Tesla investors reportedly believe that the company’s CEO Elon Musk may have made yet another joke about marijuana, this time when selling a company debt security.
The Financial Times reports that Tesla investors are worried that the company’s CEO Elon Musk may have made yet another joke about marijuana on behalf of the company. Recently, Tesla sold a debt security with a minimum investment size of $420,000, an amount similar to the tweet Musk sent stating that he was ” taking Tesla private at $420,” referencing the number 420 — slang in cannabis culture for the smoking of marijuana.
Musk’s initial “420” tweet resulted in an investigation by the SEC which fined both Musk and Tesla $20 million each for misleading investors. In the meantime, Musk was seen on the Joe Rogan Experience podcast smoking weed live on air. The Financial Times described Musk’s latest weed related joke stating:
The December fundraising was via the issue of $840m of auto-lease asset backed securities, bonds backed by payments from Tesla customers who lease rather than buy their vehicles. The eyebrow-raising minimum investment size of $420,000 was for the riskiest tranche of bonds, totalling $40m in all.
Tesla has attempted to explain the $420,000 figure by claiming that setting a minimum investment size is not unusual, especially for smaller trenches. Tesla also claims that the $420,000 figure was established by outside counsel for the company, not Tesla itself. Law firm Katten Muchin Rosenman claims that the figure was calculated from tax rules aimed at discouraging the lowest-rated securities being issued to a large number of investors. The law firm claims that if the debt were to be held by more than 100 investors, it would be taxed like a corporation, an issue they wished to avoid. Katten divided the $40 million tranche size by 94 and aid that the firm rounded that figure up from $416,000 to $420,000.
Given Musk’s previous issues with the 420 figure, it’s surprising that Tesla chose to go ahead with this particular debt security minimum investment size. “It is a weird number to have chosen,” stated one analyst.