Your post went to traderhood.com from where I posted a link on SeekingAlpha and he noticed that and got some ideas
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
Your post went to traderhood.com from where I posted a link on SeekingAlpha and he noticed that and got some ideas
that's true enough and common with almost everyone for that matter;
I was more referring to the quality of his trading practices etc.- they're usually flat on bias, but pretty well targeted
CyberDutchie
Active Member
I find that shameless. At least he could have given you some credit.
Next time, make a slight change to one of the numbers in your post, that way you can point out where the source was coming from. I believe Elon tried something similar years ago to find a leak in the company.
Last edited:
it is funny to read all the comments that are "spot on!" and "thanks for helping us understand" and etc. etc. etc.
since it seems he's reading this thread maybe i should point him to my pieces talking about a huge q1 revenue beat.
or, maybe i should post another piece of my original research and see if he copies that too? hahaha... that sounds like more fun.
My new short thesis
I've been trying for weeks to figure out who is taking all these short positions. Hedge funds? Insiders who know of some kind of impending doom? Petersen / Broder types? None of these make any sense. The cost to borrow shares is too high for any hedge fund. Calls are virtually a free option at this point. The Petersen and Broder suckers are too trendy and would have gone away by now. Everyone's been expecting a short squeeze for almost 2 years but the shorts don't seem to be swayed by that danger, or by the ridiculous cost to borrow. That has to be a clue.
So who would continue to short regardless of cost and potential danger from short squeeze? Your typical short players would be gone by now. I think shorting Tesla is providing another benefit that we're not aware of for these investors. What would be in it for an oil giant? Or a big automaker? Tesla threatens every oil company if the revolution they started keeps gaining momentum. There are some very powerful interests at stake. The only thing I'm not sure of is how all these short positions can hurt Tesla? I'm not an options expert so... help me here if you have any insight.
I've been trying for weeks to figure out who is taking all these short positions. Hedge funds? Insiders who know of some kind of impending doom? Petersen / Broder types? None of these make any sense. The cost to borrow shares is too high for any hedge fund. Calls are virtually a free option at this point. The Petersen and Broder suckers are too trendy and would have gone away by now. Everyone's been expecting a short squeeze for almost 2 years but the shorts don't seem to be swayed by that danger, or by the ridiculous cost to borrow. That has to be a clue.
So who would continue to short regardless of cost and potential danger from short squeeze? Your typical short players would be gone by now. I think shorting Tesla is providing another benefit that we're not aware of for these investors. What would be in it for an oil giant? Or a big automaker? Tesla threatens every oil company if the revolution they started keeps gaining momentum. There are some very powerful interests at stake. The only thing I'm not sure of is how all these short positions can hurt Tesla? I'm not an options expert so... help me here if you have any insight.
NigelM
Recovering Member
The short answer is that it's a very expensive way to hurt a company but at the top level here's the general impact:
1) Depressing the stock price undermines confidence. That can impact vendor negotiations, finance costs, cause customers to be questioning and divert management attention.
2) Hit the wallet of the CEO (who, in the case, is famous for leveraging himself). If you can make him unhappy, maybe he'll get distracted.
3) Cause all the executives who are the share option scheme to question what they are doing and whether they should remain with the company.
I don't really buy into a big oil conspiracy theory, there are any number of aggressive hedge funds that often make outlandish bets and when one of those bets pay off it can easily be enough to cover a myriad of lost bets. Looking at the above points I can see that point 1. might be valid for Tesla but points 2. and 3. would be seriously underestimating the commitment of the management team to "change the world one car at a time".
