In a bankruptcy, holders of Tesla's debt will have priority over all holders of common and preferred stock in the company — including the Valley celebrities like Google cofounders Larry Page and Sergey Brin and eBay billionaire Jeff Skoll who have invested in Tesla. Raising this round of debt, followed by a bankruptcy filing, could be Musk's way of squeezing out other shareholders — especially cofounders Martin Eberhard and Marc Tarpenning. Employee with unexercised stock options will get wiped out in such a scenario.

Current shareholders will have a right to invest in this debt round according to their current share — but Musk may well be counting on the short 30-day offering period and tight financial markets to shut out anyone who doesn't have the cash handy.

Why do I think this is a likely scenario? Because Musk has done something similar before.

When Musk briefly served as PayPal's CEO, he'd run the company's bank account to six weeks' worth of cash. PayPal insiders say Musk was pulling "financial machinations" to maintain his control of the company — but the board fired him instead and replaced him with cofounder Peter Thiel, who steered the company to its $1.5 billion purchase by eBay.

Unfortunately for Tesla, there's no obvious white knight like Thiel on the horizon.

“It’s taken us about a year to correct major errors,” Mr. Musk told the New York Times. Eberhard has a snappy response: “Look at the constant factor at the company through all the years: Elon.” A history lesson from PayPal: Not until Peter Thiel replaced Musk as CEO, and he ceased day-to-day involvement with the company, did it thrive. (Photo by Peter DaSilva/New York Times)

I would be more impressed if Sequoia hadn't pulled this act before when the last bubble burst. True, they called the movement of the market. But it's conventional wisdom today that the economy is tanking.

But what does the economy have to do with the startups Sequoia funds? The whole point of venture capital is to nurture companies that need capital. Part of the art of investing in startups is knowing when to push them out of the nest. Templated cost-cutting advice, applied across Sequoia's portfolio, is hardly a value-add.

And it's not clear how this was bad advice a year ago. Sequoia's portfolio should have been keeping a close eye on costs then as now. The IPO market is definitely ailing now, but it's hardly been healthy over the last few years. Large acquisitions have been scant since MySpace and YouTube got bought. The chaos on Wall Street doesn't change the bleak outlook for exiting startup investments profitably that existed beforehand.

So what's really going on here? Consider two of the companies that heard Sequoia's speeches last time around: PayPal and Google. They both spent and grew aggressively in the face of a local recession. They both managed to IPO when few tech companies were going public. And they both delivered handsome profits to Sequoia.

I'm just guessing at Moritz's game, but here's what I suspect is going through his head: He could have delivered a cost-cutting sermon a year ago, true. But his entrepreneurs are far more likely to listen to it now. And the rest of Silicon Valley is listening, too. He's made his bit of noise, knowing full well word would leak out, and put a scare in all his competitors.

How convenient that this scare-tactics summit was held just a month after Sequoia raised $1.7 billion in new funds. While everyone else is hunkering down, Sequoia will cull the weaklings from its portfolio, double down on the winners — and profit before anyone realizes the good times are back. Well played, Michael, well played.

Levchin's Slide promotes the practice of sharing every precious and not-so-precious moment with the world at large, and that his company has massive amounts of Facebook user data at its disposal thanks to the popularity of the company's Facebook applications. Yes, the rich are different than you and I: They don't buy into the crap they sell us.

Here's how it works:

Get up one morning, check your email on your iPhone. There's a message from PayPal confirming your 100 Euro purchase of services from Skype.

Whoa. I didn't order 100 Euros of anything. And in Euros?

You go to your computer, wake it out of its sleep, and an alert window from Skype is waiting for you.

"Your Skype password has been recently changed. You need to sign in again with your new password in order to use Skype. This is a security measure taken in order to prevent your Skype Account from being abused."

Hmm. I didn't change my password.

You try to login to Skype. You can't. You visit your PayPal account. 100 Euros has been taken out of it to purchase Skype services. You think fast, cancel the agreement you had between PayPal and Skype
to pay a $3 monthly fee for SkypeOut. You send a fraud report to PayPal. You send a fraud report to Skype.

In both reports you summarize the issue: someone hijacked your Skype account and stole 100 Euros (about $142) worth of Skype services from you. Nothing authorized by you at any point. It's called theft. All will be good, right?

PayPal takes four days to make a determination.

Quote: "A PayPal claims specialist has reviewed the case and determined that the claim does not meet the criteria for unauthorized use, so the case is now closed."

Are you kidding? According the the "specialists", theft is not unauthorized use. Skype gets to keep its 100 Euros that was stolen from you.

You think, "I'll just appeal this..where's the 'appeal' link?" You find there is none. You have to write PayPal a letter. Yes, a letter. To Omaha, Nebraska. A letter asking for the documentation they used to make the determination. An Internet company insists you write them a letter.

OK, surely Skype will help out. That is, if they ever write back. They take nearly two weeks to get around to assigning a human to the case.

Skype writes back in 10 days. "Patrick P. is on the case. Patrick says: "In your case it appears that someone has succeeded in fraudulently obtaining your PayPal account and purchasing credit."

You think, "great, somebody understands."

