2017 Investor Roundtable: TSLA Market Action

[AlMc]

Elon Musk on Twitter

The Michigan Midnight Amendment

 

[myusername]

here's the magic lines again... remember... this was drawn in the first week of JULY... nearly 2 months ago... 5m shares... $11 move... and where's it land?... right on the line.

 

[Navin]

Again. You are like herpes

 

[ValueAnalyst]

@Papafox IIRC you had said before Tesla tends to do better on flat macro days. Can you think of a reason for this? Or is it just correlation without a known causation?

 

[EnzoXYZ]

I doubt Ferrari ever goes bankrupt.

People buying Ferrari in the future will be like rich guys buying an Arabian thoroughbred today.

Or buying a Rolex in a smart watch world.

Or some of us with more than *smart* amount all in TSLA. If all goes to plan hope to buy a Ferrari in 5 years out.

My last ICE car ever.

 

[Krugerrand]

People buying Ferrari in the future will be like rich guys buying an Arabian thoroughbred today.

An Arabian Thoroughbred is a crossbreed and known as an Anglo Arab. Anglo Arabs have no special monetary value. You want to pick a rare, expensive breed or a Thoroughbred foal by a currently popular Thoroughbred racing stallion to make your point.

 

[AlMc]

An Arabian Thoroughbred is a crossbreed and known as an Anglo Arab. Anglo Arabs have no special monetary value. You want to pick a rare, expensive breed or a Thoroughbred foal by a currently popular Thoroughbred racing stallion to make your point.

Great dressage horse or 'steady eddie' jumper for your child would also get you a couple Ferraris.

I digress,

Nice to see a Green Day. If we hold $345 time to buy back trading shares or some DITM J19s for me.

Not advice: investment, horse or cars

 

[Papafox]

@Papafox IIRC you had said before Tesla tends to do better on flat macro days. Can you think of a reason for this? Or is it just correlation without a known causation?

I use the analogy of Goldilocks and the three bears. Goldilocks (TSLA) prefers the porridge to be not too hot, not too cold, but just right. Too cold equates to the macros having a substantially down day.TSLA typically runs downhill at a higher percentage than the macros on such days. Too hot equates to the macros having a substantially up day. Traders know that TSLA does not run up with anywhere near the reliability of other stocks when the macros are running up, and so traders have an incentive to move money into other stocks where a better return for the day will be realized.

Why does TSLA typically run down with big macro moves but not up? Since the fair valuation of TSLA is a rather nebulous number, there's uncertainty as to TSLA's value and so when everything else is losing value I suspect there's kind of a fear-based knee-jerk reaction that I am not going to buy TSLA today unless it has at least the same or greater discount as other stocks (because tech stocks and growth stocks tend to go down faster than the broader markets in a retreat. On the other hand, on big up days for the broader markets, TSLA's track record shows that investors don't value the stock more just because every other stock has increased 1% that day. Rather, TSLA is trading in some type of equilibrium between what bulls and bears think it is worth. Perhaps it is the high amount of shorting that contributes to TSLA not running up on big up days for the broader markets.

The numbers this week tend to reinforce this theory. Yesterday, the NASDAQ was up 1.36% and TSLA was up.1.03% (not even keeping up with the NASDAQ). Today the NASDAQ was down 0.30% with TSLA up 3.36%, so you can see some of the dynamics. Pesonally, I think that yesterday was the transition day from descending to climbing, and so this status of a transition day limited TSLA's upside potential, particularly since the manipulations by shorts looked to be significant. Today, TSLA was cleared to run, and it did. I suspect we would have had a good day today even if the broader markets were up quite a bit, but probably not as good a day as we had with the broader markets somewhat down.

 

[vgrinshpun]

Aside from the macro influence, it seems that TSLA is in consolidation (symmetrical triangle) mode after the upward trend that started in December of last year. The interesting part is that Semi event on 9/28 might come just at the right time for a breakout to above $400. Also interesting that the triangle support line coincides with $325 in the next day or two, which also happens to be point of the closing of ER gap. I think that if there will be neutral macro background in the next month or so we might very well see this breakout playing out. Macro is a big IF.

View attachment 242978

Well as an update to the symmetrical triangle post above, TSLA made a substantial move toward the upper resistance line. The impetus for this move was today's after market 8-K filing , but the interesting question is what should we expect in the second half of the week? Since 8-K form revelations are decisevely positive (more about the developments that provoked this reaction in my post below) it is likely that TSLA will continue going up in the second part of the week. The million dollar question (perhaps a multi-billion one if you are a short) is whether we might see a breakout from this triangle, which would happen at around $264 - $265 level. Get your beverage of choice ready...

