General Discussion: 2018 Investor Roundtable

[WarpedOne]

Acquisition is a valid way of growth.
I have zero objections to Tesla taking over VW and making them produce 10 milion EVs instead of 10 million FFV.

 

[Bet TSLA]

One thing that is starting to bother me about Elon's new compensation plan...

Have you read the document? Or are you just relying on reporters getting it right? Hint: if you read and understand the document you won't worry.

 

[Curt Renz]

 

[jhm]

Have you read the document? Or are you just relying on reporters getting it right? Hint: if you read and understand the document you won't worry.

Please, illumine me. What is in the document that places limits on dilution?

 

[jhm]

Acquisition is a valid way of growth.
I have zero objections to Tesla taking over VW and making them produce 10 milion EVs instead of 10 million FFV.

Yes, I am not opposed to acquisition per se. A good, strategic acquisition can enhance share value, which would be to the point of a share price goal rather than merely a market cap goal.

 

[scaesare]

After going through that video, I'm now suspecting Seeking Alpha is actually getting paid to attack TSLA. Because their editors' behavior has no other rational explanation.

No longer available... interesting.

 

[scaesare]

Acquisition is a valid way of growth.
I have zero objections to Tesla taking over VW and making them produce 10 milion EVs instead of 10 million FFV.

I do.

 

[EinSV]

Just looking at Elon's pay package. The profitability goal is based on EBIDTA.

The end goal has $175B in Sales $14B in EBIDTA.

Depreciation alone could be between $10-15B a year. 5X-7X where is now.

Interest expense could be another $3-4B a year.

Could it be Testa would still not GAAP profitable at this level of EBIDTA?

Net profit margin could be pretty small?

Obviously cash flow would depend on how much investment for growth is still going on.

Has anyone backed in to cashflow and profitability based on these targets?

GM 2016 EBIDTA is $22B with Sales of $166B.

The market cap goals are good but the EBIDTA goal seems less than I would expect at this level of sales.

Is there something I am missing?

I don't think you are missing anything. I believe it is quite possible that the EBITDA numbers would result in very modest net income, just as they do with Amazon (only ~$2B net income on ~$175B in revenue).

As with market cap/revenue, the market cap/EBITDA ratios appear to be in the same ballpark as Amazon:

TSLA market cap/EBITDA for the top level of Elon's plan -- $650B/$14B=46

AMZN market cap/EBITDA -- $675B/12.93B (ttm)=52 AMZN Key Statistics | Amazon.com, Inc. Stock - Yahoo Finance

My interpretation is that the Board is saying that if Elon takes TSLA to an Amazon-like $650B market cap and the market is still valuing TSLA by Amazon-like growth company metrics -- 3 or 4/1 P/S ratio along with an aggressive P/EBITDA level -- then he has earned his maximum bonus.

That suits me as I'd like to see Tesla stay in aggressive growth mode for as long as possible. The targets also seem achievable, especially if Tesla keeps growing at 50+% a year.

 

[Crowded Mind]

One thing that is starting to bother me about Elon's new compensation plan is that there is no real check against dilution. Market cap, revenue, and adjusted EBITDA all can be boosted by issuing more stock. Growth by acquisition can easily supply added earnings.

I am not saying that this is how I expect Musk will grow Tesla, but it is simply a weakness of the incentive plan could work against shareholder interest. Things would be materially different had the $650B market cap goal been formulated as a share price, perhaps $3250/share = $650B ÷ 200 share. Such a goal would create a disincentive to excessive dilution and better align Musk's compensation with actual shareholder value which always denominated in shares, not market cap.

Any dilution impacts Elon's current stake in TSLA as well as all of the tranches of this compensation plan since they are based on the number of shares outstanding as of 1/21/18. I've thought a lot about this but I am fine with the set up. It disincentives dilution, but not overbearingly so.

 

[ggr]

One thing that is starting to bother me about Elon's new compensation plan is that there is no real check against dilution. Market cap, revenue, and adjusted EBITDA all can be boosted by issuing more stock. Growth by acquisition can easily supply added earnings.

