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SoftBank offers to buy Uber shares at 30 percent discount

SAN FRANCISCO (Reuters) – Japan’s SoftBank Group Corp is offering to purchase shares of Uber Technologies Inc at a valuation of $48 billion, a 30 percent discount to its most recent valuation of $68.5 billion, a person familiar with the matter said on Monday.

The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. REUTERS/Issei Kato

The investment, which was approved by the Uber board in October, would also trigger a string of governance changes at Uber that would limit some early shareholders’ voting power, expand the board from 11 to 17 directors and cut the influence of former Chief Executive Travis Kalanick.

The investment and board moves are supported by new Chief Executive Dara Khosrowshahi and come at the end of a year of scandals and change for Uber, including the announcement last week that executives covered up a major hack in 2016.

The consortium of investors led by SoftBank and Dragoneer Investment Group plan to take a stake of at least 14 percent in the ride-services company. The tender offer will launch on Tuesday, sources told Reuters, and investors have nearly a month to respond.

The SoftBank-led investor group will acquire two of the new board seats, with the remaining four going to independent directors.

If there are not enough interested sellers, SoftBank can still walk away from the deal. SoftBank is also expected to make a separate $1 billion investment in the company at the $68.5 billion valuation.

Another person familiar with the deal said the offer price was in line with what investors had been expecting. SoftBank’s offer is close to what Uber was worth in 2015, when shares were priced a little less than $40 apiece for a $51 billion valuation, according to data from PitchBook Inc.

Even at the discounted price, Uber is the world’s second-highest valued private venture-backed company, after China’s ride-service company Didi Chuxing, and the offer is a chance for early investors to lock in substantial profits and for employees to cash in shares that have to date only had value on paper. Shareholders, including employees, with at least 10,000 shares are eligible to sell.

The Uber logo is seen on mobile telephone in London, Britain, September 25, 2017. REUTERS/Hannah McKay

Nearly all secondary transactions, when a new investor purchases from existing shareholders, come at a discount to the company’s valuation.

However, the 30 percent discount is steep given Uber’s plan to launch an initial public offering in 2019, said Phil Haslett, co-founder and head of investments at secondary marketplace EquityZen. Usually valuation cuts of this size happen when a company is at risk of being sold at a heavy discount, which Uber is not.

“It really comes down to a re-pricing of Uber’s value,” Haslett said.

Since it was valued at $68.5 billion more than a year ago, the company has been hit by scandals, including accusations of sexual harassment. It has also weathered federal criminal probes into software Uber used to deceive regulators and allegations of paying bribes to authorities in Asia, and a lawsuit by Alphabet Inc’s self-driving unit Waymo, accusing Uber of stealing trade secrets.

Most recently, Uber revealed that the data of 57 million Uber customers and 600,000 drivers had been stolen in a breach more than a year ago, and that the company had paid two hackers $100,000 to cover it up. Since then, governments across the globe have launched investigations into the incident. The scandal raised questions about whether SoftBank would try to renegotiate the deal for better terms.

But Uber said on Friday it had informed SoftBank about the data breach prior to informing the public. However, “our information at the time was preliminary and incomplete,” a spokesman said.

A person familiar with the matter said SoftBank would have already factored any negative impact from the breach into its negotiations with Uber.

Bloomberg reported the offer price earlier on Monday.

Reporting by Heather Somerville and Liana B. Baker. Additional reporting by Paresh Dave in San Francisco; Editing by Peter Henderson, Richard Chang and Lisa Shumaker

Our Standards:The Thomson Reuters Trust Principles.

Postal worker shot in the head while on the job dies

A United States Postal Services worker died after being shot in the head Tuesday night, Channel 2 Action News reported. 

The shooting occurred outside a post office at the intersection of Wesley Chapel and Snapfinger roads in DeKalb County, according to the news station. 

Authorities have not identified the woman, who was shot while she was working. 

Witnesses told Channel 2 they heard four rounds before the woman was shot. Police are searching for the suspected shooter. 

CRIME & PUBLIC SAFETY: Want more stories like this one? Go to www.myajc.com/crime/

Postal inspectors are investigating the shooting and working to gather details, USPS spokesman Rick Badie told The Atlanta Journal-Constitution. 

No other details have been released. 

