Articles/megaposts by DaveT

[DaveT]

Per ER, Tesla is entering a phase of perpetual profitability and cashflow positiveness. Shorts would be continually grinded as stock will continue to tear up... So why exactly is Musk concerned about shorts?

It's possible he thinks Tesla is radically undervalued because of the role of shorts, and that while the stock could rise in coming quarters it also could be very volatile and could also become undervalued again during any difficult times ahead (ie., Model Y ramp, AP crashes, missed quarterly guidance, funding raise, etc).

Also, Elon could also be concerned that the media attacks against Tesla and their products is starting to seriously impact consumer's opinion of Tesla in a negative way, and this significantly hurts Tesla's mission. He could also be realizing that the shorts' involvement could continue even after profitability in a way stronger than most expect.

 

[AlMc]

Well, many of the 'shorts' are starting the narrative already that 'Yes. Tesla may be profitable in Q3 or Q4 but it is all because they 'gamed it' by using ZEV credits and only delivering the highest margin model 3s. Once that is over and the tax credit dissipates Tesla starts losing Monet again.

I think EM sees this as a possibility and as @DaveT says there will be some more ramp difficulties ahead. The shorts will continually change their thesis. Eventually this will hurt the brand. He wants 'out' of this recurring theme.

Personally, I can't blame him.

 

[JRP3]

Also, Elon could also be concerned that the media attacks against Tesla and their products is starting to seriously impact consumer's opinion of Tesla in a negative way, and this significantly hurts Tesla's mission. He could also be realizing that the shorts' involvement could continue even after profitability in a way stronger than most expect.

Exactly this. It's not just the shorts, it's the shorts, the media, and all the powerful forces desperately wanting Tesla to fail, all feeding off of each other increasing the volume and frequency of FUD. Of course going private won't stop it all but it will severely cripple the efforts.

 

[wdolson]

Well, many of the 'shorts' are starting the narrative already that 'Yes. Tesla may be profitable in Q3 or Q4 but it is all because they 'gamed it' by using ZEV credits and only delivering the highest margin model 3s. Once that is over and the tax credit dissipates Tesla starts losing Monet again.

I think EM sees this as a possibility and as @DaveT says there will be some more ramp difficulties ahead. The shorts will continually change their thesis. Eventually this will hurt the brand. He wants 'out' of this recurring theme.

Personally, I can't blame him.

If they start losing French impressionist painters they are in real trouble.

A bit more seriously, I agree with you.

 

[generalenthu]

Per ER, Tesla is entering a phase of perpetual profitability and cashflow positiveness. Shorts would be continually grinded as stock will continue to tear up... So why exactly is Musk concerned about shorts?

That's because Damodaran is a numbers jock and doesn't understand the impact of stock price on employee morale, the games shorts play and the ridiculousness of having to operate under a microscope.

Remember Brandolini's law:

”The amount of energy necessary to refute bullshit is an order of magnitude bigger than to produce it."

 

[schonelucht]

Why it would go that low?

Because of cash issues. Management will be distracted by the failed buy out offer (and inevitable follow up lawsuits) enough that I believe Tesla will dip in the red again. And that’s without creditors getting restless possibly tightening the screws asking for accelerated payment schedules etc. Because, if the deal fails, they’ll reason, the potential new investors found something in the books they didn’t like (and their due diligence will obviously have a much much closer look at the inside financials than we’ll ever get). Investment capacity going forward will be much lower etc.

If we need a bridge debt/equity facility in those circumstances it’s going to be on very unfavorable terms.

 

[aubreymcfato]

Mmm, Doug Field at Apple is not great news.
I wouldn't be surprised if Elon argued with Doug for M3 issues,
Doug got frustrated/tired and left, for then accepting a very generous Apple offer.

Sometimes I worry that Elon squeezes his workers a bit too much, even when they are world-class talents
like Doug. Doug kinda gave his finger back to Tesla going at Apple...

 

[Zhelko Dimic]

Per ER, Tesla is entering a phase of perpetual profitability and cashflow positiveness. Shorts would be continually grinded as stock will continue to tear up... So why exactly is Musk concerned about shorts?

Attacks on TSLA actually hurt Tesla brand.
And that won't go away for awhile, even with success.
Success will bear higher SP, and higher SP and related valuation will be 'incomprehensible' to some for a long while.

 

[hiroshiy]

Mmm, Doug Field at Apple is not great news.
I wouldn't be surprised if Elon argued with Doug for M3 issues,
Doug got frustrated/tired and left, for then accepting a very generous Apple offer.

Sometimes I worry that Elon squeezes his workers a bit too much, even when they are world-class talents
like Doug. Doug kinda gave his finger back to Tesla going at Apple...

What if Doug's move was planned? Elon's goal is sustainable transport, thus Apple making electric cars gives further progress to his goal. Also if Apple is making cars, it would require ODM, like Foxconn manufactures iPhones for Apple.

 

[Matias]

Per ER, Tesla is entering a phase of perpetual profitability and cashflow positiveness. Shorts would be continually grinded as stock will continue to tear up... So why exactly is Musk concerned about shorts?

He takes it too personally. He should quit twitter and only focus on execution.

 

[aubreymcfato]

What if Doug's move was planned? Elon's goal is sustainable transport, thus Apple making electric cars gives further progress to his goal. Also if Apple is making cars, it would require ODM, like Foxconn manufactures iPhones for Apple.

Well, it's in the realm of possibilities,
but I find more probable that Doug left after issues with the M3 ramp up.

