Qualcomm draws up plans to rebuff Broadcom's $103 billion offer: sources

(Reuters) – U.S. chipmaker Qualcomm Inc (QCOM.O) is making preparations to reject rival Broadcom Ltd’s (AVGO.O) $103 billion bid as early as this week, four people familiar with the matter said on Sunday, setting the stage for one of the biggest-ever takeover battles.

A building on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake

Qualcomm’s board of directors could meet as early as Sunday to review the unsolicited acquisition offer and decide on its strategy, the sources said. The preparations for the board meeting indicate that Qualcomm is poised to rebuff the bid as insufficient as early as Monday, although it may decide to spend a few more days this week to prepare its full response to Broadcom, the sources added.

Qualcomm Chief Executive Steven Mollenkopf has spent the past few days soliciting feedback from Qualcomm shareholders, and feels that Qualcomm’s $70-per-share bid undervalues the company and does not price in the uncertainty associated with getting the deal approved by regulators, according to the sources.

Broadcom CEO Hock Tan, who said earlier this month he would redomicile his company to the United States from Singapore, has stated he is open to launching a takeover battle. The sources said Broadcom was preparing to submit a slate of directors by Qualcomm’s Dec. 8 nomination deadline. That would allow Qualcomm shareholders to vote to replace the company’s board and force it to engage with Broadcom.

FILE PHOTO: A sign on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

Broadcom has also been deliberating the possibility of raising its bid for Qualcomm, including through more debt financing, some of the sources said, although it was not clear when Broadcom would choose to make such a move.

The sources asked not to be identified because the deliberations are confidential. Qualcomm and Broadcom did not immediately respond to requests for comment.

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Qualcomm provides chips to carrier networks to deliver broadband and mobile data. It is engaged in a patent infringement dispute with Apple Inc (AAPL.O), and is also trying to close its $38 billion acquisition of automotive chipmaker NXP Semiconductors NV (NXPI.O) after signing a deal in October 2016. Broadcom has indicated it is willing to acquire Qualcomm irrespective of whether it closes the NXP deal.

NXP shares have been trading above Qualcomm’s offer price, as many NXP shareholders, including hedge fund Elliott Management Corp, have been holding out for a better price. Qualcomm does not plan to significantly raise its price for NXP as a defensive strategy to make its acquisition by Broadcom more expensive, according to one of the sources.

Qualcomm shares closed at $64.57 on Friday, while Broadcom ended at $264.96.

Reporting by Greg Roumeliotis in New York and Liana B. Baker in San Francisco; Editing by Peter Cooney

Our Standards:The Thomson Reuters Trust Principles.

MakeSpace, the ‘Cloud Storage for Physical Stuff’ Startup, Swaps Out Its CEO

MakeSpace, a well-funded startup that emerged from the recent explosion of on-demand services companies, has replaced its CEO, the company confirmed to WIRED. Co-founder Sam Rosen has stepped down and co-founder and COO Rahul Gandhi will become CEO. The company says the departure, which has been in the works for the last month, was “completely amicable” and plans to announce the news Monday morning.

MakeSpace was founded in 2013 amid a surge in interest from investors and consumers in new on-demand services enabled by mobile phones. The company sold itself as a “cloud storage for physical stuff” a concept that contributed to some observers declaring the on-demand trend—”Uber for X“—had gone too far. Indeed, self-storage units for peoples’ junk is more of a tech-enabled service than a digital innovation, but investors took the idea seriously. MakeSpace raised more than $57 million in venture funding from investors including NBA star Carmelo Anthony, rap legend Nas (Nasir Jones), and the investment firm of the Winklevoss brothers.

MakeSpace’s service picks up, stores, and delivers items to storage units for its customers for a monthly fee. Since it launched, a number of copycats have flooded the market, something Gandhi says is a positive thing. “The market is continuing to grow and get stronger. That makes us a lot more confident that the service we’re building has a huge need in the market,” he says.

MakeSpace’s most recent round of funding, a $30 million Series C from venture firm 8VC, closed in December of last year. It valued MakeSpace at $100 million. Rosen had planned to raise more money in the fall of this year, a move Gandhi describes as “proactive.” Those plans have now been put on hold until next year. Gandhi says the company has enough capital to last it through next year, and that MakeSpace’s cost of acquiring customers does not exceed that of the old-school storage unit companies it competes with. The company has “tens of thousands” of customers across four cities, with approximately 225 employees, Gandhi says.

There may be additional announcements regarding the company’s team and strategy in the coming weeks, Gandhi says, noting that there are no plans for layoffs, closing facilities, or changing its pricing structure. The company expects more than one of MakeSpace’s markets to hit profitability next year.

Louis C.K. Responds After New York Times Report and Being Dropped by Netflix, The Orchard

Hollywood studios are moving quickly to distance themselves from Louis C.K. one day after a bombshell The New York Times report surfaced allegations from multiple women who accused the comedian of masturbating in front of them without their consent. On Friday, the comedian admitted that the allegations against him are true and issued an apology (see below).