Know what’s really going on with crime and public safety in your metro Atlanta community, including breaking news, trial coverage, trends and the latest on unsolved cases. Sign up for the AJC’s crime and safety newsletter delivered weekly to your inbox.

In other news:

A Tennessee college student tweeted something that touched Twitter’s collective heart. Bailey Sellers, 21, has received flowers every year her father ordered before his death. Her 21st birthday flowers are the last ones. “Miss you so much daddy,” she tweeted.

SoftBank Is Said to Offer to Buy Uber Shares at a Steep Discount

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Uber plans to go public by 2019, and investors are interested in whether it can maintain a high valuation before an initial public offering. Credit Eduardo Munoz/Reuters

SAN FRANCISCO — SoftBank formally started its process for buying a significant stake in Uber with an offer to purchase some shares at a valuation of $48 billion, far below the nearly $70 billion valuation that the ride-hailing company garnered in its last round of fund-raising, according to two people briefed on the matter, who asked to remain anonymous because the process is confidential.

The price is an opening bid in what is known as a tender offer, in which a company makes a public offer to purchase stock from existing shareholders. The tender offer will take weeks to complete, and the price for Uber is likely to fluctuate until the process is complete.

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SoftBank and Dragoneer Investment Group plan to buy at least 14 percent of Uber through a combination of new and existing stock. Credit Issei Kato/Reuters

Yet any discount will be a comedown for Uber, which is the most highly valued private company in the world. The ride-hailing service has been making plans to go public by 2019, and investors are intensely interested in whether Uber can maintain a high valuation before it stages an initial public offering.

The tender offer could not have come at a worse time for Uber, which has been rocked by a series of scandals and a leadership change this year. Last week, Uber also disclosed that it had covered up a security breach that had compromised the personal data of 57 million rider and driver accounts.

That revelation has angered regulators and lawmakers around the world. At least three lawsuits related to the data breach have been filed against Uber. On Monday, Uber faced a joint suit filed by Illinois and Chicago over the data breach. Lawmakers have also sent letters to Dara Khosrowshahi, Uber’s chief executive, questioning the company about the hacking. Senator Richard Blumenthal, a Democrat from Connecticut, has publicly said the Federal Trade Commission should investigate and fine Uber for its behavior.

The risks to Uber’s business posed by its reputation could weigh on the price that any buyer would be willing to pay. SoftBank and its leader, Masayoshi Son, have made clear that the investment firm is willing to play hardball, and it has hinted that it will put money into Uber’s rival Lyft if it does not get an offer that it likes from Uber.

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Asian indexes pressured; Japanese defense stocks climb

Most major Asian indexes edged down on Tuesday, following a narrowly mixed close on Wall Street overnight. With little data due during the session, markets turned their attention to events later this week.

Japan’s Nikkei 225 closed 0.04 percent below the flat line at 22,486.24 after a choppy session. Major exporters, including automakers and tech names, were mostly lower. Energy-related names also finished the session lower as oil prices edged down.

Defense-related plays, meanwhile, closed higher following headlines that Japan had noticed radio signals that North Korea could be making preparations for a ballistic missile launch. Defense-linked stocks trended higher, with Hoya Machinery surging 12.51 percent and Ishikawa Seisaku surging 8.43 percent by the end of the day.

Across the Korean Strait, the Kospi rose 0.25 percent despite some tech stocks extending Monday’s declines. Heavyweight Samsung Electronics, however, reversed early losses to rise 1.22 percent after closing lower by more than 5 percent in the last session following a Morgan Stanley report that downgraded its stock. Other tech plays were mixed: SK Hynix fell 0.6 percent and LG Display edged down 0.16 percent. Manufacturing plays traded higher.

Down Under, the S&P/ASX 200 finished off 0.08 percent at 5,984.25, as a 1.33 percent fall in the telecommunications sector weighed on the index. Retailers climbed, but major miners finished the day with losses, with Rio Tinto and BHP down 0.76 percent and 2.04 percent, respectively.

Hong Kong’s Hang Seng Index came under slight pressure, trading 0.66 percent lower. That followed a South China Morning Post report that Beijing will limit southbound capital in the Stock Connect. Chinese mutual funds intending to allocate less than half of their funds to the Hong Kong stock market will be approved, compared to earlier rules that allowed allocations above 80 percent, the Post said, citing sources.

