Articles That Seeking Alpha Doesn't Want To Publish

[SteveG3]

for what it's worth, this comment I wrote on Seeking Alpha has not been deleted yet, but I thought I'd share it here in case it is, or if anyone else wants in on this new approach to FUD I find quite fun. it's near the top of an "article" Anton Wahlman posted tonight:

"Like every bear article or comment I've read, this piece from Anton relies on one or more of these four tactics:

1. Name Calling
2. False Statements
3. Distortion of information, such as cherry picking information out of context
4. Attempt to convey a false air of authority

Anton's clearly gone back to the well with this article.

You have to wonder... if the bears actually have a legitimate case against a TSLA investment, why aren't we hearing that rather than the list above? It's been like this for at least the two and a half years I've been following Tesla... could it be they just have no case to make based on facts and reasoning?
Ponder that for a while... in the meantime, see if you can identify by number which of the four tactics above Anton has deployed here (hint: he's used more than one).
For bonus points see if you can identify which number the various bear crew members use in their comments to Anton's blog."


---------------------


now rather than reply to bear gibberish only to run in circles as they spin back more middle school squirmy gibberish, I've
taken to just calling which numbers I see in bear comments. It's way more efficient, and I think effective in getting at the point... there's not facts and reason in their posts, but just formulaic intellectual dishonesty which can be identified as 1, 2, 3, 4 or some combo, and the specific content of a 1, 2, 3, or 4 comment is irrelevant. this might make more sense if you look at the page (of course, you may prefer not to click on SA). of course, if a bear makes a substantive point, I will gladly acknowledge it.

http://seekingalpha.com/article/274...ess-conference-schedule?uide=4208861&uprof=45

 

[SteveG3]

Update: Seeking Alpha removed that post overnight.

While it was up it seemed to me to be quite effective at diminishing intellectually dishonest posting.

fwiw, here's the reason S.A. cited for removing the post:

"The comment copied below looks to contain such a personal attack and/or blanket dismissal and so, regrettably, we’re compelled to remove it."

 

[JRP3]

If someone posts an article based on a false premise, invalidating the entire point of the article and making it worthless, you aren't allowed to say that because of their "blanket dismissal" clause. Basically on SA you can lie as much as you want but you can't call someone a liar.

 

[SteveG3]

Basically on SA you can lie as much as you want but you can't call someone a liar.

that's pretty much my experience of SA, and it's sure attracted people who want a haven for lying.

 

[chickensevil]

that's pretty much my experience of SA, and it's sure attracted people who want a haven for lying.

So what you are saying is, if I started an article out with Elon Musk died last night and went on to outline why Tesla was now doomed to failure... You couldn't come out with a comment (and evidence) refuting that Elon Musk died because it would dismiss the entire article? That's... Interesting... We should find a way to flip that lying into puff pieces for Tesla. Call it reverse FUD.

 

[chickensevil]

Just went to post a comment on that Anton piece and was "warned" before I even posted something along the lines of "comments reflect your professional reputation are you sure you want to post that?" Not sure what I posted that was so wrong, maybe you all can tell me?

Does the BMW 3 series hurt BMW 7 series? Are they even remotely the same cars? If you had the choice and money wasn't a factor would you prefer the 3 or the 7?

While I am certain that there are people who stretched up to the S that would have gone with the model 3 otherwise, I think the same will be said about people stretching up to the 3 that normally buys something much cheaper. Anyone paying attention knows roughly what will be the minimum possible specs of the model 3 and they would have already made up their mind to wait or get the S instead... Revealing the product would have no meaningful affect since anyone swayed away from the 3 would be countered by the increased brand awareness leading to more overall S sales.

The only canablizing is what the S is currently doing to the X now that you can get the S as an AWD. Many people were going for the X because that was the only way to get that. So unless the X has something unique about it that would force someone into an SUV over a sedan that they would normally buy then all of this is just crap and there is no "Osborn" effect. This shows you know little to nothing about Tesla's product offerings (current and future) nor about their customers (current and future) maybe you should study that for a while before you write another article that makes these simple mistakes...

 

[FluxCap]

The more we ignore Seeking Alpha, the less relevant it becomes. It has already been de-listed from Yahoo's news feed. I will not visit, or click a Seeking Alpha link.