The independent film studio The Orchard said in a statement on Friday that it “will not be moving forward with the release of I Love You, Daddy—the movie that Louis C.K. wrote, directed, and starred in—which was supposed to hit theaters November 17. The studio previously cancelled the movie’s New York premiere event on Thursday in advance of the Times‘ story.

The Orchard paid a reported $5 million to acquire worldwide distribution rights to the film in September after the movie made a well-received debut at the Toronto International Film Festival. (The deal was the largest to come out of that festival this year.) Even before yesterday’s huge allegations, Louis C.K. had been drawing criticism over I Love You, Daddy, which features some questionable content and offensive language, including a storyline where a character’s 17-year-old daughter has a romantic relationship with a 68-year-old man.

Meanwhile, multiple media giants also took a step back from Louis C.K. on Friday. Netflix announced that it will not move forward with a planned stand-up special featuring the comedian, who signed a deal with the streaming service to create two comedy specials earlier this year. The first of those two stand-up specials started streaming on Netflix in April.

“The allegations made by several women in The New York Times about Louis C.K.’s behavior are disturbing,” a Netflix spokesperson said in a statement provided to Fortune. “Louis’s unprofessional and inappropriate behavior with female colleagues has led us to decide not to produce a second stand-up special, as had been planned.”

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On Friday afternoon, Louis C.K. issued a statement verifying the accounts of five women who accused him of sexual misconduct in The New York Times‘ report. Here is the comedian’s full statement:

I want to address the stories told to the New York Times by five women named Abby, Rebecca, Dana, Julia who felt able to name themselves and one who did not.

These stories are true. At the time, I said to myself that what I did was okay because I never showed a woman my dick without asking first, which is also true. But what I learned later in life, too late, is that when you have power over another person, asking them to look at your dick isn’t a question. It’s a predicament for them. The power I had over these women is that they admired me. And I wielded that power irresponsibly.

I have been remorseful of my actions. And I’ve tried to learn from them. And run from them. Now I’m aware of the extent of the impact of my actions. I learned yesterday the extent to which I left these women who admired me feeling badly about themselves and cautious around other men who would never have put them in that position.
I also took advantage of the fact that I was widely admired in my and their community, which disabled them from sharing their story and brought hardship to them when they tried because people who look up to me didn’t want to hear it. I didn’t think that I was doing any of that because my position allowed me not to think about it.
There is nothing about this that I forgive myself for. And I have to reconcile it with who I am. Which is nothing compared to the task I left them with.

I wish I had reacted to their admiration of me by being a good example to them as a man and given them some guidance as a comedian, including because I admired their work.

The hardest regret to live with is what you’ve done to hurt someone else. And I can hardly wrap my head around the scope of hurt I brought on them. I’d be remiss to exclude the hurt that I’ve brought on people who I work with and have worked with who’s professional and personal lives have been impacted by all of this, including projects currently in production: the cast and crew of Better Things, Baskets, The Cops, One Mississippi, and I Love You Daddy. I deeply regret that this has brought negative attention to my manager Dave Becky who only tried to mediate a situation that I caused. I’ve brought anguish and hardship to the people at FX who have given me so much The Orchard who took a chance on my movie. and every other entity that has bet on me through the years.
I’ve brought pain to my family, my friends, my children and their mother.

I have spent my long and lucky career talking and saying anything I want. I will now step back and take a long time to listen.

Thank you for reading.

Time Warner’s HBO said it is removing the comedian from its lineup of performers for Jon Stewart’s annual fundraiser Night of Too Many Stars: America Unites for Autism when it airs on the cable network later this month, and HBO also said it is “removing Louis C.K.’s past projects from its On Demand services.”

And 21st Century Fox’s FX Networks, which airs the comedian’s comedy series Louie (along with projects Louis C.K. executive produces, like Better Things and Baskets) said in a statement on Thursday that the network is “obviously very troubled by the allegations” against the comedian and that “the matter is currently under review.”

raceAhead: Chasing John Coltrane, Twitter Verifies a White Supremacist, A More Inclusive Yelp

I was introduced to Trane later in life. Eight years ago in fact.

He was the new, part-time doorman in our low-key uptown apartment building. He was barely nineteen. Outfitted in a spare uniform, some two sizes too big and cinched at his waist, he looked a good deal younger, like a boy cosplaying a man who signed for packages and, if he remembered, held the door.

“I’m Trane,” he said by way of introduction. “But most people think it’s Train.”

“Trane, Like Coltrane? I asked. He burst into a smile and then we were friends.

Trane’s story was like so many young, black men with extremely limited means but high hopes. He was the next generation after the Great Migration, and he liked to tell stories about the times when things got sideways, he’d get sent down to stay with his Southern cousins, where they’d fish for crappies using Skittles as bait. The village that was raising him also included a blur of pastors, some teachers, social workers, street corner philosophers, government uplift programs and now, a bunch of random renters on Manhattan’s Upper West.

But tough as things may have been at times, he had a mother who so believed in the transcendent power of John Coltrane, that she named not one but two of her sons after him. Cole, Trane’s minutes-older brother, was his identical twin. I was transfixed by the notion. What was this black boy magic?