On the mainland, the Shanghai Composite hovered around the flat line, trading higher by 0.05 percent. Meanwhile, the Shenzhen Composite rose 1.02 percent after having closed lower for the past three sessions.

MSCI’s broad index of shares in Asia Pacific excluding Japan was off 0.21 percent at 2:41 p.m. HK/SIN.

U.S. stocks closed mixed on Monday, with retailers rising as markets bet on a strong holiday shopping season following Black Friday. Shares of U.S. chipmakers, however, struggled overnight.

The Dow Jones industrial average tacked on 0.1 percent, or 22.79 points, to close at 23,580.78 while other major indexes finished the session a touch softer.

Tax reform was in focus stateside, with the U.S. Senate expected to vote on a bill on Thursday. Sen. Rand Paul, R-Ky., on Monday said he would vote in favour even though he still had some concerns. If the Senate bill is passed, joint legislation with the House — which passed its own version on Nov. 16 — will have to be created.

Meanwhile, the Senate confirmation hearing for Jerome Powell, President Donald Trump’s nominee for Federal Reserve chair, is due to take place on Tuesday during U.S. hours. Markets are likely to keep watch for a sense of Powell’s views on inflation, among other issues.

New home sales in the U.S. rose to their highest level in a decade in October. The metric rose 6.2 percent to 685,000 units, compared to the 6 percent fall forecast in a Reuters poll.

The dollar was mostly stable against a basket of currencies. The dollar index stood at 92.866 at 2:27 p.m. HK/SIN, compared to Monday’s close of 92.899. Against the yen, the greenback edged up to trade at 111.16, after dipping as low as 110.92 earlier in the session.

“[A] bumpy ride is expected for the dollar if no clear progress is made on the tax bill,” Zhu Huani, an economist at Mizuho Bank, said in a note.

Japan’s Toray Industries falsified data at one of its units for eight years, local media said. Toray Hybrid Cord, a Toray subsidiary, falsified product data for goods that were sold to 13 clients, Kyodo reported. Several other Japanese firms, including Kobe Steel and Mitsubishi Materials, have been caught up in data fabrication scandals of late. Shares of Toray closed down 5.3 percent.

Meanwhile, Japan’s SoftBank has proposed to buy Uber shares at $48 billion, Reuters reported, citing a source. That amount would be a 30 percent discount to Uber’s valuation, Reuters added. SoftBank shares were off 0.25 percent by the end of the day.

Chinese automaker Anhui Jianghuai Automobile on Monday signed a memorandum of understanding with Volkswagen to develop joint venture models in China. The companies had earlier set up a joint venture focused on developing electric vehicles.

Oil prices were under pressure as investors weighed the impact of an upcoming meeting among major oil producers on U.S. shale prices. The slide in prices also came on the back of TransCanada announcing the Keystone pipeline would be restarted on Tuesday, Reuters said.

Ahead of the Thursday meeting, some analysts are expecting an OPEC-led agreement to curb output to be extended beyond its current March 2018 expiration.

“Based on the early readings of the OPEC meeting, and statements from Russia’s oil minister, it looks as if an agreement to extend to end-2018 is nearly concluded after talks ahead of the full session,” Anne-Louise Hittle, vice president of macro oils at Wood Mackenzie, said in a note.

Still, the decline in prices is seen to as a result of cautious sentiment ahead of the meeting, with other analysts highlighting uncertainty over Russia’s position. “It is believed Russia wants language in the new agreement that would link the size of the curbs to the health of the oil market,” Giulia Lavinia Specchia, an economist at ANZ, said in a morning note.

U.S. crude futures extended losses, slipping 0.57 percent to trade at $57.78 per barrel. U.S. crude had declined around 1 percent in the last session, having climbed to two-year highs in recent days. Brent crude futures edged down 0.28 percent to trade at $63.66.

— CNBC’s Fred Imbert contributed to this report.

At Time Inc., a Jittery Reckoning on the Day After the Sale

One employee, asked Rich Battista, Time Inc.’s chief executive, how much money he would personally gain from the sale. (Mr. Battista demurred, but according to regulatory filings, he could walk away with some $15 million.)

The questions captured a profound sense of loss afflicting a company that had once defined modern magazines, although it was not yet clear what would become of it under its new minders.