(I put that last quote in because it's something I've heard different employees mention).
on who the shorts are, i suspect there are a number of hedge funds and long/short equity funds that are in the name. that's because on fundamental metrics tesla is a disaster. roe is negative, p/e is non-existent, price/book is off the charts, debt/equity is high, revenues had been non-existent. any computer model would look at such a stock and say it's going to be game over there soon. even though the short positions are large relative to the float, 32 million shares at $38 = $1.2 billion. a dozen large hedge funds ($5 billion+) that shorted $100 million of tesla could account for the entire amount and yet maintain less than a 2% portfolio weighting. the short charges will matter to them, but they will probably hope there's some normalization in those high costs.
the short positions are quite logical. especially after the last earnings report. on the last call, production had fallen far short of estimates. margins on the most expensive models were miserable. and we know generally this management has had expectations of production that have always been too optimistic. so when they said, "4500 units, mid-teens gross margin, breakeven non-gaap & cash flow", even i had doubts. heck i can confess to selling part of my position because i couldn't figure out the math they were sharing based on their q4 report. then shortly after that the 10-k is delayed? oh my god as a short you had to be salivating, you'd probably add to your position. which they did. a lot. and the short interest jumped by 5 million shares in a month. it was very fortunate for us longs that the 10-k was delayed, because imo the shorts really pressed their bets too hard during that time.
but then the 10-k came out, and the mystery is solved. $15000+ in credits per vehicle, and with that much in excess profit, all of the math works just fine. everything makes sense. but who would have expected the credits were that high? not one article i read had ever predicted anything above $5000-7000 per car.
that was just the recent increase in short interest. now think about a few of these questions for a few moments, and after a while you start to wonder why would tesla succeed?
1. what's the last automaker that started from scratch and became profitable and successful in the usa? how many years has that been? how many have tried and failed? if i remember correctly the answer in the last fifty years is zero have succeeded.
2. even looking at the ones that are successful, what kind of profits do they generate, what are their earnings multiples? ford has a p/e of 10 and toyota a p/e of 15. at this time it's hard to imagine that next year tesla generates $2+ in eps to justify a $30+ stock price.
3. look at the short history on http://www.tesla-short-interest.us . 2/3rds of the shorts have been around since the early days, when it wasn't even clear if tesla could make it to manufacturing this car. the company ipo'd as basically a one-product company with a concept. wall street is littered with carcasses of companies that started like that.
4. as all the critics point out, tesla's book value has steadily eroded, cash flows have historically been highly negative, working capital was in question. how many companies in a condition like this attain critical velocity to break up and out of the downward spiral? frankly it's not that many.
5. now think about the one time risks. imagine a product fire like fiskar had. or a major safety issue with the battery pack. or a structural defect with the frame. or stuck pedals like toyota. remember all the stuff that tesla is using is all new. any one major failure could be a significant dent to their reputation. and when you're burning $90m in cash each quarter with only $200m in the bank, well you just don't have a lot of room to have such mistakes. as a short you could even bet that heck there would be one major issue somewhere, that a startup couldn't possibly go from zero to perfect production. as a shareholder, that's the main thing i worry about when i go to bed each night: a major recall / product defect.
6. even if tesla executes everything else perfectly, what if the economy turns down or interest rates shoot up? luxury car sales have always fallen off a cliff in those circumstances. tesla would have a very hard time surviving another economic rough patch.
7. prior to model s, which electric cars have gained enough traction to make it seem like industry is viable at all? none. the safe bet would be the trend will continue, the shorts would say.
i'm sure you could think of many more logical reasons to be short tesla based on numerical data and historical precedent.
it's very difficult to quantify the drive and passion of a ceo and employees who are hell-bent on achieving a mission. imagine if you had a ceo who was paid to lead tesla, not leading tesla to achieve a personal mission? would you be as interested in the company?
the short positions are quite logical. especially after the last earnings report. on the last call, production had fallen far short of estimates. margins on the most expensive models were miserable. and we know generally this management has had expectations of production that have always been too optimistic. so when they said, "4500 units, mid-teens gross margin, breakeven non-gaap & cash flow", even i had doubts. heck i can confess to selling part of my position because i couldn't figure out the math they were sharing based on their q4 report. then shortly after that the 10-k is delayed? oh my god as a short you had to be salivating, you'd probably add to your position. which they did. a lot. and the short interest jumped by 5 million shares in a month. it was very fortunate for us longs that the 10-k was delayed, because imo the shorts really pressed their bets too hard during that time.
but then the 10-k came out, and the mystery is solved. $15000+ in credits per vehicle, and with that much in excess profit, all of the math works just fine. everything makes sense. but who would have expected the credits were that high? not one article i read had ever predicted anything above $5000-7000 per car.
that was just the recent increase in short interest. now think about a few of these questions for a few moments, and after a while you start to wonder why would tesla succeed?