Meeting Trane triggered in me an eight-year quest to understand all things Coltrane, a satisfying if incomplete journey into the life of a man who was rarely interviewed or filmed, but who had come to represent a type of black intellectual and artistic excellence that inspires people to this day.

I listened to his music obsessively. I collected first-hand accounts. I watched every documentary I could find. I made a spiritual pilgrimage to his home in Dix Hills, Long Island. I even developed a nerd-level interest in the mouthpieces he used and tinkered with to change his sound.

So, naturally, I was drawn to Chasing Trane: The John Coltrane Documentary, which premiered this week on PBS. It’s definitely worth your time.

While true jazz insiders will undoubtedly find flaws somewhere in the thesis, it gave me what I was looking for. The filmmakers rely largely on Coltrane’s own words, read by Denzel Washington, to help explain his development as an artist, and tap people who knew him and loved him — like jazz great Sonny Rollins, Cornell West, and Coltrane’s own children — to help put the artist’s work into a broader context. Their love for him is a gift.

Coltrane himself was a miracle. He was a sensitive child of the Jim Crow South, who lost most of his immediate family before he was twelve. He was a late bloomer, musically, and he white-knuckled his way out of a crippling addiction into a spiritual awakening that transformed the way he played. He was nurtured by and then outgrew Miles Davis, and through ascetic dedication and intellectual honesty, developed into an artist who made music the world had never heard before. He died of liver cancer at the peak of his career, and yet his records can still makes you feel … something real.

But the true thrill of the film is the previously unreleased photos and video, showing Trane as a shy and gentle man, living his life and loving his family and friends. While he may be best known for his seminal work, A Love Supreme – a musical declaration that his sound was now a fully spiritual expression, completely intertwined with God – the revelation of Chasing Trane is of a man capable of deep love of a personal variety, fully present, untempted by fame or other childish things. Something anyone could be or want.

It was then that I finally saw the complete picture of the Coltrane magic that compelled a troubled new mother to lay his name upon her twin sons.

My first Trane has since moved on, and his Facebook has gone quiet, which makes me worry from time to time. He is on a short list of souls I think specifically about when I hear of a police shooting or other incident involving a young black man. And I often wonder what the original Trane would think of the world as it feels lately, supremely unloving in ways both familiar and strange.

I think John Coltrane would say to pray, do your serious work, and stay positive. “You know, I know that there are forces out here that bring suffering to others and misery to the world,” he once said. “But I want to be the opposite force. I want to be the force which is truly for good.”

I want to believe that his name will be enough to protect sweet Trane and his brother, I really do. But being a small part of a greater opposite force seems like the only hope. It may not always feel like magic, but it keeps me doing the work.

On Point

Twitter has verified Jason Kessler, the white supremacist who organized the Charlottesville rally
Kessler’s new blue checkmark is odd timing for Twitter, who a short time ago had promised to redouble their efforts to curb violent speech and eliminate hate groups. Kessler had deleted his account last August, after a backlash for a series of tweets in which he said that Heather Heyer, who was killed at Kessler’s “Unite the Right, rally” was “a fat, disgusting Communist,” and called her death “payback time.”
The Daily Beast
Meet Ashley Bennett, a brand new legislator who is not here for your misogynist humor
Bennett was just living her life when a Facebook meme mocking the Women’s March was posted by John Carman, a local legislator in Atlantic County, New Jersey. She was so insulted, she decided to run for his seat. And she won! The psychiatric emergency screener had never run for office before, but she sounds prepared. “I am beyond speechless and incredibly grateful to serve my community. I never imaged I would run for office.” The knee-slapper that got him ousted? “Will the woman’s protest be over in time for them to cook dinner?” People were seriously pissed.
Vox
A new platform aims to train underrepresented company founders who are building start ups
It’s not an incubator or a boot camp. Instead, Founder Gym, co-founded by Mandela Schumacher-Hodge and Gabriela Zamudio, plans to offer four-week training programs that will help emerging entrepreneurs get smart about fundraising, pitching, user growth and problem validation. Bold faced names will offer classes, and while the duo doesn’t take an equity position, there is a $395 participation fee. Click through for details. And take note: Applications for the first cohort just opened and will run through November 30. The first four-week program begins January 8, 2018.
Techcrunch
Inside Yelp’s methodical quest for diversity
An all-star team wrote this case study detailing Yelp’s diversity efforts to date, including Rachel Williams, Head of Corporate Recruiting, Diversity & Inclusion at Yelp and Michael Luca, an associate professor of business administration at Harvard Business School. They’ve had some real success, but one of the most refreshing aspects of their analysis is that they do more than just benchmark. They also share their thinking behind the strategies they’ve tried and are transparent about what didn’t work. Turns out blinding résumés and having candidates use a voice disguiser in first-round phone interviews was a complete dud. “This cuts to the heart of the problem in 2017, which is that increasing diversity at tech companies isn’t about finding a silver bullet,” they say. Have a process, be transparent about what’s happening, and evaluate the policies you implement. Boom there it is.
HBR