“It was a once very powerful, very important, very profitable force in the global publishing industry and an important player in the journalism world,” John Huey, the editor in chief of Time Inc. from 2006 to 2012, said on Monday. “It’s now a severely wounded animal.”

Meredith’s top executives, however, were more upbeat. “This is truly a transformative moment for the Meredith Corporation,” Stephen M. Lacy, the chief executive, said during a call with investors on Monday morning.

What Time Inc.’s Glory Days Looked Like

Read more »

Over the course of an hour, Mr. Lacy and other company leaders addressed questions from analysts about its strategy. While the call apparently helped electrify Wall Street — Meredith’s stock price shot up more than 10 percent for the day — it did little to quell the anxiety among the people working at the company it had acquired.

In an interview on Monday evening, Thomas H. Harty, Meredith’s president and chief operating officer, said his company had not made any decisions about selling Time Inc. titles, though he did not reject the notion outright.

“We really don’t have any particular plans for any part of the portfolio yet,” he said. He added that Time, Fortune, Money and Sports Illustrated were “really iconic brands that have been underperforming.”

Mr. Harty also said Meredith had “no plans to move any editorial or sales and marketing jobs from New York” and also did not expect “for the foreseeable future” to move Time Inc. employees out of their current offices. He added that layoffs are likely at Time Inc., which has drastically reduced the size of its work force in the last decade.

Meredith makes for an unlikely Time Inc. caretaker. A media company built on publications that celebrate domestic life, it has shown no past interest in current events, celebrity, sports and business — the very subjects that make up the bulk of the material in Time Inc.’s best known magazines.

In 2013, a deal between Meredith and Time Inc. collapsed reportedly because Meredith did not want to acquire four of Time Inc.’s signature publications — Time, Sports Illustrated, Fortune and Money.

It remains possible that Meredith will try to sell off titles including Time, Fortune and Sports Illustrated after the deal closes, and some current and former Time Inc. employees have wondered whether or not the Kochs themselves may have an interest in buying them.

“I think if we were being a little paranoid, we would say, ‘Yes, it sure looks like the Kochs will take those titles,’” Reed Phillips, a managing partner at the investment bank Oaklins DeSilva & Phillips, said. “But in reality, I don’t think it will work that way.”

Spokesmen for Meredith and Koch Industries have said the Kochs would have no influence over the magazines. Koch Equity Development, the private equity arm of Koch Industries through which Meredith received an infusion of $650 million, will not have a board seat. Meredith said the firm would “have no influence on Meredith’s editorial or managerial operations.”

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Time Inc., the publisher of Time, Fortune, Sports Illustrated and People, had been floundering since it was spun off from Time Warner in 2014. Credit Mark Lennihan/Associated Press

In a merger agreement filed with the Securities and Exchange Commission on Monday, Meredith said Koch Equity Development would meet with the company’s senior management four times a year and would have the right to appoint an observer to attend board meetings, if Meredith declined to pay the firm its expected dividend.

“We’ve agreed to meet with them just like we do with any other Wall Street analyst,” Mr. Harty said.

He added that Meredith’s senior management team had never discussed the deal with the Kochs themselves. “No one’s ever met with the Koch brothers,” he said.

The sale of Time Inc. underscored how far the publisher has fallen since its days as an arbiter of American culture. From their cavernous offices within the Time-Life Building overlooking Rockefeller Center, Time Inc.’s editors once commanded the attention of presidents and shaped global discourse.

Time magazine made the news accessible in staccato reports. Life magazine, in its large-format heyday, captured world leaders, Hollywood stars and soldiers at war through vivid photography and silky prose. Sports Illustrated was a bible for fans of Muhammad Ali, Willie Mays and Michael Jordan.

Fortune did not limit itself to industry titans but also covered people living in poverty, as it did with “People and Places in Trouble,” a photo essay by Walker Evans. And People magazine ushered in modern-day fame culture by making celebrities seem relatable and everyday people seem like stars.

Time Inc. had seemingly found a way to keep itself vibrant into the new century when it merged with Warner Bros. in 1989. In 2014, however, it found itself spun off from Time Warner. Since then, it has struggled to offset steep declines in print advertising and circulation.