1. what's the last automaker that started from scratch and became profitable and successful in the usa? how many years has that been? how many have tried and failed? if i remember correctly the answer in the last fifty years is zero have succeeded.
2. even looking at the ones that are successful, what kind of profits do they generate, what are their earnings multiples? ford has a p/e of 10 and toyota a p/e of 15. at this time it's hard to imagine that next year tesla generates $2+ in eps to justify a $30+ stock price.
3. look at the short history on http://www.tesla-short-interest.us . 2/3rds of the shorts have been around since the early days, when it wasn't even clear if tesla could make it to manufacturing this car. the company ipo'd as basically a one-product company with a concept. wall street is littered with carcasses of companies that started like that.
4. as all the critics point out, tesla's book value has steadily eroded, cash flows have historically been highly negative, working capital was in question. how many companies in a condition like this attain critical velocity to break up and out of the downward spiral? frankly it's not that many.
5. now think about the one time risks. imagine a product fire like fiskar had. or a major safety issue with the battery pack. or a structural defect with the frame. or stuck pedals like toyota. remember all the stuff that tesla is using is all new. any one major failure could be a significant dent to their reputation. and when you're burning $90m in cash each quarter with only $200m in the bank, well you just don't have a lot of room to have such mistakes. as a short you could even bet that heck there would be one major issue somewhere, that a startup couldn't possibly go from zero to perfect production. as a shareholder, that's the main thing i worry about when i go to bed each night: a major recall / product defect.
6. even if tesla executes everything else perfectly, what if the economy turns down or interest rates shoot up? luxury car sales have always fallen off a cliff in those circumstances. tesla would have a very hard time surviving another economic rough patch.
7. prior to model s, which electric cars have gained enough traction to make it seem like industry is viable at all? none. the safe bet would be the trend will continue, the shorts would say.
i'm sure you could think of many more logical reasons to be short tesla based on numerical data and historical precedent.
it's very difficult to quantify the drive and passion of a ceo and employees who are hell-bent on achieving a mission. imagine if you had a ceo who was paid to lead tesla, not leading tesla to achieve a personal mission? would you be as interested in the company?
excellent analysis luvb2b.
There are good arguments on the other side- but to your point, these are compelling for short-bets and help explain their prevalence.
Then again, many of the original short arguments have been vacated by near perfect performance; I guess that's what has the stock price over-valued currently (from a by-the-book perspective);
but one more year of similar performance (reaching profitability) I suspect will force half the shorts out. Not sure we'll ever get a true short squeeze, but they will provide a strong put underneath while they meet 2013 targets;
There are good arguments on the other side- but to your point, these are compelling for short-bets and help explain their prevalence.
Then again, many of the original short arguments have been vacated by near perfect performance; I guess that's what has the stock price over-valued currently (from a by-the-book perspective);
but one more year of similar performance (reaching profitability) I suspect will force half the shorts out. Not sure we'll ever get a true short squeeze, but they will provide a strong put underneath while they meet 2013 targets;
Thank you for this great analysis. Very helpful. I knew that Tesla had a negative balance sheet and the intangibles are just another pie in the sky to most hedge fund computers. I assumed that they would react differently when it became so expensive to borrow that you can buy free options. Given that 2/3rds of the shorts have been there since the early days, it's probably unlikely that we'll see a significant short squeeze unless the fundamentals change dramatically. Is that safe to say?
While I also have concerns about a recall or similar damaging event, I'm much more concerned about this last question of yours. I've met countless Tesla employees who go to work every day feeling like they're part of a movement. I've heard stories of engineers sleeping in the shop so they could get the first prototype done before a critical deadline. We've had Rangers sleep at our house after staying up until 1 AM working on our car so they could get to the next customer on time. Can you imagine that happening at GM or Toyota? The "quants" are not used to quantifying this. I wonder how often the board talks about life insurance and other contingency plans.
Many thanks for your contributions to this forum.
