.

Perhaps you are thinking, "Musk is no Buffett. These are not comparable situations. Buffett has built something in Berkshire that if anybody else could have built it, they would have. Buffett is one of a kind. OF COURSE the job of an independent board would be to pay Buffett perhaps even as much as 50% of the value he creates, and if Buffett is happy to work for less, an independent board's job should be to jump up and down and ring the church bells and proclaim their love for Buffett, and that does NOT mean they are not independent."

Well, how many human beings since 1945 have presided over building a profit making car company from scratch? I'm pretty sure the answer in the US is zero. Maybe Canada or the USSR has a guy we never heard of? Maybe that guy at BYD should count too, but BYD makes a lot of money from gas-powered hybrids, while Tesla does it with nothing but electricity.

Does anybody anywhere who isn't completely blinded by dislike of Musk imagine that anybody else could have lead Tesla to $550 billion market cap growth since 2018? If you were on the board of Tesla (heaven forfend!), heading the compensation committee, would you not consider it your sworn duty to jump at a deal where Musk gets paid nothing if he only doubles the Market Cap, but where he will split the gains with the shareholders 90:10 if he delivers a 10 bagger? Would you really imagine you were in Musk's pocket for doing so? Would you EVER credit the Judge's idiotic suggestion that Musk would have worked for free when he has so many other companies and investors?

How would you like it if the court came after Buffett's $100,000 a year because the Berkshire board was not independent, and claimed they were doing so to protect the BRK shareholders?

So Jim, I know you dislike Musk for very rational reasons. But I believe you have a Judicial temperament when you want to. And my question to you is:

How can you not dislike this Judge and this ruling at least nearly as much as you dislike Musk?

Thanks for weighing in!

R:)

So Jim, I know you dislike Musk for very rational reasons. But I believe you have a Judicial temperament when you want to. And my question to you is:

Well, I know it's fruitless to attack a guy's religion, so I'll just leave it there.

Jim

Some points of Jim's I didn't mention in my first reply.

From Jim:
Without such information she found the stockholder vote was not fully informed."
(emphasis mine)

The ruling wasn't "your pay was too high", more like "your board is a joke, so the process was too".

You are leaving out that her ruling was really "your board is a joke, so the board's decision has to be ruled 'entirely fair' but as I describe in this decision, it was not."

As to "your board is a joke," Tesla's great sin was that they used the term "independent directors" to refer to board members who were not otherwise employed by Tesla nor on its executive team nor working for or with Tesla in other capacity. You know, the kind of defition you would get if you googled "define independent board member". She decided that board members were not independent because they made a lot of money from the Tesla stock they owned, because NOBODY WANTS A BOARD THAT OWNS STOCK in the company. Sorry that was sarcasm by the way.

But as egregious as her holding Tesla to a different definition of independent board member than the rest of the English speaking world uses, she needs to compound the error by Falconing Up her analysis of "entirely fair". Fear not! She is up to that task.

That the agreement is not entirely fair is proved mainly by the "fact" that the board did not need to pay Musk ANYTHING to keep him working at Tesla. With 20% stock ownership, he had enough skin in the game to work for free. Now I do hope that it suffices to just say out loud, that is the stupidest wrongest thing I have ever seen in a judicial business decision. If Musk has a choice of getting 20% of any increases in TSLA market cap by, say, sleeping in conference rooms while he works 100 hours a week trying to get the 3, and then the Y assembly lines up to a few 1000 cars per week, or he can earn 20% of any increases in TSLA market cap by, say, putting his efforts into SpaceX, Neuralink, or even OpenAI or perhaps his own AI company, how stupid do you have to be to guess that paying him nothing IS NOT GOING TO WORK??? Well apparently, exactly as stupid as you have to be to be a sitting Judge on the Delaware Chancery court.

Jim muses:
Oddly enough, my beef with the deal is rarely mentioned. Assume for a moment that the pay deal was OK for compensation of the boss of a big company.
But Mr Musk only has a part time job there!

Surely you are joking, but I don't trust the rest of your audience to realize that.

Musk pretty famously slept in the Tesla factory and reported working 120 hour weeks when ramping up the production of the Model 3 and Model Y to a few thousand per week. The Model 3, or is it the Model Y, now outsells the Toyota Camry in the United States. THIS is why the market cap of Tesla grew by 10X since 2018.

Surely you don't imagine anybody whos pay agreement pays them NOTHING if they only double the size of the company they are managing is working by the hour? I get paid by the hour because my contribution to my company's stock price is immeasurably small. Musk is playing a different game than that, and playing it better than anybody else in the world over the last 10 years or so.

Steve Jobs by the way, worked only part time at Apple when he was CEO. Or was he only part time at Pixar? I forget.

