General Discussion: 2018 Investor Roundtable

[Remus]

I agree. Thinking about where the piles of tens of billions are, BH is at the top of the list and really a better candidate than Apple or Google.

I was happy to see Charlie Munger's firm involved and wondered/hoped something with BH might be a possibility.

Charlie Munger calls Elon Musk 'brilliant' and bitcoin 'stupid and immoral'

Musk “swings for the fences”

Regarding Tesla, Munger said, “It’s already created more significance than anybody had predicted. Its founder is bold and brilliant, and he swings for the fences. People like that get some remarkable results. Sometimes they get some quick failures. I haven’t the faintest idea how Elon Musk will turn out, but he has a considerable chance of success and considerable chance of failure. He seems to like it that way.”

Munger said he hadn’t heard that Musk had tweeted that he was going to start a candy company in response to Buffett’s comment, “I don’t think he’d [Musk] want to take us on in candy.”

“I didn’t hear that. Sounds like wise-assery,” Munger chuckled. “I can’t criticize anybody else for wise-assery.”

I don't think Buffett will buy Tesla shares. It's clearly shown in the Munger quote, it's too much uncertainty for BRK's taste.

And some of the uncertainty does come from Elon, who, in my opinion, has a serious 'public' communication issue. We all know that he is over optimistic. But the biggest problem is his poor choice of words, and imprecision to the point of exaggeration. It's getting to the point that I can understand some people call him a liar. Such as his zero doubt about certain production target that ultimately fell short. Once Mr. Buffet said on TV about Elon kinda flip flop on whether they need to raise capital, citing that as one of the reason it is hard to predict Tesla's next move.

We longs interpret that as he being candor. My interpretation is that he is a sincere person and he is fostering an honest and open communication inside Tesla and Space X. But he failed at being precise and always in a rush. This maybe a good thing that drives him to push the envelop. It has its downside.

As Mark Cuban said we get the whole package. We accept this package when we invest in Tesla. But I don't expect many others also accept that.

 

[brian45011]

[Moved from Market Action]

Such as? Give a tangible example of what you think will be there... An agreement with Panasonic to share 30% of net revenue after the one-millionth car?

See pages 122 through 150 of the 10k which is a list of exhibits with links http://ir.teslamotors.com/static-files/0fbefe56-326c-412e-a33c-aa1b342e9469

There are several hundred documents (including 182 amendments to SCTY's indenture) with many of the more commercially important ones protected by SEC confidentiality orders, so heavily redacted and not available to speculate about.

I submit any professional conducting due diligence about a transaction of this size would want to, at a minimum, not only understand fully the several agreements with Panasonic at both GF1 and GF2 but also probably:

-the Investor's Rights Agreement
-the ABL Credit Agreement
-the Warehouse Agreements
-the SUNY-Silevo Agreements
-the Agreements with solar and auto Special Purpose Entities

In addition Exhibit 21.1, SEC Info - Tesla, Inc. - ‘10-K’ for 12/31/16 - ‘EX-21.1’ is five pages of subsidiaries. Someone will have to scrub these down to assure there are no surprises in the various jurisdictions where Tesla conducts business.

But it's not just 10k materials. There will be a "document room", probably with controlled access supervised by Wilson Sonsini requiring a NDA for entry, with far more detailed documents (many digital) about all aspects of Tesla business including important supply agreements, supporting sub-ledgers and journal entries from the accounting system, and internal management reports and projections about markets, technology strategies, etc.

I am not implying anything untoward will be uncovered, but high wealth investing entities expect a return on their capital. They also realize they will have to fund initially Tesla's future growth since access to public markets will no longer be an alternative. Their assessments, from all the non-public information they will have access to, of the rate and timing of returns will determine whether they accept or decline participation going forward.

 

[Bet TSLA]

They also realize they will have to fund initially Tesla's future growth since access to public markets will no longer be an alternative.

Do you actually mean something by this assertion? Tesla has said it will self-fund going forward. So they're lying? And even if they need funding, does SpaceX find this impossible or even difficult?

 

[avoigt]

For those who have not seen it yet. M3 with 48% market share in July. Can't wait for the August numbers!

r/teslamotors - Tesla Model 3 is taking a huge share of all US electric+hybrid car sales. 6 charts visualizing the impact.

 

[Wooloomooloo]

[Moved from Market Action]



See pages 122 through 150 of the 10k

/snip

I am not implying anything untoward will be uncovered, but high wealth investing entities expect a return on their capital. They also realize they will have to fund initially Tesla's future growth since access to public markets will no longer be an alternative. Their assessments, from all the non-public information they will have access to, of the rate and timing of returns will determine whether they accept or decline participation going forward.

Actually something 'untoward' was heavily implied in the original quote, along the lines of "it will make them run for cover".

Of course there are things not included on a 10K (although many of the amendments are available either in the proxy statements or other filings, and this is completely normal). The idea there is some nefarious document room with a bunch of terrible agreements and toxic liabilities, is somewhat far-fetched, and could easily apply to any company.