 

[SteveG3]

Just went to post a comment on that Anton piece and was "warned" before I even posted something along the lines of "comments reflect your professional reputation are you sure you want to post that?" Not sure what I posted that was so wrong, maybe you all can tell me?

Chicken, based on the inoffensive nature of your comment, and apparently what was an instant warning, I'm guessing some software found the word "crap" (which some people consider a swear word) and gave you that message. You could try the same content again with the word removed.

fwiw, your call, but I don't think turning the tables and writing a lie filled puff piece makes sense. Now, an absurdly lying positive piece as satire I think would be great... but I'm pretty sure they would not post it.

 

[JRP3]

then all of this is just crap

Blanket dismissal, plus a meansy word. Bad chicken.

 

[32no]

When I see something really stupid on SA, I can't stop myself from posting a sarcastic comment in response, especially since the bears often have vitriolic comments towards bulls. However, I never got anything from SA. Here's a recent comment I posted in response to a couple of knuckleheads agreeing that carbon dioxide isn't a pollutant:

pot pie and chip,

<<Carbon dioxide is not a poison or pollution.>>
For the sake of science, education, and enlightenment, wrap a plastic bag around your head then record results over time. Try not to let your hand shake too much, we want legible results. Then we can talk about whether carbon dioxide is a poison/pollution.
<<I heard that plants, trees and the like actually enjoy it and produce clean oxygen in return....>>
Chip, you can try this experiment too. But this time, take a very large plastic dome, get all the oxygen out, and stand in it with a single potted plant. Let's see how that goes. Try not to scratch the surface of the dome in attempts to escape though, it's not cheap.

This is the type of comment SA should remove, along with many of the bear comments that are disparaging, vitriolically sarcastic, or just flat out dumb or irrelevant. I know that I should be the change I want to see in the world and all, but sometimes the problem isn't seen by everyone else and needs to be exaggerated. Plus, I doubt Pot pie and Chip will be too keen on taking their extreme stupidity/ignorance outside their skulls next time (hopefully).

 

[chickensevil]

Blanket dismissal, plus a meansy word. Bad chicken.

Haha really? That is considered a "bad word"? Wow... Wouldn't want to hurt someone's feelings on the internet, heaven forbid it!

Also I justified my dismissal of his reasoning, I was just really quite annoyed by the stupidity I couldn't help myself. In fairness I have only ever had one comment actually removed... Maybe I need to step my game up?

 

[JRP3]

Definitely, I've had more than 20 deleted :biggrin: Of course my post total is probably much higher as well, so percentage wise it's not that many.

 

[chickensevil]

Definitely, I've had more than 20 deleted :biggrin: Of course my post total is probably much higher as well, so percentage wise it's not that many.

Yeah my rate of increase in posts dropped off as I started getting more and more value from this website. Which is why my rate of posts have steadily gone up here.

While people can get on the crazy side of both bull and bear here this forum has a really great way of keeping the stupid out which has been quite nice.

That's value I haven't seen on Seeking Alpha, Reddit, or Yahoo. Nor in any of the comment thread of various articles on other websites. There is something to be said about having a place that seems to foster a good healthy discussion about things while keeping a lot of the bad stuff at bay.

 

[32no]

Published.

One of the first comments is our friend logical thought (Mark Spiegel), our favorite source of FUD.

 

[CalDreamin]

Published.

One of the first comments is our friend logical thought (Mark Spiegel), our favorite source of FUD.

That figures. He's the King of anti-Tesla FUD.

 

[Auzie]

Published.

One of the first comments is our friend logical thought (Mark Spiegel), our favorite source of FUD.

Great article 32no. It sparked some interesting discussion in the comments section. Arguments and facts in your article seem to be simply unbearable to MS. He posted 36 comments, digging himself in deeper and deeper with each comment. No matter what facts and arguments are put to him, he finds a way to spin it to support his position.

The passion of Tesla haters is so fascinating.

What a difference between SA and CT, best illustrated with this response to MS:

Offgridman to Mark B. Spiegel• 8 hours ago All through this comment thread you have repeatedly said "let's see what happens", let's see how it plays out ", or " give it a couple years and I will be right "
Well then would you please do so, you have spent hours coming back to argue with all of the other commentors, your position has been well explained multiple times, there's no need to waste space yet again.