The Woke Leader

Jay-Z wrote and narrated a film decrying America’s ‘War on Drugs’
Last year, Beyonce’s husband stepped from the shadows to lend his words and voice to a short art video that describes the history of draconian drug laws in the U.S. that exploded the prison populations and disproportionately targeted black and brown people – even though white people sold and used more crack cocaine than anyone else. (It’s a caste system, whispers Isabel Wilkerson.) Oh, and he mentions the legal marijuana industry, which leaves out black and brown entrepreneurs. The video features the artwork of Molly Crabapple, and remains an essential primer on one of the most divisive issues facing black communities today.
New York Times
Out at work in 2017
It’s not so easy being queer for lots of people who work, explains Fast Company’s Rich Bellis. For starters, “[t]he Justice Department rolled back protections for LGBTQ workers in July, and it remains legal to fire someone for being gay or transgender in 28 states,” he explains. In a poignant essay, Bellis introduces the “Out At Work” package, which includes an ambitious survey of the working lives of LGBTQ people, including more than 3,000 responses from all 50 states and a dozen countries. The stories are rich and varied, some “coming out” stories resulting in more open workplaces (and better benefits) while others are utterly heartbreaking. There are some bold-faced names in the mix as well. This future award-winning package deserves your full attention. A full tip of the hat to Bellis and the team.
Fast Company
Johnstown, Pennsylvania still loves Trump
Though they are clear, despite his promises, that no help is coming to depressed former steel town. While this is part of the “first year of Trump” wave of stories which will revisit the rust belt fans of 2016, this story is notable for a couple of important reasons. One of them is the true cognitive disconnect between what people believe the president is doing and what he is actually doing. (And I only mean golfing a lot.) And the next is the true level of abandonment and despair that certain Americans are experiencing, that no next wave is poised to address. And finally, writer Michael Kruse finally found someone willing to tell the truth about what they really feel about all those knee-taking millionaire football players. Even though you know it’s coming, it takes your breath away.
Politico

AT&T ready to fight U.S. on Time Warner deal: CEO

WASHINGTON/NEW YORK (Reuters) – AT&T Inc (T.N) will not sell cable network CNN to win antitrust approval of its proposed $85.4 billion purchase of media company Time Warner Inc (TWX.N) and will fight the government in court if a negotiated settlement is not reached, the wireless company’s chief executive said on Thursday.

The AT&T logo is seen on a store in Golden, Colorado United States July 25, 2017. REUTERS/Rick Wilking

Justice Department staff recommended that AT&T sell either its DirecTV unit or Time Warner’s Turner Broadcasting unit, which includes news company CNN, a government official told Reuters on Thursday, on the grounds that a combined company would raise costs for rival entertainment distributors and stifle innovation.

The two sides are still in talks on approving the deal, which was announced in October 2016, but have disagreed on whether asset sales are necessary to gain approval.

“If we feel like litigation is a better outcome then we will litigate,” AT&T CEO Randall Stephenson told the New York Times DealBook conference on Thursday. He said the company had been ready to go to court the day the deal was announced.

AT&T has signaled it would not agree to sell DirecTV, which it acquired for $49 billion in 2015, leaving CNN and other cable TV assets as the main sticking point in negotiations.

The antitrust regulator is worried the combined company could make it harder for rivals to deliver content to consumers using new technologies, the official said. AT&T has said it wants to disrupt “entrenched pay TV models.”

FILE PHOTO: The CNN building (L) in Dubai Media City Park March 17, 2016. REUTERS/Russell Boyce/File Photo

Stephenson said several times on Thursday that a combined AT&T and Time Warner will create a data and advertising company whose competitors will be the newest and most disruptive entrants into the media sector, Amazon.com Inc (AMZN.O), Facebook Inc (FB.O), Netflix Inc (NFLX.O) and Alphabet Inc’s (GOOGL.O) Google, not other wireless phone companies.

The Justice Department’s desire for asset sales has raised concerns about political influence on the $85.4 billion deal, given U.S. President Donald Trump’s frequent criticism of CNN. As a candidate, Trump vowed to block the deal shortly after it was announced, but has not addressed the issue publicly as president.

The head of the Justice Department’s antitrust division, Makan Delrahim, said in a statement late on Thursday that he has “never been instructed by the White House” on the AT&T deal.

Raj Shah, a White House spokesman, said in a separate statement that Trump “did not speak with the Attorney General about this matter, and no White House official was authorized speak with the Department of Justice on this matter.”

The deal is opposed by an array of rivals and consumer groups worried that it would give the combined company too much power. Opponents are pushing for conditions that would limit AT&T’s ability to charge media rivals higher prices to carry Time Warner content.

Shares of Time Warner were down nearly 1 percent in afternoon trading at $87.85. AT&T shares rose 1.6 percent to $33.97.

Reporting by David Shepardson and Anjali Athavaley; Additional reporting by Subrat Patnaik and Aishwarya Venugopal; Writing by Anna Driver; Editing by Bill Rigby

Our Standards:The Thomson Reuters Trust Principles.

Former Yahoo CEO apologizes for data breaches, blames Russians

WASHINGTON (Reuters) – Former Yahoo Chief Executive Marissa Mayer apologized on Wednesday for two massive data breaches at the internet company, blaming Russian agents for at least one of them, at a hearing on the growing number of cyber attacks on major U.S. companies.

