On eve of bankruptcy, U.S. firms shower execs with bonuses; Corporate Insiders Pocket $1 Billion in Rush for Coronavirus Vaccine; I checked out the new Polestar cars; Elon Musk, Blasting Off in Domestic Bliss; The fifth (and final) step of cultivating mentors

By Whitney Tilson

Monday, July 27, 2020

1) For a good example of why average Americans are so furious about a rigged system, look no further than this. What a total disgrace! On eve of bankruptcy, U.S. firms shower execs with bonuses. Excerpt:

Nearly a third of more than 40 large companies seeking U.S. bankruptcy protection during the coronavirus pandemic awarded bonuses to executives within a month of filing their cases, according to a Reuters analysis of securities filings and court records.

Under a 2005 bankruptcy law, companies are banned, with few exceptions, from paying executives retention bonuses while in bankruptcy. But the firms seized on a loophole by granting payouts before filing…

The pre-bankruptcy payouts are needed, companies say, because potential stock awards are worthless and it would be impossible for executives to meet business targets that were crafted before the economic crisis. The bonuses ensure stability in leadership that is needed to hold faltering operations together, the firms contend.

Some specialists argue the bonuses are hard to justify for executives who may have few better job options in an economic crisis.

“With double-digit unemployment, it’s a strange time to be paying out retention bonuses,” said Adam Levitin, a professor specializing in bankruptcy at Georgetown University’s law school.

2) Though not quite as egregious, this is along the same lines: Corporate Insiders Pocket $1 Billion in Rush for Coronavirus Vaccine. Excerpt:

The race is on to develop a coronavirus vaccine, and some companies and investors are betting that the winners stand to earn vast profits from selling hundreds of millions – or even billions – of doses to a desperate public.

Across the pharmaceutical and medical industries, senior executives and board members are capitalizing on that dynamic.

They are making millions of dollars after announcing positive developments, including support from the government, in their efforts to fight Covid-19. After such announcements, insiders from at least 11 companies – most of them smaller firms whose fortunes often hinge on the success or failure of a single drug – have sold shares worth well over $1 billion since March, according to figures compiled for the New York Times by Equilar, a data provider.

In some cases, company insiders are profiting from regularly scheduled compensation or automatic stock trades. But in other situations, senior officials appear to be pouncing on opportunities to cash out while their stock prices are sky high. And some companies have awarded stock options to executives shortly before market-moving announcements about their vaccine progress.

The sudden windfalls highlight the powerful financial incentives for company officials to generate positive headlines in the race for coronavirus vaccines and treatments, even if the drugs might never pan out.

3) I sent this e-mail recently to my Tesla (TSLA) e-mail list (if you wish to be added to it, simply send a blank e-mail to: [email protected]):

Polestar is a new Sino-Swedish automotive brand jointly owned by Volvo and its parent company Geely. It is headquartered in Gothenburg, Sweden with production taking place in Chengdu, China.

It is now taking orders for two new cars: the Polestar 1, a hybrid sports car priced at $155,000 (it’s sold out until next year), and the Polestar 2, a pure electric vehicle that falls somewhere in between the Tesla Model S and Model 3, priced at $59,900 (you can configure one here; deliveries start in November).

Last week, Polestar opened up a “pop-up” showroom in New York City, right across the street from the Apple (AAPL) Store on 59th and Fifth, so I went in on Friday afternoon to check out the cars.

I was very impressed with both – they look great, seem solidly built, are luxurious, have panoramic sunroofs like Teslas, have good specs, all of the safety features and technology that Volvo is rightly known for, and, as the owner of four Volvos over the past two decades, the interior was comfortably familiar.

I can’t say how they drive (I signed up to be notified when I can take a test drive – maybe in a couple of weeks the salesman said).

And I can’t comment on the software, which is increasingly important to buyers – and a big edge for Tesla I think.

In summary, the Polestar 2 reminds me of the Jaguar iPace and Audi e-tron, both of which have been total busts in the U.S., though have sold better in Europe. I suspect the same will be true for the Polestar 2…

That said, these are just two of hundreds of competing cars from every auto manufacturer on earth that are going to hit every market on earth in the next one to three years. This tsunami of competition will be great for consumers – but it’s hard to see how it’ll be great for Tesla… and its nearly $300 billion market capitalization…

Here’s a picture of me in the Polestar 2. I posted nearly two dozen more pics on my Facebook page here.

4) Speaking of Tesla, love him or hate him (there’s no in-between, it seems), CEO Elon Musk is absolutely unique and fascinating, as this extended interview with New York Times columnist Maureen Dowd shows… Elon Musk, Blasting Off in Domestic Bliss. Excerpt:

The billionaire laughs a lot during the interview. He has come out on the other side of two of the most painful, lachrymose years that any entrepreneur could imagine, with self-inflicted wounds and schadenfreude galore.

“I think I’m a little scathed, yeah,” Mr. Musk said, adding: “I mean, basically, there was a period from end of 2017 to about, I guess, the middle of last year, that was excruciating.”