With a scattershot business strategy, it now offers insurance for pets and a Sports Illustrated subscription streaming service for Amazon. Perhaps its biggest claim to fame in recent months was some unsolicited attention Time received from President Trump over the weekend about its “Person of the Year” issue.

“The reality is that it was a print company that produced great consumer brands but they were not brands for which it was easy to make a transition in an age of mobile,” Norman Pearlstine, a longtime Time Inc. executive and its editor in chief from 1995 to 2005, said.

“You can point to lots of things that might have been done differently or might have been done better,” he added, “but I’m not sure any of that could have overcome that basic reality.”

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Dueling officials spend chaotic day vying to lead federal consumer watchdog

The battle over who will lead a prominent federal consumer watchdog agency escalated Monday, with dueling leaders each claiming control before a federal judge during a chaotic day of public appearances and maneuvering.

By the end of the day, it was still unclear who was the true acting director of the Consumer Financial Protection Bureau — President Trump’s pick of White House budget director Mick Mulvaney or one of the agency’s longtime executives, Leandra English.

Mulvaney showed up at the agency’s Washington headquarters early in the morning bearing a bag of doughnuts and then firing off an email ordering the staff to disregard any orders from English. His office tweeted photos of Mulvaney taking part in office meetings and he invited in the press to announce that he had declared a temporary freeze on hiring and rulemaking.

Trump “wants me to get it [the agency] back to the point where it can protect people without trampling on capitalism,” Mulvaney said.

English, meanwhile, came to the office and sent an early morning email welcoming the staff of 1,600 back from the Thanksgiving holiday and then headed to Capitol Hill, where she met with several Democratic lawmakers. She held her first public appearance before a barrage of cameras and reporters sitting alongside Sens. Charles E. Schumer (D-N.Y.) and Elizabeth Warren (D-Mass.). Barely audible, English said the lawmakers had been “very helpful.”

Leandra English, a longtime executive with the CFPB, speaks with Senate Minority Leader Chuck Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.) before a meeting on Capitol Hill Monday. (Melina Mara/The Washington Post)

The confusion promised to continue for at least another day after a federal judge — a recent Trump appointee — declined to rule immediately on English’s request for a temporary restraining order barring Mulvaney from taking over.

English’s attorney, Deepak Gupta, asked U.S. District Judge Timothy J. Kelly to rule as “expeditiously as possible” in a way that could be immediately appealed. “Everyone needs to know who is director of the bureau,” Gupta said.

The standoff is quickly turning into one of the highest-profile efforts by the Trump administration to roll back the government’s oversight over the financial industry. And it is bringing to a head a long-simmering partisan fight over the CFPB, an agency established in 2011 in response to the global financial crisis.

The tug-of-war left the CFPB’s staff and contractors befuddled over how to proceed. Legal experts said any actions taken by either Mulvaney or English could later be challenged in court should they not ultimately prevail — effectively freezing the agency’s ongoing work. The CFPB, for example, is working on rules for debt collectors, which are now likely to stall, legal experts said.

Republicans have been trying to wrest control of the agency for years, complaining that the CFPB lacked accountability and its rulemaking made it harder for consumers to get a loan. Republicans in Congress, for example, recently voted to block a regulation allowing consumers to sue their banks, arguing it would trigger a flood of frivolous lawsuits and drive up costs. On Twitter, Trump called the agency a “total disaster.”

But Democrats and consumer advocates have cheered the CFPB’s aggressive actions against big financial institutions, noting its record $100 million fine against Wells Fargo for opening millions of fake accounts consumers didn’t want. The agency, they say, was intentionally created to be independent of Congress and from political pressure from the White House. Schumer said he recalled language being added to the legislation about who could temporarily replace an absent director to further limit political interference.

The White House and the Consumer Financial Protection Bureau are at odds over who should lead the watchdog agency as its acting director: its former director’s chief of staff, Leandra English, or White House Budget Director Mick Mulvaney, who has called the bureau “a sick joke.” (Jenny Starrs/The Washington Post)

“We purposely put that to avoid putting a fox in charge of the henhouse,” he told reporters.

The Trump administration spent months privately fuming that the CFPB’s longtime director, Richard Cordray, initially did not resign like other banking industry regulators following the election, and they have recently accused him of using his office to gain political favor. A former attorney general of Ohio, Cordray has been rumored to be interested in running for governor.