”As CEO, these thefts occurred during my tenure, and I want to sincerely apologize to each and every one of our users,” she told the Senate Commerce Committee, testifying alongside the interim and former CEOs of Equifax Inc (EFX.N) and a senior Verizon Communications Inc (VZ.N) executive.

“Unfortunately, while all our measures helped Yahoo successfully defend against the barrage of attacks by both private and state-sponsored hackers, Russian agents intruded on our systems and stole our users’ data.”

Verizon, the largest U.S. wireless operator, acquired most of Yahoo Inc’s assets in June, the same month Mayer stepped down. Verizon disclosed last month that a 2013 Yahoo data breach affected all 3 billion of its accounts, compared with an estimate of more than 1 billion disclosed in December.

In March, federal prosecutors charged two Russian intelligence agents and two hackers with masterminding a 2014 theft of 500 million Yahoo accounts, the first time the U.S. government has criminally charged Russian spies for cyber crimes.

Those charges came amid controversy relating to alleged Kremlin-backed hacking of the 2016 U.S. presidential election and possible links between Russian figures and associates of President Donald Trump. Russia has denied trying to influence the U.S. election in any way.

Special Agent Jack Bennett of the FBI’s San Francisco Division said in March the 2013 breach was unrelated and that an investigation of the larger incident was continuing. Mayer later said under questioning that she did not know if Russians were responsible for the 2013 breach, but earlier spoke of state-sponsored attacks.

Former Yahoo Chief Executive Marissa Mayer waits to testify before a Senate Commerce, Science and Transportation hearing on “Protecting Consumers in the Era of Major Data Breaches” on Capitol Hill in Washington, U.S., November 8, 2017. REUTERS/Kevin Lamarque

Senator John Thune, a Republican who chairs the Commerce Committee, asked Mayer on Wednesday why it took three years to identify the data breach or properly gauge its size.

Mayer said Yahoo has not been able to identify how the 2013 intrusion occurred and that the company did not learn of the incident until the U.S. government presented data to Yahoo in November 2016. She said even “robust” defenses are not enough to defend against state-sponsored attacks and compared the fight with hackers to an “arms race.”

Yahoo required users to change passwords and took new steps to make data more secure, Mayer said.

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“We now know that Russian intelligence officers and state-sponsored hackers were responsible for highly complex and sophisticated attacks on Yahoo’s systems,” Mayer said. She said “really aggressive” pursuit of hackers was needed to discourage the efforts, and that even the most well-defended companies “could fall victim to these crimes.”

The current and former chief executives of credit bureau Equifax, which disclosed in September that a data breach affected as many as 145.5 million U.S. consumers, said they did not know who was responsible for the attack.

Senator Bill Nelson said “only stiffer enforcement and stringent penalties will help incentivize companies to properly safeguard consumer information.”

Thune told reporters after the hearing the Equifax data breach had created “additional momentum” for Congress to approve legislation. He said Mayer’s testimony was “important in shaping our future reactions.”

The Senate Commerce Committee took the unusual step of subpoenaing Mayer to testify on Oct. 25 after a representative for Mayer declined multiple requests for her voluntarily testimony. A representative for Mayer said on Tuesday she was appearing voluntarily.

Reporting by David Shepardson; Editing by Susan Thomas

Our Standards:The Thomson Reuters Trust Principles.

Tesla Shorts Are Too Short-Sighted

Intro

Tesla (TSLA) reported earnings Wednesday, November 1st, with the entire call and much of the quarterly letter focused on the Model 3. One of the most prominent pieces of information that came out was that the vehicle faces a 3 month delay to reach a 5,000 a week run-rate. For those paying attention, this was not a complete surprise, as a supplier already announced a 3-month postponement of higher volumes for a part for Tesla, and Panasonic admitted delays in the production lines at the Gigafactory.

The stock reacted negatively the next day, dropping nearly 7% by Thursday’s close.

In this article, we will take a walk down memory lane and examine the Model S and X releases, and see if there is any clues about potential outcomes for the stock at different points in the Model 3 ramp.

Model Releases & Stock Effect

2012: Model S

A very long time ago in Tesla time, Model S was just about to be released. The supercharger network concept had just been introduced, and the only vehicle Tesla had ever sold was the Roadster, an amalgamation of IP from the company Tesla had grown from, and the Lotus Elise.

People were skeptical Tesla could produce a compelling, reliable car in any sort of volume. The automaker was aiming to produce 20,000 a year of the car. News eventually broke from Tesla they were having trouble ramping some variants of the Model S. The stock lost ~21% of it’s value from the news before bottoming out.

Chart
TSLA data by YCharts

As Tesla proved their ability to manufacture a vehicle designed in-house from the ground up and slowly ramp production, investor confidence soared to new highs as can be seen in the chart below:

Chart
TSLA data by YCharts

The stock posted gains from July 1st, 2012 ($29.02) to July 1st, 2013 ($117.18) of over 400%. This does not include gains had from the bottoming-out of the stock near ~$20 that occurred from the temporary delays.