R:)

Sorry Jim, your comments are irresistible, or at least I am not resisting them.

You're entirely welcome to disagree, but it's not me you're disagreeing with, it's the Delaware Chancery's interpretation of the law. They are generally considered to be the best corporate jurisprudence people in the world, for good reason.

I forget, how long did Buffett say it takes to destroy your good reputation?

My prediction is that either that Judge is done or Delaware is done as a haven for corporations. Maybe I'm wrong but I hope I remember to check in 2 years or so to see.

The deal was written by the beneficiary, and his approval was the only one sought prior to its signature--see the comp committee quote.

Suppose you are trying to hire me because my work will be worth anywhere form $50 billion to $550 billion to you. I come in and I say "Here are my terms, I want options grants that have a current value from $280 million up to $2.8 billion as long as I deliver to you market cap valuation of from $55 billion up to $550 billion." If you accept those terms from me, is it because you are not independent? Or maybe it is because you are independent? How else do you negotiate the services of someone you need, other than by paying careful attention to what they say they need? Why did it take 6 months with multiple edits and changes for Musk to decide what he and his pet board were going to pretend to negotiate for him? Why did he give TSLA holders $550 billion in value and keep only $55 for himself?

Then the relevant facts weren't given to the shareholders before they were asked to vote on it. Smells like three day old fish, but then, one could hardly call any of that out of character.

What do YOU think the definition of independent director is? Someone you don't vacation with? Someone who is not your friend? Gates is on Buffett's board, as are or have been other friends of Buffett's over the years. And I'm sort of under the impression that all of Berk's board memebers have benefited immensely financially from the BRK holdings. Are you good with Delaware Chancery taking away Buffett's $100,000 a year salary? Would you sing their praises for that?

The only surprising thing is that he got called on it. Normally all the US courts and regulators give him the "rich guy", "famous guy", and/or "genius guy" get-out-of-jail-free card whenever he breaks the law.

Are you thinking of when the court gave him a pass on his brash offer to take Twitter private?

Or when the SEC decided not to go into court against him as long as he paid them $20 million and didn't admit guilt?

Or when Senator Elizabeth Warren made a special deal with Musk to give him back the $15 billion he paid in US Income Taxes, more than anybody ever had paid in one year, just so she wouldn't be caught up in looking stupid by citing Musk by name as a billionaire that pays no taxes?

Or perhaps it is when the Media repeatedly puts out headlines about millions of Teslas being recalled when the "recall" requires an over-the-air software update that changes the size of the writing on some of the icons on Tesla's touch screen?

Yup, Musk definitely gets all the breaks. Too bad none of his cars work and none of his investors have avoided financial ruin, and even the US Internal Revenue Service can't catch a $15 billion break. (By the way, that was sarcasm, Musk didn't get the $15 billion back from the US IRS.)

R:

Dang Jim, your posts are just too quotable!

Jim:
Thousands of people are convicted or barred from directorships or contract bidding for transgressions *much* more modest than his [Musk's] litany.

I'd be interested in knowing, how many of those barred people have delivered even $1billion in value to the rest of the world?

You might argue at my guess that Musk should properly be assigned at least $500 billion in value delivered, but surely the $15 billion he paid in US taxes in one year puts an absolute floor on his contributions to the rest of society.

Just wondering how well the system is doing at protecting us from people who actually deliver value.

R:

DTB:
Further to this point, the justification for this amazingly lucrative deal was to keep Musk’s focus on Tesla. But nothing required him to reduce his activities with SpaceX, Neuralink, etc. Or even to hang on to these ‘focus-enhancing’ shares. On the contrary, he went and sold a bunch of Tesla shares to buy another distraction with Twitter! And now he wants more Tesla shares to keep him from focusing too much attention on SpaceX, Neuralink and now Twitter/X too.

Why should the Tesla board give one tiny turd what Musk is doing or not doing with SpaceX, Neuralink, etc?

What if the Tesla board's focus was actually on motivating Musk to do stuff for Tesla that would enhance the production, revenues, earnings, and stock price of Tesla irregardless of any and all irrelevant factors all around both the rest of the word and even all around the rest of the Muskosphere?

What if the Tesla board and shareholders were ecstatic with building a car company that has the best selling car model in the WORLD and has no resentment that the irrelevancies of SpaceX launching more rockets than anybody in the world, or Neuralink modifying more pigs to be able to become political commentators than anybody else in the world?

Famously, I do not agree with the idea that the board of Tesla has ANY INTEREST AT ALL in what Musk is doing for ANYBODY or ANYTHING other than Tesla. Does that make me an anti-communist? A mature adult? Whatever it makes me, its true.