 

[erthquake]

The impetus for this move was today's after market 8-K filing , but the interesting question is what should we expect in the second half of the week? Since 8-K form revelations are decisevely positive (more about the developments that provoked this reaction in my post below) it is likely that TSLA will continue going up in the second part of the week.
View attachment 243368

Does this have to do with the sales incentive plan for JonMcNeill which might suggest strong S/X sales?

Website wait times for delivery change

 

[vgrinshpun]

I am not an expert in reading the SEC filings (as I often run out of patience sooner than reaching an end of habitually long sentences), but three items from the today's 8-K stood out as the reason for the run-up (my apologies to @techmaven):

1. Warehouse agreement amendment. Looks like Tesla transferred unused $75M from the 2016 agreement with DB that support Tesla leasing leasing financing from 2016 to 2017. Since at ASP of $100k the $75M **addition** to the funds available for Tesla leasing program could pay for about $7,500 cars (or more, depending on how leasing accounting works - financials professionals help is solicited). So the implication is that Tesla projects that it will be able to lease at least 7.5k MS/MX more than it previously planned to.
   

   Warehouse Agreements
   
   In order to support the Tesla Finance direct vehicle leasing program, Tesla’s subsidiaries from time to time establish warehouse credit facilities, as to which Tesla is not a guarantor or otherwise a party. Previously, Tesla Finance LLC (“TFL”) and Tesla 2014 Warehouse SPV LLC (the “2016 Warehouse Borrower”), entered into a Loan and Security Agreement dated August 31, 2016 with Deutsche Bank AG, New York Branch (“DB”), as administrative agent, and the other parties thereto (as amended from time to time, the “2016 Warehouse Agreement”).
   
   On August 17, 2017, the 2016 Warehouse Agreement was amended and restated (the “A&R 2016 Warehouse Agreement”) to permit the sharing of the existing $600.0 million lender commitment thereunder with a contemporaneously executed Loan and Security Agreement, by and among TFL, LML Warehouse SPV, LLC, an indirect Tesla subsidiary (the “2017 Warehouse Borrower”), DB as administrative agent and the other parties thereto (the “2017 Warehouse Agreement,” and together with the A&R 2016 Warehouse Agreement, the “Warehouse Agreements”). The Warehouse Agreements provide that the lender commitment under the A&R 2016 Warehouse Agreement may from time to time be reduced and reallocated to the 2017 Warehouse Agreement in a corresponding amount. As of August 23, 2017, a portion of the lender commitment has been reallocated to the 2017 Warehouse Agreement, such that the commitments under the A&R 2016 Warehouse Agreement and the 2017 Warehouse Agreement are $525.0 million and $75.0 million, respectively.
   
   The 2017 Warehouse Borrower’s obligations under the 2017 Warehouse Agreement are secured by the right to the proceeds of certain lease contracts and leased vehicles. The interest rate under the 2017 Warehouse Agreement is generally based on (i) LIBOR plus a fixed margin, currently resulting in an interest rate of approximately 2.7%, or (ii) the interest rate of short-term commercial paper notes used by certain lenders to maintain their loans. The 2017 Warehouse Borrower is subject to various customary events of default, covenants and limitations. The ability to draw under the 2017 Warehouse Agreement is scheduled to end on August 17, 2018, and the loan maturity date is September 20, 2019, in each case subject to specified acceleration or extension conditions. There were no amounts outstanding under the 2017 Warehouse Agreement as of August 23, 2017.
   
   In addition, the A&R 2016 Warehouse Agreement amended certain terms of the 2016 Warehouse Agreement to be substantially similar to the 2017 Warehouse Agreement, including by extending the loan maturity date to September 20, 2019. However, unlike the 2017 Warehouse Agreement, the A&R 2016 Warehouse Agreement provides that following the next drawdown of funds thereunder, additional drawdowns will require the consent of the lenders.

   
   
2. Solar City Credit Agreement payout - outstanding $325.3M balance under the credit agreement with BoA. It seems that Tesla is using lower interest bond money to re-pay higher interest Solar City balance (once again professionals in financing are most definitely welcome to comment on this conjecture). If true, sounds like another brilliant move by Tesla.
   

   SolarCity Credit Agreement
   
   On August 17, 2017, SolarCity elected to repay in full all amounts outstanding, and on August 18, 2017, terminated the commitments, under its Amended and Restated Credit Agreement, dated as of November 1, 2013 (as amended, the “SolarCity Credit Agreement”), by and among SolarCity, the subsidiaries of SolarCity party thereto as guarantors, the lenders from time to time party thereto and Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, in accordance with the prepayment and termination provisions of the SolarCity Credit Agreement. Prior to the prepayment in full, there was $325.3 million outstanding under the SolarCity Credit Agreement.