2015: Model X

After many delays of the final reveal and official delivery as opposed to the initial reveal in 2012 seen here), the Model X finally started rolling off the assembly line in September 2015. The stock had gotten over-hyped pending the release of the model and had gone to new-highs of $280 in July.

Since it’s initial release, the Model S had improved in reliability significantly, had undergone range and performance enhancements, and had gone on to sell 50% more than the planned ~20,000 a year from 2012 in 2014 with 31,655 deliveries.

The Model X then began rolling off the assembly in line in severely low numbers, with shorts calling the beginning of deliveries “fake” and the share price being tested. From September to February, the share price of Tesla fell from around $250 the time of the Model X delivery ceremony to $151 as the Model X failed to be produced in significant numbers.

Chart
TSLA data by YCharts

Just a couple month later, as it was proven that the Model X ramp was salvageable and the production rate (and reliability of the vehicle) was brought up to speed with Model S investor confidence once again returned, propelling the stock near new highs.

Chart
TSLA data by YCharts

This rally would continue due to many catalysts other than the Model X (like growing anticipation of Model 3, Merger with SolarCity, Gigafactory progress) until the Model 3 delivery ceremony.

All in all, the stock had dropped 47.37% from the highs reached before deliveries began, only to recover almost 70% from the bottom once the Model X situation had been remedied. Looking at the gains from the high pre-Model X deliveries to pre-Model 3 deliveries, the gains were approximately ~37% above previous highs.

Chart
TSLA data by YCharts

2017: Model 3

Tesla stock saw the return to new-highs, like leading into the Model S and X ramp, as anticipation of the Model 3 worked up to feverish levels. Shortly before the highly anticipated launch of the model, the stock reached a peak of $383 in June (and again when it achieved $385 in September).

In keeping with the past, as the hype has worn off and volumes of the vehicle have failed to materialize, the stock has slowly slid to present levels of the low $300’s, or a little more than a 20% decrease from previous highs.

Chart
TSLA data by YCharts

Now that we are brought up to speed with the past performance of the stock in relation to the ramps, and have identified the trend seems to be continuing with the Model 3, let’s look at implications for the share price going forward. Below is a table looking at the changes as different sentiments regarding the ramp have been achieved.

Gains and Losses in Relation To Ramps & SP Lows/Highs

Model SP Loss from High Due To Delays SP Gain from Previous High On Successful Ramp SP Gain Over Ramp Related Low
Model S ~21% ~225% ~432%
Model X ~47% ~37% ~70%
Model 3 ~20%* ? ?

*20% As of publishing

Thoughts On The Trend

I believe that as the ramp gets worked out, whether it be in a month or in 6, the stock will rebound quickly to the previous upwards resistance level around $385 and surpass it be a fairly large margin. As long as reliability is average or above when reviews do start coming out in earnest, (or even if they do not as Model X showed) I think investors will be very pleased whenever the Model 3 run rate of 5,000 is achieved. Obviously, the sooner the better, but I would expect investors would prefer a knock-out product later rather than one that could jeopardize the vast log of reservations sooner.

It definitely seems that each model ramp has had a significant impact on investors, with worries from delays creating tremendously attractive buying opportunities. If the share price increases over the previous high in a similar to manner to the Model X rally, the new high would be over $500.

Before we conclude with a summary of the above and our stance on the stock, I believe it is worth taking in a point about the nature of ramps at Tesla.

A Point About The Ramp

One point Musk tried to really drive home, as he has done in the past, is that the ramp is really a “stepped exponential”. What this means essentially is that it does not follow a linear path. I wish to illustrate the point further than he was able to on the call with a scenario as outlined below:

linear vs exponential graph

(Image Source)

Suppose the assembly line has 100 process steps to complete the product. 90 of the steps are capable of creating 1000 of the product a day, the companies desired run rate. 5 of the other steps are able to do 1,200, which is actually above the companies goal. The other 5, unfortunately, are only able to do 100, 200, 300, 400 and 500 a day, respectively.

The company fixes the step that is only able to do 400 a day and makes it 500, however they can still only do 200 a day, as that is the bottleneck of the entire production process. Then, they make that one able to do 1000 a day. Now, they can only do 300 a day. Even if they fix the two that can do 500 a day, they will still be limited to 300 a day.

What this lengthy hypothetical demonstration above shows is that they could be making vast improvements to various processes on the line each day, however they will not reflect in the daily, weekly, or even monthly production levels unless they were able to increase the rate of whichever process was causing the biggest slow-down. This could be equated to the buffalo herd theory.

What this means for us is that if people begin extrapolating based off how much they were able to improve the run-rate in a certain amount of time, they could be blown away by sudden improvements that occur seemingly overnight. This is also why management is not guiding for certain levels by quarters end, but in slightly broader time frames.

Additionally, it is worth noting that they have been planning for “volume deliveries in second half of 2017” since before Q3 2016. This seems to be relatively on track, although it will only be somewhere below 3,000 until March and not the full 5,000.