Oh poor me! I owned TSLA shares starting in 2018 and Musk did all this stuff for SpaceX, Neuralink, and Twitter!

And all I got was this lousy T-shirt!

And the best selling car in the world! And a 10-bagger on my stock!

Yes, the Delaware Chancery court is the best in the world. Was I should say. Too bad they decided to blow themselves up by playing to the resentful.

R:

Hey Ralph,
Congrats on all your incredible success and thanks for all the typing...
But don't you think the Tesla board might be a better fit for all the Tesla posts?

Cheers

skyesix:
The board said the gargantuan compensation package was necessary to keep Musk engaged with Tesla--but the package had no provisions to actually keep him engaged with Tesla.

And yet:

1) Musk by all accounts spent months working 100 hour weeks when Tesla was ramping up production of the model Y, famously sleeping in conference rooms at the Tesla factory in Fremont.

2) The Model Y is now the best selling car model IN. THE. WORLD.

3) By all accounts, (of anybody who knows a damn thing anyway) the Tesla is technologically years ahead of the competition and has redefined what an EV is.

4) You can find complaints about Elon from people who work for him. But none of those complaints is "we could have done this without Elon."

skyesix:
And in fact, he didn't stay engaged with Tesla as witnessed by all the time he spent on Twitter. Which means the board didn't do their jobs.

Ludicrously wrong! You have to literally know NOTHING about what Musk and Tesla have done since 2018 to reach this conclusion. Or else you have to lie, but why, to what end? I made the points above, but didn't also mention the other accomplishments such as the new gigafactories around the world and the Cybertruck with its million-person long waiting list, all of which were done since 2018. Ask anybody anywhere who pays ANY attention whether Musk had anything to do with those things. Or with the gigacastings which are changing how the industry builds cars.

skyesix:
Who lost money? The shareholders who overpaid for executive compensation and didn't receive what they were promised. Again, zero dogs in this fight but I can't see any version of this where the board did their jobs.

The shareholders have literally 10X as much value in their shares now as they did in 2018. What the Falcon are you talking about?

R:
(as in BFR, "Big Falcon Rocket")

Why should the Tesla board give one tiny turd what Musk is doing or not doing with SpaceX, Neuralink, etc?

What if the Tesla board's focus was actually on motivating Musk to do stuff for Tesla that would enhance the production, revenues, earnings, and stock price of Tesla irregardless of any and all irrelevant factors all around both the rest of the word and even all around the rest of the Muskosphere?

I actually agree with most of your points, and am unconvinced by the Delaware court’s arguments. Musk should probably be penalized for not conforming to best practices, but $55b? And it amazes me that a deal like this could be overturned retroactively, when virtually all the parties to the deal must be happy with the outcome. Makes me think of another recent high-profile case in the USA, involving TFG, or the recent government treatment of a big utility owner we know…)

It seems that the ground is shifting under our feet as the rule of law becomes judges deciding what the outcome should be for political reasons.

Banksy:
Hey Ralph,
Congrats on all your incredible success and thanks for all the typing...
But don't you think the Tesla board might be a better fit for all the Tesla posts?

I'm counting on people to do what I do. Only read the things you find interesting.

Which leads me to say: thanks for reading this far!

R:)

People who tell me how rich they or others are. My comment always is to ask them if they are going to give me any of that money? If not I always say "Who gives a Shit"

Sorry, simply incorrect. EVERY milestone required a combination of production, earnings, AND STOCK PRICE to be met. It was not possible for Musk to meet and collect on a milestone without the longs having earned, collectively, something like 10X as much as Musk earned for meeting that milestone.

I should be smart enough to leave this alone, but since I'm not I'll respond anyway...

Your statement is a red herring. The question isn't if the longs made money or not. The question (one of them) is what is a fair amount to pay to keep Musk engaged in running the company? The board never asked that question. There appears to have been almost no negotiation over the deal at all, except for minor technical details. It is a fair question to ask why Musk's comp needed to be literally orders of magnitude more than the CEOs of Amazon, Google, Microsoft, Meta, etc. One of the rationales for the size of the package was that Musk needed lots of money for his Mars project. Which may be true, but has nothing to do with Musk running Tesla.

You've said a few times that Musk's motivation was unchallengeable because back in 2018 Musk was sleeping on the factory floor. But that's before the compensation package was approved and before Musk bought Twitter. Besides working on Twitter himself, Musk transferred 50 Tesla engineers to work on his projects at Twitter. There is no version of this where Tesla engineers working at Twitter adds value for Tesla shareholders.