   
   
3. Incentive compensation plan withJon McNeil, President of Global Sales and Service. This ostensibly indicates that there is a good chance that demand is not that bad after all (also see #1 above)
   

   On August 18, 2017, Tesla entered into an incentive compensation plan (the “Compensation Plan”) with Jon McNeill, Tesla’s President, Global Sales and Service, pursuant to which Mr. McNeill will be eligible to receive variable compensation upon the achievement of certain target levels of (i) vehicle deliveries during the third and fourth quarters of 2017, (ii) operational and financial metrics relating to vehicle service performance and costs during 2017, and (iii) customer satisfaction scores during 2017, with an aggregate target payout amount of $700,000. The specific target levels pursuant to the Compensation Plan are to be separately determined, and payments pursuant to the Compensation Plan will be made in cash, stock options or restricted stock units.

So all in all it seems that today's run-up is not a case of few buyers over-reacting to the leaked form 8-K, and there is a good chance of more of the same tomorrow. This seem to be in line with the incredible optimism that Elon and team exuded during the ER report call. I think it is crystal clear at this point that fears of M3 osbourning sales of MS/MX did not materialize after all. In fact, the interest in M3 might have viral effect on the sales of MS and MX. That should help financials in Q3 and Q4 mightily.

 

[vgrinshpun]

Does this have to do with the sales incentive plan for JonMcNeill which might suggest strong S/X sales?

He-he... Looks like we have three strikes for the price of one (read my post above).

 

[erthquake]

I am not an expert in reading the SEC filings (as I often run out of patience sooner than reaching an end of habitually long sentences), but three items from the today's 8-K stood out as the reason for the run-up (my apologies to @techmaven):

1. Warehouse agreement amendment. Looks like Tesla transferred unused $75M from the 2016 agreement with DB that support Tesla leasing leasing financing from 2016 to 2017. Since at ASP of $100k the $75M **addition** to the funds available for Tesla leasing program could pay for about $7,500 cars (or more, depending on how leasing accounting works - financials professionals help is solicited). So the implication is that Tesla projects that it will be able to lease at least 7.5k MS/MX more than it previously planned to.
   
   
   
2. Solar City Credit Agreement payout - outstanding $325.3M balance under the credit agreement with BoA. It seems that Tesla is using lower interest bond money to re-pay higher interest Solar City balance (once again professionals in financing are most definitely welcome to comment on this conjecture). If true, sounds like another brilliant move by the Tesla.
   
   
   
3. Incentive compensation plan withJon McNeil, President of Global Sales and Service. This ostensibly indicates that there is a good chance that demand is not that bad after all (also see #1 above)

So all in all it seems that today's run-up is not a case of few buyers over-reacting to the leaked form 8-K, and there is a good chance of more of the same tomorrow. This seem to be in line with the incredible optimism that Elon and team exuded during the ER report call. I think it is crystal clear at this point that fears of M3 osbourning sales of MS/MX did not materialize after all. In fact, the interest in M3 might have viral effect on the sales of MS and MX. That should help financials in Q3 and Q4 mightily.

Wow. Thanks for taking the effort to pour through that filing!

 

[SpaceCash]

I am not an expert in reading the SEC filings (as I often run out of patience sooner than reaching an end of habitually long sentences), but three items from the today's 8-K stood out as the reason for the run-up (my apologies to @techmaven):

1. Warehouse agreement amendment. Looks like Tesla transferred unused $75M from the 2016 agreement with DB that support Tesla leasing leasing financing from 2016 to 2017. Since at ASP of $100k the $75M **addition** to the funds available for Tesla leasing program could pay for about $7,500 cars (or more, depending on how leasing accounting works - financials professionals help is solicited). So the implication is that Tesla projects that it will be able to lease at least 7.5k MS/MX more than it previously planned to.
   
   
   
2. Solar City Credit Agreement payout - outstanding $325.3M balance under the credit agreement with BoA. It seems that Tesla is using lower interest bond money to re-pay higher interest Solar City balance (once again professionals in financing are most definitely welcome to comment on this conjecture). If true, sounds like another brilliant move by the Tesla.
   
   
   
3. Incentive compensation plan withJon McNeil, President of Global Sales and Service. This ostensibly indicates that there is a good chance that demand is not that bad after all (also see #1 above)

So all in all it seems that today's run-up is not a case of few buyers over-reacting to the leaked form 8-K, and there is a good chance of more of the same tomorrow. This seem to be in line with the incredible optimism that Elon and team exuded during the ER report call. I think it is crystal clear at this point that fears of M3 osbourning sales of MS/MX did not materialize after all. In fact, the interest in M3 might have viral effect on the sales of MS and MX. That should help financials in Q3 and Q4 mightily.