I can see how acquisition can suddenly boost EBITDA. An acquisition might or might not be considered dilutive, though; while more stock would be issued, more assets (hence more market cap) would be acquired. But ignoring acquisitions for a second, how can any other form of dilution, such as just issuing more shares or employee incentive shares, boost EBITDA? I don't get it. Generally such issues would boost the market cap, but should not directly affect revenue either. Only secondary effects like putting new capital to good use, or incentivizing workers, should boost revenue or earnings.

 

[Starno]

We lost Wozniak

'I don’t believe anything Elon Musk says anymore' — Steve Wozniak goes on an epic rant against Tesla

 

[bdy0627]

I don't know if this article was posted before, but I hadn't seen it. It very superficially compares the Bolt and the Model S. It's not really worth reading other than to know others have this perspective. In a nutshell: he likes the Bolt more than the Model S because it is more familiar to him. There are a number of reasons why it's not a very balanced or thorough article, but I think this sentence from it sums up the author's bias: "[the Bolt] is not as pretentious as the Teslas, so it doesn’t get quite the accolades the Teslas do, but for my money, the Bolt would be the electric car I would buy." The author does indicate he is coming from a Honda Civic, and that the Bolt feels much more familiar to him. He doesn't delve into the technology inside the Model S really at all.

Tesla vs Chevy Bolt: Lessons Learned From 1 Week Driving Electric Cars In UAE | CleanTechnica

 

[bdy0627]

We lost Wozniak

'I don’t believe anything Elon Musk says anymore' — Steve Wozniak goes on an epic rant against Tesla

Again?!

 

[Jonathan Hewitt]

Interesting that a VIN this high made it that far east already.

Highest Production VIN seen (PICS only... please.... :-))

 

[jimmyjohn]

So Woz is — now? — deciding to ‘Dare Greatly’ ???

Woz has been sucking GM’s teet for years.

 

[Starno]

Interesting that a VIN this high made it that far east already.

View attachment 276534

Highest Production VIN seen (PICS only... please.... :-))

Nice, can't wait for VINs >10 000 to be delivered.

 

[Dennisj00]

I’ll tell Woz that we drive our Leaf most everyday but only drive our S on long trips.

There’s no way to drive a Bolt or Leaf long distance unless you have hours to spare.

 

[ValueAnalyst]

One thing that is starting to bother me about Elon's new compensation plan is that there is no real check against dilution. Market cap, revenue, and adjusted EBITDA all can be boosted by issuing more stock. Growth by acquisition can easily supply added earnings.

I am not saying that this is how I expect Musk will grow Tesla, but it is simply a weakness of the incentive plan could work against shareholder interest. Things would be materially different had the $650B market cap goal been formulated as a share price, perhaps $3250/share = $650B ÷ 200 share. Such a goal would create a disincentive to excessive dilution and better align Musk's compensation with actual shareholder value which always denominated in shares, not market cap.

How about that he gets paid $1B if the market cap merely doubles in ten years

 

[tander]

One thing that is starting to bother me about Elon's new compensation plan is that there is no real check against dilution. Market cap, revenue, and adjusted EBITDA all can be boosted by issuing more stock. Growth by acquisition can easily supply added earnings.

I am not saying that this is how I expect Musk will grow Tesla, but it is simply a weakness of the incentive plan could work against shareholder interest. Things would be materially different had the $650B market cap goal been formulated as a share price, perhaps $3250/share = $650B ÷ 200 share. Such a goal would create a disincentive to excessive dilution and better align Musk's compensation with actual shareholder value which always denominated in shares, not market cap.

I wonder what dilution will look like too eventually in ten or twenty years, but in reality they've done pretty well so far. The check might be kind of along the lines of the incentives itself, any dilution is dilutive for the CEO too, just imagine if all executives or elected officials were compensated this way.

 

[anticitizen13.7]

We lost Wozniak

'I don’t believe anything Elon Musk says anymore' — Steve Wozniak goes on an epic rant against Tesla

This does not surprise me. I met Woz about 20 years ago at a convention, and my impression of his personality is that he is impeccable precise and honest (except for harmless practical jokes, of which he is famous).

Woz was a brilliant engineer, but he is not a visionary. He works within constraints. Elon, like Steve Jobs before him, doesn’t care about restraints, or conventional wisdom.

So while I understand why Woz has his perspective, I think his comments don’t have much relevance to Tesla’s future.