“We think that a lot of the past practices under the previous director and under the previous administration were used more to advance political ambitions and not about protecting American consumers, which is what that’s supposed to be,” White House press secretary Sarah Huckabee Sanders said Monday.

When Cordray did resign Friday, he set off a showdown with the White House by promoting his chief of staff, English, to deputy director, and saying that she would serve as acting director until the Senate confirmed his permanent replacement. Trump struck back a few hours later by announcing that Mulvaney would take the job instead.

Both sides spent the holiday weekend in a war of words about the fine print in dueling federal statutes. English’s supporters argue that the legislation that created the agency in 2010, the Dodd-Frank Act, gave the power to appoint an acting director to Cordray. And some questioned whether Mulvaney would have the time to properly run such a large agency while also serving as the director of the Office of Management and Budget. As head of OMB, he is tasked with negotiating budget agreements with Capitol Hill. A deal must be brokered before a deadline next week to avoid a partial government shutdown. Mulvaney said he plans to work three days a week at the agency and three days at OMB.

“President Trump put a cloud over the agency by invoking a statute [to appoint Mulvaney] that doesn’t apply here,” said Warren, who, as a bankruptcy professor at Harvard Law School, came up with the idea for the agency. “The agency has been an effective cop on the beat, and the banks don’t want an effective cop on the beat.”

Schumer said Trump has nominated people devoted to terminating the agencies they were nominated to run. Mulvaney, he said, is “only the latest in a line of Trojan horse candidates.”

Trump has installed new leadership at the top of several other regulatory agencies, many of which have already taken a more business-friendly tone. He is likely to follow that pattern with his eventual nominee to replace Cordray — a decision that Mulvaney said will happen quickly.

Mulvaney, a frequent critic of the CFPB, once called the agency a “joke . . . in a sick, sad way.” He stood by those 2015 remarks Monday but said the concerns among some consumer advocates were overblown.

“Rumors that I’m going to set the place on fire or blow it up or lock the doors are completely false,” he said. “We intend to execute the laws of the United States, including the provisions of Dodd-Frank that govern the CFPB.”

At the court hearing, Mulvaney’s attorney, Brett Shumate, a deputy assistant attorney general, was asked by the judge whether the government would agree that English would not be fired, to remove some of the urgency from the matter.

Shumate said he could not “give any representation or assurance on that score.”

For confused CFPB employees, José Andrés, the Washington celebrity chef who once had his own legal dispute with the president over operating a restaurant in Trump’s D.C. hotel, offered a respite. “Have two bosses? Please bring a proof you work there to any of our DC restaurants and the first drink is on us,” he offered on Twitt er.

Steven Mufson, Spencer H. Hsu and Thomas Heath contributed to this report.

Wells Fargo Bankers, Chasing Bonuses, Overcharged Hundreds of Clients

The whispers among employees had been around for years. They finally heard some facts during a conference call in June led by managers in Wells Fargo & Co.’s foreign-exchange operation: Some of its business customers had been cheated, according to two employees who were on the call.

An internal review showed that out of roughly 300 fee agreements based on anything from informal handshakes to emails to signed documents, only about 35 companies were charged the actual price they had been offered for currency trades handled…

Will Tesla Do a Stock Split in 2018?

Stock splits might not do anything to affect the intrinsic value of a company, but many investors still look forward to seeing the companies in their portfolios split their shares. So far, electric vehicle pioneer Tesla (NASDAQ:TSLA) has never done a stock split, even though CEO Elon Musk has expressed plenty of confidence in the company’s future. Having seen its stock jump as much as 20-fold from its $17-per-share IPO price just seven years ago, Tesla shareholders are curious whether a stock split could make the share price move higher and add to their long-term gains.

A soaring Tesla, but no split

Often, a big share-price gain prompts a company to do a stock split. Tesla’s move higher over the past few years has certainly justified a closer look at the stock. Even more recently, a jump from below $200 per share toward the end of 2016 to nearly $400 earlier this year drew a lot of attention, even from investors who are skeptical about the prospects for Tesla shares ever to split.

TSLA Chart

TSLA data by YCharts.