Perhaps in a way I have you to thank that I will be getting a new car by making an investment of only 5% of its cost. Without all of the hate from Seeking Alpha it most likely isn't possible that the Tesla stock would have gotten so popular or gained so much in value.

But in the meantime this is a technical blog, will you please take all of your margins and market percentages arguments back where they are wanted, because they aren't here.

 

[chickensevil]

Great article 32no. It sparked some interesting discussion in the comments section. Arguments and facts in your article seem to be simply unbearable to MS. He posted 36 comments, digging himself in deeper and deeper with each comment. No matter what facts and arguments are put to him, he finds a way to spin it to support his position.

The passion of Tesla haters is so fascinating.

What a difference between SA and CT, best illustrated with this response to MS:

Haha! Priceless. Although, didn't CT basically invite comment about the stock by publishing the article? ah well, either way it is nice to see others really shooting him down. My favorite was the comment from one of the admins who started to get on his case about his postings. (at least I think he is an admin, either way it was pretty great)

Bob_Wallace Top Commenter Mark B. Spiegel• 16 hours agoMark, you're getting tiresome.




You know very well that new companies take a while to become profitable. You also know that if a company is pouring its revenue back into expansion that money doesn't go flowing out to stockholders.

Everyone there seemed to get quite tired and upset about his comments.

 

[SteveG3]

Published.

One of the first comments is our friend logical thought (Mark Spiegel), our favorite source of FUD.

32no, thanks for writing this article and getting it published!

I found it very well reasoned and quite comprehensive.

- - - Updated - - -

fwiw,

I tweaked the post I wrote last week on Seeking Alpha designed to respond to false statements, etc. in it's "articles" and comments. It worked last week, but didn't make it through one night before SA removed it for ~"blanket dismissal of others ideas."

So last night I put up a new version that explicitly expresses the desire not to make any blanket dismissals of anyone's ideas. This one has lasted longer than last week's and seems fairly effective (as one example, LT made one comment, I replied, and he's not made any more). Several bears have repeatedly tried to say the posts are violations of SA's rules, and offer no value... but they've not been removed, and apparently many other people on SA find them of value.

http://seekingalpha.com/article/275...determine-teslas-future?uide=4208861&uprof=45

I probably will tweak what I wrote further to try to highlight its effectiveness and reduce potential for it to be antagonizing (perhaps tempting, but not really useful :smile:

 

[chickensevil]

It might also help, Steve, that Anton seems more reasonable than most bears on that site. But yeah, I do like that you have blown up the common logical fallacies being thrown about on that site. It gets really frustrating. And the best way to stop the logical fallacy is to call it out for what it is.

 

[32no]

Recently wrote a Seeking Alpha article that talks about Logical Thoughts article. Logical Thought's article attempts to adjust Tesla's Q3 gross margin from 22.6% to 5.1%. I wrote this article to try to clear up some deceiving things in Logical Thought's article. Will post the whole thing here shortly so you guys don't have to go through Seeking Alpha's pay wall.

- - - Updated - - -

The Truth About Tesla's Gross Margin

Summary

• Tesla defines gross margin similarly to most other companies outside the automotive industry by including R&D in Operating Expenses (OpEx) rather than Cost of Goods Sold (COGS).
• Tesla's gross margin is higher than many of its competitors and is approaching the same level as Porsche.
• Tesla's high gross margin represents significant potential for future earnings.
• Future growth prospects in earnings leads to the lofty valuation of Tesla's stock.

In a recent Seeking Alpha article, contributor Logical Thought, a hedge fund manager with a large short position in Tesla Motors (NASDAQ:TSLA), claims that Tesla's gross margin is deceptive. He adjusted it to show that it isn't really high when compared to competitors such as Porsche.
Logical Thought moved Tesla's R&D spending from Operating Expenses (OpEx) to Cost of Goods Sold (COGS) and moved the estimated costs of Tesla's stores and service centers to the Cost of Goods Sold from Operating Expenses. Since gross profit is revenue minus COGS, the newly-calculated gross margin was 5.1% compared to Tesla's stated 22.6% gross margin in Q3 2014. Logical Thought made these adjustments to make Tesla more comparable to Porsche on a gross margin basis. However, these adjustments mislead investors.