Peter Thiel, who helped build the company that became PayPal with Mr. Musk, told me, “He’s on top of the world. All of the people who have been shorting Tesla stock, who constitute a kind of ‘hate factory’ against the company, have been totally crushed. And that makes him very happy.” (Blowing a raspberry to his hedge fund foes, Mr. Musk produced a sold-out line of Tesla short shorts on his website for $69.420 apiece.)

Mr. Musk is so transparent that he seems heedless at times, in ways that make his investors nervous and his fan boys thrilled.

“The people who love him and the people who hate him are equally irrational,” said Ashlee Vance, Mr. Musk’s biographer. “It reminds me of Steve Jobs. It’s way beyond business or celebrity. It strikes me as religious, more than anything. His fans are acolytes.” (Mr. Musk is also like Mr. Jobs in his obsession with sleek design; he hates seams.)

Critics called him reckless in reopening his Tesla factory in Alameda County, Calif., in early May, after it had been closed since March 23 because of the coronavirus; he dared local officials to arrest him and threatened to move the factory to Texas or Nevada.

But his friends think it’s all part of the ride. They describe his internal narrative as going something like this: “I’m going to take over the world. That’s going to be a super-crazy process. And therefore, if the roller coaster ride isn’t incredibly scary, I’m doing something wrong.” And after Mr. Jobs, boards learned their lesson about pushing out visionaries in favor of gray-haired corporate suits.

Tesla stock has tripled in the last several months. Mr. Musk is the first person in almost a century to come out of nowhere and create a car company with that much volume, showing other plodding car companies how electric cars can be cool, sexy and incredibly efficient.

5) The fifth (and final) step – not only for cultivating a mentor but, more broadly, for deepening all relationships – is the most important: long-term relationship building. Here are some of the ideas that have worked well for me:

  • Be open, honest, and personal. Don’t just talk about your achievements and what’s going great in your life… Also share setbacks and things that are causing you stress and keeping you up a night.

When you open up with someone, it creates a level of intimacy that deepens the relationship and creates reciprocity, meaning they’re likely to share personal stuff as well. You need to be careful, however – sharing too much, too quickly can be perceived as inappropriate, or even creepy. This should be a balanced experience, with you sharing something that’s a little personal/intimate, then they reciprocate, and so forth until, over time, you’re fully “on the grass” and can talk about anything. That’s the hallmark of the kind of deep relationship you should strive for.

  • Make more personal connections (again: college, kids, pets, sports, travel, language, culture, etc.). If you run into a common friend, take a picture and send it with a nice note.
  • Become their eyes and ears and send them articles and other materials of interest. But have a high bar – not too much!
  • Congratulate them for something they did or that happened to them (you can set up Google alerts on anyone).
  • Remember their birthdays, ideally with something special like an e-mail with some photos of good times you’ve spent together.
  • Invite them to a sports or major life event like your birthday, wedding, bar mitzvah, etc. And, of course, if they invite you to anything, show up!
  • If they hit you up for a charity, give (no matter how small)!
  • Look for opportunities to do things with them – poker, golf, tennis, a trip…
  • Always pick up the tab when you’re together. It shows generosity and creates reciprocity.
  • Send an unexpected gift (a book, bottle of wine, nice pair of shoes, etc.).
  • Surprise them with special, personal things like photos/photo albums, baby gifts (always a big hit!), and home-baked cookies. For example, every December, I bake chocolate chip cookies, put them in nice holiday tins, and send them to both Berkshire Hathaway (BRK-B) CEO Warren Buffett and Vice Chairman Charlie Munger (who both have a sweet tooth), including our holiday card with a personal note thanking them for all they’ve taught me.
  • Introduce them to someone. This only works, however, if you’re 100% sure that it will be perceived as a valuable connection. In two decades, I’ve only introduced Buffett to one person – tennis legend Billie Jean King. I met her at a private event at the U.S. Open and we had a nice conversation. I’m a lifelong tennis player and fan, so my knowledge of, interest in, and appreciation for her was genuine.

Then, she asked me what I do. I said, I’m a value investor, like Warren Buffett.”

She exclaimed, Oh, I love Warren Buffett!”

Have you ever met him?” I inquired.

She said, No, but I’d love to!”

Well,” I said, I’m sure he’d love to meet you as well.”

Buffett is a big sports fan – he loves rubbing elbows with stars like Alex Rodriguez, Tiger Woods, and LeBron James – so I immediately e-mailed his secretary and told her what was going on. Within minutes, she e-mailed me back and asked for King’s mailing address.

Having made the connection, I didn’t think of it again until, a decade later, I was having lunch with a friend who’s close to Buffett and is a big tennis fan as well. I happened to tell him this story and he laughed and said that not only did Buffett and King meet, but she now attends most Berkshire Hathaway annual meetings!

Best regards,



Whitney Tilson
Get Whitney Tilson’s Daily delivered straight to your inbox.

About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

Click here for the full bio.