Patrick goes on:

"First, you are not liable for this transaction in any way. "

Sweet. You'll just appeal to Skype and... Wait. You read further.

"We suggest that you submit a Transaction Dispute via Paypal.com."

Great. Back to square one.

Patrick sends another email a couple of days later. It's about that money that was stolen from you to buy services from them that you didn't authorize.

"Skype can not refund the money you might have lost due to this incident. Every user has to take care of his/her security systems on private computers."

"Money you might have lost?" You did lose money...and by the way, it's your fault, loser.

(Photo by Joi)

Silicon Valley has a lot of noise, a lot of hype. People are very excited about all of the Facebook stuff, Facebook applications. It's just been a huge hype over the last year when actually ... there isn't really that much value. It's just a bubble. It's almost a distraction. Whereas here, there is certainly less activity. But at the same time, you don't have these bubbles of nonsense out here.

No matter what business plan they decide upon, they will have a tough time executing. As an ex-PayPaler, I can tell you that the infrastructure there is stretched to the breaking point, and it doesn’t help that the turnover rate is through the roof (I was quoted 80% in the first year, but I suspect it’s closer to 50%). Someone got the bright idea that the solution was to throw more people at the problem (Brooks’ Law, anyone?) so now nobody is responsible for anything. Portions of the code base are considered too “fragile” to modify, so obvious bugs go unfixed for years. And if you think Twitter has a scaling problem ...

Best line I heard was from an H-1B slave: “I look at the code and I want to cry.”

The swift executive rotation was a deliberate strategy of former eBay CEO Meg Whitman, a management consultant by training. She called it "repotting" — moving executives around through different parts of the business. While it may have helped her charges' careers, it did nothing for PayPal. The latest potted plant to occupy PayPal's C-suite, Scott Thompson, is bragging to investors that PayPal will soon derive more than half its revenues from websites other than eBay. A good thing, considering how growth in eBay's core auction business is grinding to a halt.

Thiel saw this as a problem back in 2002. eBay was growing fast at the time, but PayPal's investors — the company was briefly publicly traded before eBay bought it — were worried about its dependence on another company. After eBay bought PayPal, executives spent years grinding away at "integration" — even though PayPal, as an independent concern, had managed to neatly fit its payment service with eBay's auctions, without much help from eBay — in fact, with eBay actively trying to replace it with its own BillPoint payment service.

In the years since, what has eBay done with PayPal? It's recycled ideas from the Thiel era, and tried to tout them as "innovatons." It has swollen the size of the PayPal unit to some 7,000 employees. ("What do they do?" a former PayPal executive asked me.) And it has leaned on PayPal to mask slow growth in its core business.

How much would PayPal be worth now on its own, without eBay's bloated management? Would Amazon.com and Google even be trying to challenge it in the payments business? Perhaps it's a question that shouldn't remain abstract.

eBay tried to buy PayPal several times; every time eBay returned to the bargaining table, PayPal's price went up. It finally took the workings of a liquid market to determine PayPal's worth; after PayPal's IPO, eBay had to pay a fair price for the payments company.

Yes, it's time for another PayPal IPO. Too bad Peter Thiel isn't available to run the company — he's making far more money on his hedge fund than he ever did from PayPal.

(Photo by David Orban)

Ignominiously, the botched launch ended up splashing the ashes of James Doohan, the actor who play Scotty in Star Trek's ashes all over the Pacific. Perhaps more materially, three satellites — two from NASA and another form the department of defense — also saw their trips cut drastically short. Thiel's $20 million follows $100 million of Musk's own money already sunk into the project. As friendly as the two are now, Thiel's investment has to be humiliating — a reminder that Musk may have the occasional clever idea, but it takes a Thiel to make it pay off.

Wrong. Not only do Stickam's terms of service forbid "vulgar, obscene, profane, indecent or otherwise objectionable" content, but PayPal itself still is iffy on what counts as too risqué to take a payment-processing cut of.

Proto-Web celebrity Jennifer RIngley, of JenniCam, blamed PayPal for the demise of her 24/7 webcam site. Like most girls with a camera poised on them online, she was only naked here-and-there, but that's enough to get tossed off the payments service.

Stickam's playing it safe, at least in writing — enough to cover themselves when users flash some skin just north of nude. What they don't get is that there's a difference between porn and watching a woman staring bored and topless at you back through the screen. Or at least there should be.

Sure, my Sanyo phone has an AOL Instant Messanger app. But it takes two and half minutes to send a message and then another two and a half to see if I got one back. Here's a new version for the iPhone, which could put an end to expensive text messaging. An alternative: Facebook's new iPhone app integrates the site's new chat feature.

Remember radio? That place where you could listen to and discover music without paying for it? It's back.

FileMagnet lets you load and view PDFs and Office documents from you desktop. Such a nice convenient way to keep you working all the time.

This app, a guitar tuner that uses the iPhone's microphone, obviously targets a niche audience. We're betting the Edge asked Jobs for it

This Major League Baseball app would be better if it streamed MLB.tv straight to your iPhone. It doesn't. But it does show game highlights not too long after they actually happen — which won't be a bad way to get through graduations, weddings and PowerPoint presentations.