Other Effects of The Delay

Of course, the delay will impact Tesla in a very real way besides investment sentiment. These include possible customer dissatisfaction (or lack thereof), and increased duress on their financials.

Customer Satisfaction

If the delay is underestimated and expected delivery dates get repeatedly pushed back (something already occurring as documented here) they could see a mass influx of cancellations. While I expect demand to remain quite healthy for several years to come for the Model 3, unhappy customers can be a nightmare for companies. For more insight into how important customer satisfaction can be, consider looking at my recent article about google(GOOG) (GOOGL) and customer service here.

While there will likely be many customers to take the place of those who do cancel, it will certainly not be good for Tesla. The even bigger impact will be on lost or deferred revenue, however.

Financials

If the Model 3 is delayed beyond the initial 3 month estimate, Tesla’s financials will start to deteriorate rapidly. Investors were more than happy to expedite the production of Model 3 when the company last raised capital, but this will not hold true if they must repeatedly raise more and more money to accomplish the same task.

Any minor dilution is not a cause for concern for many bulls due to the fact that if Tesla succeeds it will generate massive returns for shareholders so dilution should negligibly effect returns. However, they may have issue being lent more capital if their share price deteriorates significantly, which may continue if the ramp struggles for much longer than currently expected.

An inability to raise capital on favorable terms (as a result of a lack of investor confidence) could compound the problems and create the perfect storm the shorts are waiting for. I would assert that this is the single biggest threat to Tesla right now (other than their execution itself).

Conclusion

Since the news broke of the delay, Tesla has retained support above the $280 level, and recovered 2.5% to $306 to close-out the week, less than $15 below where it was heading into Earnings.

The historical data shows repeated dips in the stock around model ramp delays, with investors getting spooked about Tesla’s ability to execute. Once the delays had been overcome, the stock soared to new all-time highs over 1/3 higher than previous.

Tesla is not a conventional company, and they do not do things in conventional ways. Although their ramps may differ in style and timeliness from industry norms, they are capable of doing so and will reward investors when they do ultimately deliver. Tesla has delivered 250,000 cars since it’s inception over a decade ago. Next year they plan to deliver 500,000 (and I think they will deliver at least 275,000). Regardless of where they fall in that range, they will double the number of Tesla’s on the road from today in one year.

It seems that there is not much additional downside for Tesla in the near-term with the stock already dropping 20% off the news of the delay and possible removal of the tax-credit. However, it’s worth noting support levels of around $220 is the stock does drop further. Regardless of short-term movement, a year from now after the ramp is considered a success, I believe the stock will likely be at new highs in the $400-$500 range.

Investor Take-away

With significant milestones achieved in the recent quarters, the Model 3 ramp delayed (and who can say they are honestly surprised) but on track and the Semi reveal slated for this month I only see positive catalysts in the near-term for Tesla, besides a potential capital raise and confirmation of the removal of the tax-credit.

If you are long the stock, holding is definitely the recommended position at this time going into 2018. I think the stock is bottomed out for the next several months and shorts should cash out if they are in the money.

If history is anything to go by, this may be the last opportunity to pick up Tesla shares in the low 300’s for quite some time.

If you found this article informative, are interested in Tesla or other disruptive technological companies I cover such as Amazon, Google and Apple, please consider following me by clicking the button at the top of the page.

Disclosure: I am/we are long TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Mobile bank N26 sees customers tripling within two years: CEO

LONDON (Reuters) – The smartphone-based bank N26 expects to peel away 5 to 10 percent of retail customers aged 18 to 35 from established banks in its core continental European market in the next two to three years, its chief executive told Reuters.

FILE PHOTO: Valentin Stalf, Founder and CEO of the Fintech N26 (Number26), poses for a portrait in Berlin, Germany, August 19, 2016. REUTERS/Axel Schmidt/File Photo

The Berlin-based fintech start-up has been signing up 1,500 to 2,000 customers a day in recent months, putting it on track to triple in size to around 1.5 million clients within two years from its current 500,000 users, Valentin Stalf said in an interview in London on Friday.

The company, which counts Chinese billionaire Li Ka-shing and Silicon Valley investor Peter Thiel among its backers, is competing with traditional branch-based retail banks by offering a suite of mobile banking services that customers can use entirely from their smartphones.

It also faces competition from other digital banks such as Revolut and Monzo, and even French telecom operator Orange (ORAN.PA), which launched its own banking service last week.

Since its launch in Germany in 2015, the company has expanded rapidly into 17 European countries including Austria, France, Spain and Italy. It recently said it will start operating in Britain and the United States next year.

“We see the U.S. as a big opportunity because digital banking is underdeveloped,” Stalf said. “There are no clear rivals for us there.”

The regulatory environment is also becoming more favorable, Stalf said.

In 2018, new European Union rules will start to force banks to allow customer data to be made available to other companies if the customers agree. That will help the likes of N26 identify potential customers and offer them better deals than their current lenders.

Stalf said that within three years N26 expects to have a 5 to 10 percent share of the market in the main countries where it operates.

N26 offers a free current account, its “anchor product”, but makes most of its money through card usage, savings, credit and insurance services.