So far, Tesla has resisted natural catalysts to doing stock splits. The initial jump in 2013 from around $30 per share up to triple-digit stock prices came amid excitement about the Model S sedan, and the subsequent increase in production capacity allowed delivery figures to rise, prompting further share-price advances into the high $200s by 2014.

Subsequent releases of new vehicle ideas also added to Tesla’s success. The Model X and Model 3 announcements were both seen as evolutionary in Tesla’s development, and although the stock’s reaction to those moves wasn’t as large as the initial success of the Model S, Tesla still continued to deliver solid returns for its shareholders.

Red Tesla roadster on pavement on a hazy day with sun shining low in the sky.

Image source: Tesla.

Musk, however, has never wasted time in his conference calls with investors to discuss the potential for a stock split. The focus has always remained on operational considerations that have a larger future impact on the company’s long-term success. For instance, in its most recent earnings call, Tesla noted that production challenges are plaguing the automaker’s efforts to ramp up production of the Model 3 mass-market vehicle. Battery module manufacturing has been a bottleneck for Tesla, and the company pushed back its anticipated timeline for reaching higher production targets as a result. Even with those difficulties, Tesla isn’t standing still, having announced earlier this month its progress toward a commercial semitrailer as well as a reimagined Roadster.

What Tesla investors should expect for 2018

Investors who expect that Tesla will decide to do a stock split in the coming year are likely to be disappointed. With the company having avoided splitting its shares at key milestones like $100 and $200, the most likely scenario under which Tesla would consider a stock split is if the share price were to reach $700. That’s a level at which several major technology companies have looked at 7-for-1 stock splits, and Tesla clearly puts itself in the same camp as those tech giants rather than its carmaker peers. It’s possible that Tesla shares could more than double in 2018, but even if they did, it wouldn’t guarantee that the company would change its stock split strategy. Tesla also doesn’t have the same pressures that companies that are part of the Dow Jones Industrials have, because the indexes that include its shares aren’t price-weighted.

In the end, despite how much attention the whole question gets, it doesn’t matter whether Tesla splits its stock or not. The way that discount brokers allow investors to buy as little as a single share of a high-priced stock has made it far easier for small investors to gain access to red-hot companies. As long as the company continues to show signs of future success, then a rising share price should be reward enough for Tesla shareholders.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

Former Pilot Flying J sales executive: ‘I cheated customers and I did it well’

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News Sentinel reporter Jamie Satterfield gives a midday update on the Pilot Flying J fraud trial from Chattanooga on Nov. 27, 2017. Four Pilot executives are on trial for cheating trucking customers on diesel rebates for 5 years. Jamie Satterfield/News Sentinel

CHATTANOOGA, Tenn. — Brian Mosher considered himself a master at the game of defrauding trucking company customers, and he told jurors Monday he presented details of it to his bosses, including former Pilot Flying J President Mark Hazelwood and current Chief Executive Officer Jimmy Haslam.

“I was hammering for a promotion with the discount savings my (fraudulent) manual rebates created for Pilot,” Mosher testified in U.S. District Court in Chattanooga. “I used manual rebates to try to position myself for promotions.”

Mosher said he went over spreadsheets with Hazelwood and Haslam that detailed how much cash he “saved” Pilot Flying J by paying trucking firms a much lower discount on diesel fuel purchases than he promised.

“Early on, I would explain the way the spreadsheet was laid out,” he said. “But later on we would just look at the bottom line.”

Insider scoop leads to fraud talk

Mosher’s testimony came in the fourth week of the ongoing trial on federal conspiracy to commit wire and mail fraud charges of Hazelwood, former Pilot Flying J vice president Scott Wombold and former regional account representatives Heather Jones and Karen Mann.

Mosher, along with 13 other former executives and sales support staff of the nation’s largest diesel fuel retailer, has pleaded guilty. Two others were granted immunity. Pilot Flying J’s board of directors has confessed criminal responsibility to the tune of $92 million in fraudulent profits.

Haslam, who also owns the Cleveland Browns, has repeatedly denied knowledge of the scheme and he is not charged.

Mosher testified that he first learned of the fraud scheme in 2008 when talking to sales executive John “Stick” Freeman about some insider knowledge Freeman had about plans by one trucking firm – Western Express in Nashville – to take over another.