Where Do Research And Development Costs Belong?

Traditionally, R&D has always been part of OpEx and is accounted that way by most companies outside the automobile manufacturing industry. COGS, however, doesn't traditionally include R&D expenses because it is supposed to represent how profitable the actual product is (i.e., revenue minus costs to manufacture the product). However, the automobile manufacturing industry reports R&D as COGS because it can amortize model specific R&D costs over the lifetime of the model it is developing. This means that these companies can report higher net incomes due to the reduction of R&D costs, but smaller gross margins.
Logical Thought decided to move Tesla's R&D costs, which totaled $135.873 million in Q3 2014, to COGS to be comparable to Porsche. This brings Tesla's gross margin to 12.9%, compared to Porsche's 29.2%. However, the number Logical Thought moved up to COGS was $74.051 million (he wrote $75 million) because he amortized 52% (this is the same ratio as Porsche, which is arguably inapplicable to Tesla) of Tesla's R&D expenses over eight years and added them to the remaining 48%. However, it is worth noting that Tesla does not actually amortize R&D because almost all of its R&D is not model specific, which is why it reports R&D under OpEx rather than COGS. Therefore, one can conclude that this adjustment was done only for comparison purposes, and not because Tesla's incorrectly reports its gross margin.
But there is a major flaw in Logical Thought's analysis that makes it deceptive. By including the partially-amortized R&D costs in COGS, he actually increases operating profits while decreasing the number he is looking to compare: Gross profits. This calculation is misleading because Logical Thought doesn't mention the fact that bottom line profits would increase if he were to move the R&D to COGS. Tesla would have had operating profits that are $61.822 million ($135.873 million minus $74.051 million) higher than they were in Q3 due to the amortization of R&D. Based on this method of accounting, Tesla would have had a $0.45 per share profit on a non-GAAP basis instead of a $0.02 profit. Moreover, this would produce a profit of $1.86 over Tesla's last four quarters instead of $0.58.
Logical Thought also compares Tesla's ex-ZEV operating margin of -14.8% to Porsche's 18% toward the end of his article. This operating margin is the regular operating margin and does not follow his own adjustments to the accounting methods. It is misleading because he compares the worst of both gross margin and operating margin. Moreover, this operating margin doesn't include Tesla's revenue from leasing vehicles. Tesla's revenue from "leasing" vehicles (Resale Value Guarantee) should have been added and ZEV credits should have been included because Tesla includes ZEV when it budgets its money. Tesla also budgets with the assumption that all resale value guarantee revenue is recognized upon delivery. After making all of these adjustments, Tesla's operating margin for Q3 2014 (an unusually unprofitable quarter due to one-time expenses) comes to 4.2% compared to Porsche's 18%. In essence, it is only fair to compare Tesla's unadjusted gross AND unadjusted operating margins to Porsche's gross and operating margins or Tesla's adjusted gross margins AND adjusted operating margins to Porsche's gross margins. It is not fair to compare a mix of adjusted and unadjusted gross or operating margins.
Finally, this whole adjustment, even when accounting for all of its effects, is flawed because Tesla operates using a generally more conservative way of accounting for R&D (it might increase gross margin, but decreases bottom line profits). Tesla's current way of accounting fits its business model better because Tesla does not have much model specific R&D, which it can amortize. Instead, it has more general R&D costs. Therefore, it is fairer to leave Tesla's gross margin unadjusted because it allows investors to compare business models.
Overall, this portion of the adjustment turns out to be pretty misleading because it takes Q3 2014 gross margin, which was unusually low due to one-time expenses, and then subtracts partially-amortized R&D to show a lower gross margin number while ignoring the increase in operating margin. Also, the fact that Logical Thought quoted the unadjusted operating margin shows the real intent behind the calculations. Finally, the claim that Tesla's gross margin is not properly calculated is false because Tesla doesn't amortize R&D and doesn't do much model specific R&D. This means that Logical Thought's adjustments were done not because Tesla reports earnings improperly, but because he wanted to compare gross margins (while ignoring operating margins). Even when all these issues are fixed, the adjustment still makes little to no sense because leaving these numbers unadjusted would make it easier to compare actual business models.

What About The Dealer Adjustments?