The company made its name taking on traditional banks but came under scrutiny itself last year after a security researcher found that its apps exposed users to potential account hijacking. N26 then implemented fixes to prevent such problems.

Stalf said the main advantages of being an app are having daily interactions with customers and as a result being able to better understand their needs and offer tailor-made, value-added services.

“If I happen to book a trip and hire a car with my N26 card, my app would instantly use that information to offer me travel and car insurance.”

With marketing costs of 5 to 10 million euros per year – far lower than those of traditional banks – and customer data gathered via payments, N26 has been able to either make a profit or break even from each newly acquired customer.

Stalf said that excluding marketing costs, the company could be profitable in about a year.

Acquiring a banking license has also helped keep costs down, and the company is now betting that word-of-mouth and good Apple Store ratings will help it contain its marketing costs and help it move along the path to profitability.

“Today you can create a trusted brand much faster because everything is more transparent,” said the 32-year-old Vienna-born entrepreneur.

(In the first paragraph, company corrects to say .. retail customers aged 18 to 35 ..not.. all retail customers)

Reporting by Sophie Sassard in London; Additional reporting by Eric Auchard in Frankfurt; Editing by Hugh Lawson

Our Standards:The Thomson Reuters Trust Principles.

BP, Shell lead plan for blockchain-based platform for energy trading

(Reuters) – A consortium including energy companies BP and Royal Dutch Shell will develop a blockchain-based digital platform for energy commodities trading expected to start by end-2018, the group said on Monday.

The logo of BP is seen at a petrol station in Kloten, Switzerland October 3, 2017. REUTERS/Arnd Wiegmann

Other members of the consortium include Norwegian oil firm Statoil, trading houses Gunvor, Koch Supply & Trading, and Mercuria, and banks ABN Amro, ING and Societe Generale.

Blockchain technology, which first emerged as the architecture underpinning cryptocurrency bitcoin, uses a shared database that updates itself in real-time and can process and settle transactions in minutes using computer algorithms, with no need for third-party verification.

Mercuria has been a vocal advocate of implementing blockchain technology to significantly cut costs in oil trading.

“Ideally, it would help to eliminate any confusion over ownership of a cargo and potentially help to make managing risk more exact if there are accurate timestamps to each part of the trade,” said Edward Bell, commodities analyst at Dubai-based lender Emirates NBD PJSC.

Similar efforts for an energy trading platform have failed to take off, Bell said, but added this latest bid with backing from BP and Shell and the banks, “may have more success than if it were an independent party trying to convince oil and gas companies to make use of it.”

The new venture is seeking regulatory approvals and would be run as an independent entity, the consortium said in a statement.

“The platform aims to reduce administrative operational risks and costs of physical energy trading, and improve the reliability and efficiency of back-end trading operations…,” the statement said.

(This version of the story was refiled to make clearer in headline that platform is tool for trading, not a trading platform)

Reporting by Arpan Varghese in Bengaluru; Editing by Manolo Serapio Jr.

Our Standards:The Thomson Reuters Trust Principles.

Toyota seeks more investments in Israeli auto tech, robotics

TEL AVIV (Reuters) – Japan’s Toyota Motor Corp is seeking more investments in Israeli robotics and vehicle technologies after its venture arm led a $14 million investment in Intuition Robotics in July.

A logo of Toyota Motor Corp is seen at the company’s showroom in Tokyo, Japan June 14, 2016. REUTERS/Toru Hanai/File Photo

The startup, which makes robots for the elderly, was the first Israeli investment for Toyota AI Ventures, a new $100 million fund investing in artificial intelligence, robotics, autonomous mobility and data and cloud computing.

“We will see more involvement of Toyota in the Israeli market in the future,” said Jim Adler, managing director of California-based Toyota AI Ventures, which is part of the $1 billion Toyota Research Institute.

“There’s more in the pipeline,” he told Reuters during a visit to Israel, adding that technologies dealing with perception and prediction and planning were of particular interest to Toyota.

Perception technology enables a self-driving vehicle to understand the world around it while prediction and planning can help a car interpret situations such as whether a child at an intersection might try to cross at a red light.

“There’s a tremendous amount of innovation happening in Israel as cars become more produced by data,” said Adler, who is in the country meeting companies whose technologies interest Toyota.

Israel is a growing center for automotive technology. Earlier this year Intel Corp bought autonomous vehicle firm Mobileye – one of Israel’s biggest tech companies – for $15.3 billion.

On Friday Germany’s Continental AG said it was buying Israel’s Argus Cyber Security, whose technology guards connected cars against hacking.

Toyota AI Ventures has made five investments and expects to invest in at least 20 companies worldwide.

Regarding its investment in Intuition Robotics – which plans to begin trials of its robots with older adults in their homes early next year – Adler said there were many common features between robotics and autonomous vehicles, which he referred to as “big robots with wheels”.

Japan’s population is aging, with 40 percent expected to be over 65 in 20 years, he said, and there will be demand for technologies that help the elderly stay in their homes, rather than have to move to assisted-living facilities.

“We think Toyota will have a role there,” he said.

Editing by Keith Weir

Our Standards:The Thomson Reuters Trust Principles.