Shorty
Member
Cash account stocks can and do get shorted all of the time. Brokers use a formula to determine what percentage of stocks that they can safely loan. The only certain way of preventing your stock from being loaned out is to take possession of the certificate.
CapitalistOppressor
Active Member
I honestly had forgotten about the credits before the earnings call (which caused them to have more revenue than I expected) but I had done a lot of research on them back in July and August when I was making my decision to invest. The $5-$7k number is per credit, but the Model S is unique amongst EV's because it gets 3 credits per car. The credits were based on cars like the Volt or Leaf, but Tesla went and made a car with a battery 3 times that size.
I pointed that out to John Peterson in response to one of his stupid doom and gloom posts back in August, but after asking me for my research I never heard back from him again. It was a pleasant surprise to be reminded during the conference call
whatchootalkinboutwillis?
well i would luv it if you shared your research with me. i have been trying to figure this out a while.
according to my calculations what you say, $15-21k per qualifying car ($3-5k per REIT x 3) is nearly impossible.
just take 2012 results as an example. they earned around $15k per car average in credits. but not all cars were sold in qualifying geographies. with only about a dozen states in the zev program, taking into account population and selling bias i guessed probably only 40-50% of cars qualified for zev credits. that implies you got $30k++ per qualifying vehicle in credits going on. man that's a big gravy train.
i had a hard time understanding the whole credit thing. this presentation dumbed it down for me. refer to pg 46.
from this it looks like model s is 3-4 credits? or maybe 5-7 if it qualifies as fast refueling with superchargers? regardless i never found good data to tell me what the credits were worth. and how about the ghg credits? no clue for me on those either.
the whole tesla plan makes sense in light of this. the 8000 vehicle cash flow break even probably assumes selling cars only in zev states. 8000 x $90000 x 15% margin = $108m gross profit. add 8000 x $25000 = $200m in credits. that's $308m in cash flow from operations to cover expenses. few people took credits into account at this level, that's why 8000 unit breakeven looked like a pipe dream.
tesla gains a huge first mover advantage because once they are making enough zev cars the marginal value of a zev credit goes to zero. by then tesla will have already streamlined operations for profitability without credits. a new entrant will face huge financial hurdles without an extra $100-200 million in credit revenue to offset startup costs.
and if I remember right, Elon specifically said the 25% margin goal was without credits.
If they reach that by year end and maintain with, Europe-Asia and Model X coming on; 2014-15 could be excellent.
if you were short from last monday you're paying 82% annually to borrow the shares, and have to fork over 60c (1.5%) for the week. thank you!
here's the latest updated history.
01-APR-13 -84.45% <--- not finalized yet
31-MAR-13 -84.45%
30-MAR-13 -84.45%
29-MAR-13 -84.45%
28-MAR-13 -82.66%
27-MAR-13 -77.29%
26-MAR-13 -85.35%
25-MAR-13 -75.84%
24-MAR-13 -60.69%
23-MAR-13 -60.69%
22-MAR-13 -59.51%
21-MAR-13 -54.77%
20-MAR-13 -49.85%
19-MAR-13 -49.04%
18-MAR-13 -44.88%
17-MAR-13 -43.94%
here's the latest updated history.
01-APR-13 -84.45% <--- not finalized yet
31-MAR-13 -84.45%
30-MAR-13 -84.45%
29-MAR-13 -84.45%
28-MAR-13 -82.66%
27-MAR-13 -77.29%
26-MAR-13 -85.35%
25-MAR-13 -75.84%
24-MAR-13 -60.69%
23-MAR-13 -60.69%
22-MAR-13 -59.51%
21-MAR-13 -54.77%
20-MAR-13 -49.85%
19-MAR-13 -49.04%
18-MAR-13 -44.88%
17-MAR-13 -43.94%
Remember that Tesla "sells" many of its cars in California, even when they are then immediately shipped to the new, out-of-state owner. That's how I got my car in MA before Tesla secured its Class 1 Dealer license, and how all sales to TX still work. I'm not sure how the REIT rules work in this case.
yes- I imagine some were soiling their shorts today - and maybe again tomorrow;
