Tesla Will Do... What Now?
Tesla makes and addition to its terms and conditions, PLUS: following up on an old investigation.
Don’t You Do It
A story from Business Insider popped up the other day stating that Tesla TSLA 0.00%↑ had made a… unique update to its terms and conditions, specifically in relation to the perpetually almost-here Cybertruck.
On page three of the five page document, under the clause for resellers, discontinuations, and cancellations, a paragraph headlined ‘For Cybertruck Only’ reads:
You understand and acknowledge that the Cybertruck will first be released in limited quantity. You agree that you will not sell or otherwise attempt to sell the Vehicle within the first year following your Vehicle’s delivery date. Notwithstanding the foregoing, if you must sell the Vehicle within the first year following its delivery date for any unforeseen reason, and Tesla agrees that your reason warrants an exception to its no reseller policy, you agree to notify Tesla in writing and give Tesla reasonable time to purchase the Vehicle from you at its sole discretion and at the purchase price listed on your Final Price Sheet less $0.25/mile driven, reasonable wear and tear, and the cost to repair the Vehicle to Tesla’s Used Vehicle Cosmetic and Mechanical Standards. If Tesla declines to purchase your Vehicle, you may then resell your Vehicle to a third party only after receiving written consent from Tesla. You agree that in the event you breach this provision, or Tesla has reasonable belief that you are about to breach this provision, Tesla may seek injunctive relief to prevent the transfer of title of the Vehicle or demand liquidated damages from you in the amount of $50,000 or the value received as consideration for the sale or transfer, whichever is greater. Tesla may also refuse to sell you any future vehicles.
Thats… interesting. And strange. But maybe not for Tesla? I don’t know. First off, there seems to be quite a lot of risk here for the buyer—if you get the Cybertruck and don’t like it, or if it doesn’t work, et cetera, you can’t sell it but have to provide notice in writing to Tesla (I presume that’s an email) and then allow them an unspecified amount of time to get back to you (but, you know, ‘reasonable,’ whatever that means), and then see if they’ll take the Cybertruck off your hands.
Simply selling the vehicle less than a year after you purchased it, however, could cause the company to sue you for $50,000 or the value of the Cybertruck, whichever is greater.
Also unclear is how Tesla will discover breaches of this condition (full disclosure: I am not a lawyer and everything here is more or less curious speculation). Transactions between private parties are generally, you know, private, and access to title records isn’t something that automakers typically have access to. Perhaps incentivizing Cybertruck buyers to utilize Tesla’s fledgling insurance arm? Some kind of vehicle data gathering algorithm? I don’t know. I’m sure they’ve thought that through, but to me it seems like a rather cumbersome thing to track.
I guess there are two real ways that the company could be thinking about this.1
The Cybertruck will be wildly, massively successful—so much so that the temptation for the first wave of owners to sell at a price greater than what they bought for it.
The Cybertruck will be rife with problems and issues—so much so that owners may be tempted to sell them quickly and create a negative vibe for the vehicle moving forward, a vibe that the company would presumably like to manage.
The first option seems like… the official spokesperson answer. But it doesn’t really make sense—why would Tesla care if I or anyone else sells my Cybertruck for more money? Doesn’t that mean that the vehicle is underpriced? Further, wouldn’t it be good for the company in the long run to have the resale market be on fire? That would seemingly enable the company to thumb their nose at Cybertruck naysayers—it’s so good people can resell it for more.
Of course, the issues that have plagued the Cybertruck have been quite public and even included a leaked email from Elon Musk where he reminded/berated Tesla employees about the precision required to build the Cybertruck. This is what kind of makes the second option (or something similar to it) seem more plausible.
I guess what can be most objectively said about the whole thing is that this is a really big leap for the industry—something generally reserved for tech. For example, if you jailbreak your iPhone, you can’t turn around and send the thing in to Apple for repairs if the screen cracks. However, you don’t expect that Chevy will sue you for lifting your truck or hanging some… anatomy from the trailer hitch (although maybe they should be allowed to in that case).
Either way, it’ll be interesting to see how this plays out when someone dares to dump their Cybertruck early.
Nuggets In Chains
Tyson Foods TSN 0.00%↑ reports earnings Monday, November 13th, and while analysts will be looking out for improved results after the last quarter’s underwhelming performance, the earnings will also land near the one-year anniversary of the arrest of the company’s CFO doing his best impression of Kendall Roy.
This would normally not make ongoing waves except, well, the guy is still the CFO. Because his name is John Tyson, and astute readers will observe that his last name and the name of company kind of match.
As stated before, when these sort of things happen in corporate America (and they happen quite a bit), the organization kind of just takes the lump, parts ways with the person, and moves on. That’s, you know, part of being a public company—in exchange for being owned by public shareholders, the company’s management is, well, sort of expendable, at least in the sense that standards are fairly rigorous when applying the ‘where there’s smoke there’s fire’ test.
Family run public outfits, however, are a different beast. Long before the invention of dual share classes that allowed founders to retain corporate control and relegated the common shareholder to the role of mere passenger, family control in the form of majority ownership via trusts was the only game in town (if you were part of the family, of course). In Tyson’s case, the Tyson family controls a majority of voting shares via a family trust.
As a result, after John Tyson’s arrest, there was a public apology at the next earnings call followed by the announcement that independent members of the board would be conducting an investigation.
On the conference call, Tyson CEO Donnie King stated:
I would like to take a moment to make one final point. Like John, the company takes this matter seriously. Tyson Foods has a strong, robust corporate governance process. Our independent Board of Directors are overseeing a thorough review of this matter, and I'm confident in this independent process.
Ah, yes, the independent directors would look into the conduct of the grandson of the founder, and then report dispassionately, as they would with any other executive.
Right. Well, it’s been over a year and despite the very public nature of the incident and the public announcement of the investigation, it appears that the results will be kept private, with Tyson the Younger being scolded for being a bad boy or some other sort of thing. Corporate governance, am I right?
Succession, anyone?
Final Thoughts…
California has giant, forgotten city that never was. FOMO is gripping the equity markets yet again. L.A. mansion are testing $150,000 monthly rents. Where does Hamas source its money? Crypto! Big retailer earnings on deck this week. Semiconductors are being smuggled into Russia. It looks like India reeeeeaaallly wants Tesla.
There are, obviously, many more ways which people could think about this, but this is just my speculation.