You've also mentioned that no one seriously believed the targets would be met. But there is one important group of people who did: The board. The board concluded internally that there was a 70% chance that all targets would be met, and several of them were on schedule to be met in the short term. But the board stated in the proxy the targets would be difficult and challenging. There is a term for people who say one thing in public and different thing in private, and it isn't very flattering. You've also mentioned that lots of boards have conflicts, which is absolutely true. We know this because they are required to disclose them, which the Tesla board did not do. The board withholding important information from the shareholders was a key component in the chancellor's conclusion that the proxy was deficient.

Again, I have no dog in this fight, but it is clear the Tesla board gave you and the other shareholders a good solid rodgering.

Anyway, we're off into dead horse territory at this point, so I'll let you have the last word.

I should be smart enough to leave this alone, but since I'm not I'll respond anyway...
...
Again, I have no dog in this fight, but it is clear the Tesla board gave you and the other shareholders a good solid rodgering.

I really take great exception with this post!
I'm pretty sure that rodgering is actually spelled rogering.

Jim

I really take great exception with this post!
I'm pretty sure that rodgering is actually spelled rogering.

Thank you! I actually spent far more time than any reasonable person would trying to figure out the spelling. I went back and forth. Spellcheck was no help, so I resorted to saying it aloud in my best fake English accent. It sort of rolled better if you could hear the "d" so that's what I went with. Makes it sound extra pompous somehow.

Thank you! I actually spent far more time than any reasonable person would trying to figure out the spelling. I went back and forth. Spellcheck was no help, so I resorted to saying it aloud in my best fake English accent. It sort of rolled better if you could hear the "d" so that's what I went with. Makes it sound extra pompous somehow.

I really must apologize for my pedantic post. (there are subtexts to it which some might see, others not)
Having looked it up, it turns out that the phrase goes back to the 17th century, well before there were norms of orthography. It's probably valid to spell it any way you like, and I like your reasoning, so go for it.

Jim

I really must apologize for my pedantic post. (there are subtexts to it which some might see, others not)
Having looked it up, it turns out that the phrase goes back to the 17th century, well before there were norms of orthography. It's probably valid to spell it any way you like, and I like your reasoning, so go for it.

"Vewy well. I will welease Woger!" -- Life of Brian https://www.youtube.com/watch?v=7Lc86JUAwwg

Elon just announced they completed their design on the Roadster (Twitter). Reveal by end of year. Production next year. "0-60 < 1 sec ... and that's the least interesting thing about it." Collaborated with SpaceX. 50K deposit. I think it will be able to fly for short distances. You only live once ... and it's later than you think.

Also, perfect for the windy drive down the hill to the casinos in MC.

Short Ferrari. (Not really, it's a great brand and one of the few that won't be hurt by autonomy.)

oh lord....more toys for the cult. my neighbor has 2 tesla's, a tesla roof, and now the truck, which they park on the back lawn, too big for garage , .... I wonder if Tesla is cannibalizing its own products....

Elon just announced they completed their design on the Roadster (Twitter). Reveal by end of year.

There are of course two generations of the Roadster.
For clarity, that's the one announced in 2017 and shipping in 2020.

Jim

did they ever get their deposits back ?.....

I know asking that this thread be moved to the Tesla board is futile but could the benevolent Manlobbi, who has given us such a terrific gift here, possible add a 'ignore thread' option for those of us interested in following BRK and companies and issues associated with it?

No offense intended. The rock concert cutting into our ballet makes for confusing scrolling.

Cheers,

SD

did they ever get their deposits back ?.....

I don't know. I've never heard of anyone asking for the deposit back on the Roadster. I think that it's refundable. My guess, and it's only a guess, is that anyone ordering a Roadster now will be able to drive the world's best supercar for a few years and sell it for more than you paid. You can daily drive it too, unlike a Ferrari.

I have five CTs reserved. Still waiting for the first one ... maybe a few months. I think my $500 investment is going to work out well ... even after the one year resale boycott. (In truth though, the other four will probably go to friends and family.)

I've had $50K down on the Roadster for a few years and yes I can get my deposit down. Received notice the other day that I can get my limited edition founders series if I want now. I've read that they are $133K. Bought the Tesla X Plaid two years ago for $172K with the full self driving. The list price is almost half what I paid. The three of the Tesla's, X Plaid, Cyber Truck and Roadster or still less than one A! It's the cost of toys!

I know asking that this thread be moved to the Tesla board is futile but could the benevolent Manlobbi, who has given us such a terrific gift here, possible add a 'ignore thread' option for those of us interested in following BRK and companies and issues associated with it?

Programmed!

To ignore a thread, you need to first view the whole thread (if you are not viewing posts in threaded mode, then no problems - simply view any individual post as usual, and then click "Whole Thread").

Once viewing the whole thread, you can then click "Ignore Thread", which is shown at the very top and the very bottom of the whole thread. This will zap the thread.

- Manlobbi

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