My 363 weekly lottos are gonna PAY off. I'm kinda siked. Michelada in hand, cheers all

 

[AnneBoleyn]

I must say TT007 was spot on about TSLA this AM, despite my doubts. I would still hope to see that 400 range in the near future... preferably before Jan 2018 and 19 for my own sake!

 

[elasalle]

When is Tesla going to buy Ferrari?

Didn't a Tesla Model X just make a Lamb out of a Lamborgouni ?

 

[ValueAnalyst]

I use the analogy of Goldilocks and the three bears. Goldilocks (TSLA) prefers the porridge to be not too hot, not too cold, but just right. Too cold equates to the macros having a substantially down day.TSLA typically runs downhill at a higher percentage than the macros on such days. Too hot equates to the macros having a substantially up day. Traders know that TSLA does not run up with anywhere near the reliability of other stocks when the macros are running up, and so traders have an incentive to move money into other stocks where a better return for the day will be realized.

Why does TSLA typically run down with big macro moves but not up? Since the fair valuation of TSLA is a rather nebulous number, there's uncertainty as to TSLA's value and so when everything else is losing value I suspect there's kind of a fear-based knee-jerk reaction that I am not going to buy TSLA today unless it has at least the same or greater discount as other stocks (because tech stocks and growth stocks tend to go down faster than the broader markets in a retreat. On the other hand, on big up days for the broader markets, TSLA's track record shows that investors don't value the stock more just because every other stock has increased 1% that day. Rather, TSLA is trading in some type of equilibrium between what bulls and bears think it is worth. Perhaps it is the high amount of shorting that contributes to TSLA not running up on big up days for the broader markets.

The numbers this week tend to reinforce this theory. Yesterday, the NASDAQ was up 1.36% and TSLA was up.1.03% (not even keeping up with the NASDAQ). Today the NASDAQ was down 0.30% with TSLA up 3.36%, so you can see some of the dynamics. Pesonally, I think that yesterday was the transition day from descending to climbing, and so this status of a transition day limited TSLA's upside potential, particularly since the manipulations by shorts looked to be significant. Today, TSLA was cleared to run, and it did. I suspect we would have had a good day today even if the broader markets were up quite a bit, but probably not as good a day as we had with the broader markets somewhat down.

Thank you for this very detailed post; I really appreciate it.

Have you seen similar traditing patterns in other stocks in your past? Is this unusual characteristic unique to Tesla?

 

[ValueAnalyst]

I am not an expert in reading the SEC filings (as I often run out of patience sooner than reaching an end of habitually long sentences), but three items from the today's 8-K stood out as the reason for the run-up (my apologies to @techmaven):

1. Warehouse agreement amendment. Looks like Tesla transferred unused $75M from the 2016 agreement with DB that support Tesla leasing leasing financing from 2016 to 2017. Since at ASP of $100k the $75M **addition** to the funds available for Tesla leasing program could pay for about $7,500 cars (or more, depending on how leasing accounting works - financials professionals help is solicited). So the implication is that Tesla projects that it will be able to lease at least 7.5k MS/MX more than it previously planned to.
   
   
   
2. Solar City Credit Agreement payout - outstanding $325.3M balance under the credit agreement with BoA. It seems that Tesla is using lower interest bond money to re-pay higher interest Solar City balance (once again professionals in financing are most definitely welcome to comment on this conjecture). If true, sounds like another brilliant move by Tesla.
   
   
   
3. Incentive compensation plan withJon McNeil, President of Global Sales and Service. This ostensibly indicates that there is a good chance that demand is not that bad after all (also see #1 above)

So all in all it seems that today's run-up is not a case of few buyers over-reacting to the leaked form 8-K, and there is a good chance of more of the same tomorrow. This seem to be in line with the incredible optimism that Elon and team exuded during the ER report call. I think it is crystal clear at this point that fears of M3 osbourning sales of MS/MX did not materialize after all. In fact, the interest in M3 might have viral effect on the sales of MS and MX. That should help financials in Q3 and Q4 mightily.

I don't see anything in here to alter my fundamental view of the company, or expectations for a short-term SP move.

 

[vgrinshpun]

I don't see anything in here to alter my fundamental view of the company, or expectations for a short-term SP move.

What is your expectation for a short-term SP move? Short squeeze?

 

[ValueAnalyst]

What is your expectation for a short-term SP move? Short squeeze?

Yea - short-term as defined by a long-term investor. So not in the next few weeks maybe but sooner than people expect.

But my point was I didn't really see anything decisively positive and unexpected in the 8-K