DutchTab takes the pain out of splitting a tab so you don't have to ask the server to do it. Only problem: greasy fingers on your iPhone.

After using DutchTab to figure out how much you owe, send your friend the cash via PayPal. Seriously, in 2000, the folks at PayPal thought this was how people would use the service rather than to settle eBay auctions. The future is here!

Always be closing, right? Keeping your leads' contact info in your pocket at all times will at least get you the steak knives.

Muxtape founder Justin Ouellette showed us what can go wrong when you have to email blog posts from your iPhone instead of being able to use an app like TypePad. (If you upload the wrong file, you still might end up blogging your deal memos by mistake, though.)

The oversharing generation's perfect app. Opt in and your friends will know where you are at all times.

With video and text chat allowing managers to check in on employees and feed them scripts, as well as cheap international calling and archiving conversations, it can work as a cheap and easy tool for managing remote customer-service centers to close those deals made on eBay and keep the credit card charges flowing into PayPal. In other words, it's about lubricating "transaction friction" by increasing buyer confidence and decreasing credit card charge-backs and complaints. Now if only there was a country with lots of English speakers and really low wages.

Kind of like that anonymous complaint about eBay's anticompetitive practices in Australia "accidentally" displaying data which identified Google as the author. If the conspiracy theorists are right about Google blocking access to PayPal through App Engine intentionally, then why not just say that turnabout is fair play after eBay pulled similar stunts to keep Google Checkout off the auction site? That seems easier.

The file had an electronic stamp showing it was generated from a Microsoft Word document titled ""ACCC Submission by Google re eBay Public 2.DOC." So much for the secret jab. Google runs its own payments service, Google Checkout, and the PayPal rivalry is often intense. Last summer, Google planned a Boston Tea Party to promote Checkout to merchants during the eBay Live conference in Boston. eBay complained and, even though Google canceled the event, eBay pulled its advertising from the site for several weeks.

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Previously:

• A is for Adelson, who cofounded Digg


• B is for Botha, who sold YouTube big


• F is for Fitzpatrick, and "hookers and blow"


• L is for Levchin, who never goes slow

Previously:

• A is for Adelson, who cofounded Digg


• B is for Botha, who sold YouTube big


• F is for Fitzpatrick, and "hookers and blow"

Previously:

• A is for Adelson, who cofounded Digg

PayPal "has gone to great pains to ... not be a bank" according to Christa Quarles, managing director of Thomas Weisel Partners. Some users think the company is holding the cash to make money on the interest, but it's a small enough amount — an estimated $10 million a quarter, tops — that it doesn't make a significant impact on eBay's bottom line. (If it hadn't taken a massive writeoff for its Skype purchase last year, eBay would have made more than $1 billion in net profit.) Instead, PayPal's move is likely an attempt to reduce fraudulent purchases by keeping money in de facto escrow until the purchase has been finalized. Sellers may not like it, but the alternative — PayPal letting sketchy transactions go through, and then recovering the money later — sounds worse.

(Photo by AP/Paul Sakuma)

This time, to improve results, eBay will integrate PayPal data — "data about what people actually purchased and bought," Donahoe said — into its search algorithm. How timely, since eBay has only owned PayPal for more than five years now.

Something needs to change. Check out the top result for a search on the term "Wii." Somehow I don't think eBay's earning a lot of revenue on listed items like this one.

But don't get too excited. After all, even the Facebook-app advertising economy is scarcely developed. Most of the apps making money are ... advertising other apps. It's as if this were California in 1849 and you had people setting up picks-and-shovels advertising agencies before the picks-and-shovel merchants opened their doors. Online advertising works, obviously, but no one's hit on the right formula for Facebook apps yet.

Turning Facebook into a marketplace is another potential revenue stream for the site. As eBay learned with PayPal, it's not enough just to list goods; you have to provide the means to move cash and close the deal, too. Expect to see a ton of e-commerce apps — and a rash of alarmist articles predicting Amazon and eBay's doom. There's always a market for those.

eBay spokeswoman Shannon Stubo confirms that Hill and Knowlton still works for eBay, though not on as many projects as it did before last month, and never in the UK, where Jackson works. eBay, she notes, never authorized this particular press release. Jackson, however, was managing director of Hill and Knowlton's UK tech practice until recently, so it beggars belief that he wouldn't have known eBay was a client.

Was Jackson merely stupid? Or was he vindictive? Hill and Knowlton, after all, is the same firm which recently dissed the Entertainment Software Alliance, a videogame lobby group, shortly after the ESA spurned its advances.

Hill and Knowlton's San Francisco-based tech chief, Joe Paluska, didn't respond to a request for comment. But in a recent interview with a UK PR blog, Jackson had this to say for himself:

TWL: Just how big a penis do you need to run the UK corporate technologies practice at H&K?
MJ: Apparently it's not just about size; it seems experience is quite important too.

The other secret? No one sleeps around here. Levchin offhandedly mentions his life without a company:

"I enjoy sitting on nice beaches and hanging out with my girlfriend and playing with my dog, but that's three hours a day," Mr. Levchin said. "What about the remaining 18 hours I'm awake?"