Logical Thought also adjusted Tesla's margin down an additional 7.8% to 5.1% to make Tesla comparable to Porsche, a company that sells its cars to dealers, and thus get less than the MSRP. Logical Thought performs this adjustment by taking the typical 10% difference between the dealer invoice price and the MSRP and subtracting Autonation's (NYSE:AN) 22% gross margin to estimate the cost of Tesla's stores and service centers, which are the equivalent of Tesla's dealerships.
This adjustment is also flawed. At 7.8% of revenues and about 200 stores and service centers, this adjustment works out to a cost of $1.33 million per store/service center per year.
(click to enlarge)
A "$1.33 million" service center (source)
(click to enlarge)

A "$1.33 million" store (source)
Obviously, even when adding up all costs for these often tiny stores and service centers, you do not get to $1.3 million. The problem with the original calculation is that it subtracted the invoice price from the MSRP and then subtracted the dealer gross margin. However, you will almost never find a dealer who sells at MSRP, so instead, it is fairer to use the average price paid. The average price paid for the Porsche Cayenne is about 2% lower than MSRP. It is also clear that the average selling price of the Cayenne is inflated because the Porsche Panamera average price paid is about 4% lower than MSRP. Anyway, using the Panamera numbers (more comparable to the Model S) yields an additional cost of 4.68% rather than 7.8%. This works out to a cost of about $800k per store/service center per year.
However, this adjustment, like the R&D adjustment, is still flawed because it tries to force a comparison of two different business models by forcing one into the others' standards. It is much more relevant and much less artificial to compare the business models as they are rather than create an artificial comparison.

What About R&D Costs Per Car Compared To Porsche?

Logical Thought also compares Tesla's Q3 R&D per vehicle of $17,449 to Porsche's approximate R&D per vehicle of $12,000 and claims that even if Tesla ramped up to have the same number of models as Porsche and sell the same number of cars, it would only reduce Tesla's R&D per vehicle by a few thousand. However, this comparison assumes that Tesla has a relatively stable R&D per vehicle rate, which it doesn't. In 2012, Tesla's R&D per vehicle delivered was more than $85,000. In 2013, Tesla's R&D per vehicle averaged $8,742, which is much lower than Porsche's 2013 level. In 2014, R&D costs were back up to their current levels.
(click to enlarge)
(Non-GAAP subtracts stock based compensation from R&D and adds Resale Value Guarantee revenue to the total revenue)
Obviously, Tesla's R&D per vehicle has a very different nature than Porsche's, and thus it is silly to claim that Tesla will only get its R&D costs down to Porsche's level if it matches Porsche in the number of models and sales. We do not know what level Tesla will get its R&D costs down to and trying to predict it isn't even speculation, its pure guesswork.

Scaling Up Production And Gross Margin

In Tesla's Q2 shareholder letter, Tesla mentioned their goal of reaching 100,000 delivery rate by the end of 2015 provided that there is good execution and no serious macroeconomic shocks. This number is huge compared to this years exit rate of about 50,000 cars per year. In Tesla's Q3 shareholder letter, they mentioned an annual growth rate of at least 50% for the foreseeable future. In order to accomplish these goals in 2015, Tesla has reduced the number of options by removing some and clumping others together in order to achieve higher production efficiency. The production growth that Tesla is aiming for will almost certainly result in higher gross margins as production efficiency increases with economies of scale. Moreover, the Model S D (all wheel drive) will result in higher average selling prices and also higher gross margins, and once Model X hits production, it will again increase average selling prices and gross margins. In other words, Tesla has a long ways to go in terms of increasing gross profit margin, and in the future, it might even match Porsche's margin even when "adjusted".

Why Is A High Gross Margin Important For The Stock?

Tesla's gross margin is supposed to hit 28% in Q4 2014 and will keep growing in 2015, perhaps even surpassing Porsche's 2013 gross margin of 29%. This is great news for Tesla investors because the high gross margin represents high potential for future net profitability and contributes to Tesla's high valuation. Tesla's currently negative net profit might inspire some short-sighted Tesla bears to short the stock, and thus give Tesla bulls many opportunities to earn money from short squeezes when the investment crowd realizes that current net profit margins are less representative of future net profit margins than current gross margins. Since Tesla is a maturing company, its operating expenditures are currently disproportionately high, and will eventually come down to a level at which Tesla is profitable.