Freeman, who also has pleaded guilty and is expected to testify, got caught cheating Western Express and Pilot Flying J agreed to buy a dilapidated airplane from the firm for $1 million to smooth things over, testimony has shown.

The story of the airplane was legend among the direct sales division where the fraud scheme was centered, secret recordings showed. Freeman has said in those recordings – none of which contain Haslam’s voice – that Haslam knew about that, too.

At the time of his discussion with Freeman, Mosher was under the supervision of Hazelwood, who had not yet been promoted to president. Mosher said he asked Hazelwood “several times” about Freeman’s admitted fraud and whether it was a good idea.

“(Hazelwood responded), ‘Absolutely. We do not have contracts with these customers,’” Mosher testified.

‘I cheated customers and I did it well’

So, Mosher said, he got on board.

“I was told this is what I should do so I cheated customers and I did it well,” he said.

But as Mosher watched Freeman garner a promotion to a vice president’s job and saw Hazelwood himself rise up the ranks, he said he balked.

“I was fairly put off when other folks got promoted, and I had not,” he said.

Mosher was so good at the fraud that he reached his “commission capacity,” so each new fraud netted Pilot Flying J money but not Mosher, he told jurors. Mosher complained directly to Hazelwood, he said.

“I told him I was tapped out in commissions,” he said. “Therefore, manual rebates (insider code for fraud) did not allow me to profit.”

Mosher said he threatened to quit defrauding Pilot Flying J customers.

“(Hazelwood) responded, ‘That wouldn’t be a very good idea,’” Mosher testified.

Mosher got his promotion. He was director of national accounts when the FBI and IRS Criminal Investigation Division raided Pilot Flying J’s Knoxville headquarters on Tax Day 2013.

‘Elder statesmen’ of fraud

He also was tapped by Freeman to teach the art of fraud to every Pilot Flying J staffer in the direct sales division during a mandatory training session held at Pilot’s headquarters in November 2012.

What Mosher, Hazelwood, Wombold and Freeman didn’t know was Texas salesman Vincent Greco had turned mole for the FBI and recorded both that training session and a meeting among executives at Freeman’s Rockwood lake house two weeks earlier.

In that October meeting, Freeman boasted that the salesmen and supervisors gathered at his lake house were the “elder statesmen” who needed to teach underlings and new hires how to use the manual rebate system to defraud trucking companies. He said Mosher was the best man for the job.

Wombold said trainers like Mosher needed to highlight three lessons for Pilot Flying J direct sales staff as part of their presentations to make sure they “know these things backward and forward.”

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Assistant U.S. Attorney Trey Hamilton asked Mosher to describe the three key points he was instructed to deliver in his fraud training session.

“How to target unsophisticated trucking companies, how to cheat them out of their due rebate and how to get away with it,” Mosher replied.

‘Buck stopped at Mark Hazelwood’

Haslam was not at the lake house. Hazelwood arrived late.

“What’s up guys?” he yelled out.

He said he was excited by a conversation he had with John Compton, who for a brief stint in the fall of 2012 and early 2013 took over Haslam’s chief executive job so Haslam could devote time to the Browns, before arriving at the lake house.

“(Compton said), ‘I’m going to leave you (expletive) alone. All I want you (expletive) to do is sell a bunch of gallons,’” Hazelwood said on the recording.

Mosher explained why Hazelwood was so excited about Compton’s attitude.

“The buck stopped at Mark Hazelwood,” Mosher told jurors. “We would have to report no higher up the chain than Mark Hazelwood.”

It wasn’t clear if Hazelwood had told Compton about the fraud scheme. But within months of the decision to put Compton, who had helmed the Pepsico snack food and drinks corporation, Haslam took back the job, saying he missed it. Compton became a “strategic advisor.” His name has not been mentioned in any documents related to the fraud scheme made public so far.

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Freeman can be heard on the recording explaining to Hazelwood the idea of Mosher teaching the art of fraud at the mandatory sales training session. By that time, Mosher said, Hazelwood and the other executives had consumed a lot of alcohol and Hazelwood’s tone was raucous.

“Brian’s going to wind up running this (expletive),” Hazelwood said on the recording.

When Mosher explained that he planned to tell “stories” of fraud as a teaching tool since it was “from telling stories” that “we all learned this business from,” Hazelwood responded, “I’d agree with that.”

The trial continues Tuesday.

 

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