 

[NOLA_Mike]

It's possible he thinks Tesla is radically undervalued because of the role of shorts, and that while the stock could rise in coming quarters it also could be very volatile and could also become undervalued again during any difficult times ahead (ie., Model Y ramp, AP crashes, missed quarterly guidance, funding raise, etc).

Also, Elon could also be concerned that the media attacks against Tesla and their products is starting to seriously impact consumer's opinion of Tesla in a negative way, and this significantly hurts Tesla's mission. He could also be realizing that the shorts' involvement could continue even after profitability in a way stronger than most expect.

Additionally I believe Elon has stated that the stock price volatility (much of which I think he blames on negative press and concerted efforts of short sellers and other outside forces) is having a negative impact on Tesla employees (all or most of whom are stock owners). It is a distraction to them.

From my perspective, these end of quarter pushes that have been happening since the introduction of the Model S in 2012-2013 wherein they go "all in" trying to get as many cars delivered as possible before the quarter cutoff date have resulted in less than ideal delivery experiences for many customers who take delivery during that last couple of weeks before quarter's end. I think a Tesla that doesn't have to concentrate on short term quarterly reporting will be a smoother operation in that regard as well.

Mike

 

[Words of HABIT]

FUD is out of control. IMHO a private Tesla couldn't come soon enough to advance their mission. As most all my TSLA is held in Canadian RRSP and TFSA accounts, I don't know if I can participate as a private shareholder, however if able would do so in a heartbeat. I'm thinking what is best for Tesla, not what is best for me.

David, you are one of the few posters that got me excited about investing in Tesla back in 2012 and I thank you for that. You have done incredible effort with your posts and weekly newsletter over the years and I commend you.

Wishing all TSLA investors the very best, and wishing Tesla even better.

 

[ggr]

Well, it's in the realm of possibilities,
but I find more probable that Doug left after issues with the M3 ramp up.

There's a funny saying in the context of rivalry between otherwise friendly countries: "Every time a New Zealander moves to Australia it raises the average IQ of both countries." Maybe Elon is happy for Doug to give Apple a leg up to building sustainable transportation, even when he didn't want him doing Model 3 any more.

 

[JRP3]

From my perspective, these end of quarter pushes that have been happening since the introduction of the Model S in 2012-2013 wherein they go "all in" trying to get as many cars delivered as possible before the quarter cutoff date have resulted in less than ideal delivery experiences for many customers who take delivery during that last couple of weeks before quarter's end. I think a Tesla that doesn't have to concentrate on short term quarterly reporting will be a smoother operation in that regard as well.

Spot on, I think this is an important point which has not seen enough discussion. Employees and customers both suffer which hurts the company.

 

[neroden]

Aswath Damodaran on Twitter

View attachment 324788

Wow, he hasn't studied Tesla at all, has he? It's pretty obvious to everyone why Musk wants Tesla to go private. And it's also pretty obvious who could fund it (Larry Page being the most obvious example).

 

[sweter]

I wonder if we'd have seen the tent and 5k Model 3's at end of 18Q2 if Tesla was private?

 

[Alketi]

Doug's departure has all the hallmarks of a firing, exactly in line with the secretary-story from Vance's book.

- (Assume argument over production ramp, stating 5K is impossible by July 1st)
- "If you think it's impossible then I'll make it happen plus I'll do your job". (Which means I don't need you)
- Doug goes on leave right before ramp (May)
- Elon assumes all his duties plus his own (press release)
- The tent is constructed in 3 weeks
- 24/7 push with Elon sleeping on the line. 5K goal is reached.
- A few weeks later Doug leaves the company

 

[ggr]

Doug's departure has all the hallmarks of a firing, exactly in line with the secretary-story from Vance's book.

- (Assume argument over production ramp, stating 5K is impossible by July 1st)
- "If you think it's impossible then I'll make it happen plus I'll do your job". (Which means I don't need you)
- Doug goes on leave right before ramp (May)
- Elon assumes all his duties plus his own (press release)
- The tent is constructed in 3 weeks
- 24/7 push with Elon sleeping on the line. 5K goal is reached.
- A few weeks later Doug leaves the company

Note that Elon also credits Jerome Guillen with a lot of the progress. Jerome seems to be Elon's general purpose troubleshooter. But I want him to go back to the Semi development.

 

[oneday]

For those saying Tesla becoming profitable will shut the door on a lot of the FUD slinging: I posit, it will not and it would possibly even get worse.

1. We all know the detractors will constantly shift the narrative.

2. Once Tesla makes profit and even does so consecutively, the new narrative will be: Not enough profit, look at the P/E, overvalued, they only make $2 per car, etc etc

3. Tesla is a growth company in an extremely capital intensive industry.

4. Profits will not be significant until Tesla stops growing.

5. 10 more years of this?

6. Tesla smear campaign is at a scale, almost, unlike anything we have ever seen. With opponents with deep deep pockets, and Wall Street benefitting from these distortions.

7. Profits won't shut anyone up because at the last earnings call Elon said many future quarters they will just barely eek out a profit.

8. Elon doesn't want to raise capital because the current climate is so toxic. Going private Tesla can be more open to plan an acceleration of growth they can't consider any longer being public. I speculate that if the climate were not so toxic, he would want to raise a little more capital. My evidence: the roof of GF1.

9. As Elon said going private until growth is more subdued will destroy the wall street influence of FUD and vitriol. Once growth is more stable on the 5-10% per year scale, then re- IPO.