I actually appreciate you taking the time to respond with something thoughtful and detailed, but even so, it boils down to "there might be something going on we don't know about" as opposed to "it's very likely Tesla has agreements with suppliers that are detrimental to its long term growth, as evidenced by 'x' or the lack of 'y' "

In this illustrative example, X and Y don't exist, so we're left with FUD and nothing more.

-M

 

[brian45011]

Do you actually mean something by this assertion? Tesla has said it will self-fund going forward. So they're lying? And even if they need funding, does SpaceX find this impossible or even difficult?

Did you not see "initially" or just chose to ignore it? Tesla's SEC filings acknowledge that capital spending has been curtailed from plans announced last year, and Elon issued an e-mail in April:

“All capital or other expenditures above a million dollars, or where a set of related expenses may accumulate to a million dollars over the next 12 months, should be considered on hold until explicitly approved by me,” he continued. “If you are the manager responsible, please make sure you have a detailed, first principles understanding of the supplier quote, including every line item of parts & labor, before we meet.”​

No "they're [not] lying" Expansion plans have been slowed--they may not want to wait until growth "self-funds" to accelerate the pace of growth.

 

[EarlyAdopter]

Munger, Tolles and Olsen is Charlie Munger's law firm.

Charlie Munger of Berkshire Hathaway.

For what it's worth.

The first thing I found out about Wachtell, Lipton, Rosen & Katz is that it's famous for helping companies avoid hostile takeovers.

Small is lucrative for Wachtell, corporate America's legal defense...

Second thing to know about Wachtell, it's one of the best corporate law firms, if not the best, in the world. Shareholders should take this as a sign that their best interests are being well represented.

Third thing to know is these firms will drop everything they are doing and burn the midnight oil like you've never seen to get a deal of this magnitude done. My wife used to be an attorney one of these types of firms. As she notes, when a client like this comes along you work 72 hours straight over the weekend to get a deal done. Obviously, in this case we need to get through shareholder approval, which will probably be the long pole, but the motivation is there.

 

[brian45011]

Actually something 'untoward' was heavily implied in the original quote, along the lines of "it will make them run for cover".

For the record, I did not author that statement. I was actually responding to the "not abundantly clear in the 10k filing " in your post
TSLA Market Action: 2018 Investor Roundtable

Of course there are things not included on a 10K (although many of the amendments are available either in the proxy statements or other filings, and this is completely normal). The idea there is some nefarious document room with a bunch of terrible agreements and toxic liabilities, is somewhat far-fetched, and could easily apply to any company.

I actually appreciate you taking the time to respond with something thoughtful and detailed, but even so, it boils down to "there might be something going on we don't know about" as opposed to "it's very likely Tesla has agreements with suppliers that are detrimental to its long term growth, as evidenced by 'x' or the lack of 'y' "

In this illustrative example, X and Y don't exist, so we're left with FUD and nothing more.

-M

I see it differently. IMO, it's the substantive information, including the redacted parts, that is NOT in the public domain (regardless if it is wart-less) which will be used to assess whether to put up significant private capital, as in:

I have continued to communicate with the Managing Director of the Saudi fund. He has expressed support for proceeding subject to financial and other due diligence and their internal review process for obtaining approvals. He has also asked for additional details on how the company would be taken private, including any required percentages and any regulatory requirements
​

Their advisers will likely heavily rely on traditional fundamental analysis and techniques

​

 

[dc_h]

So why not just delete the link? e.g. General Discussion: 2018 Investor Roundtable

The link was to "
“It's not what you don't know that kills you, it's what you know for sure that ain't true.”

I've clicked on multiple links here that failed and numerous others that were behind pay walls; some how, none of those were removed by moderators.

My work proxy sometimes blocks based on certificate issues. Site looks pretty well behaved.

 

[Johan]

Do you actually mean something by this assertion? Tesla has said it will self-fund going forward. So they're lying? And even if they need funding, does SpaceX find this impossible or even difficult?

He's not implying that they are lying. But what he is saying is that when Tesla is de-listed from the stock market they won't as easily be able to raise capital should it be needed through a follow-on offering, and selling debt may also be harder as a non-stockmarket-traded company. If you tie up a lot of capital in an investment in Tesla as a private you will have a greater interest in Tesla surviving should times get rough - that's a risk that needs to be priced in.

 

[EarlyAdopter]

He's not implying that they are lying. But what he is saying is that when Tesla is de-listed from the stock market they won't as easily be able to raise capital should it be needed through a follow-on offering, and selling debt may also be harder as a non-stockmarket-traded company. If you tie up a lot of capital in an investment in Tesla as a private you will have a greater interest in Tesla surviving should times get rough - that's a risk that needs to be priced in.

Uber, and number of other Unicorns, have had no problem raising billions in private capital. The world has shifted. The public markets are no longer the only game in town.

But, and I think this is key to why Elon is taking Tesla private now and not two years ago - Tesla stated quite clearly on the last earnings call they don't anticipate needing to raise funds again, ever, aside from local loans from China for the next Gigafactory.

 

[ZachShahan]

Its a very carefully written piece so clearly that has been word by word checked and approved and written by a group of lawyers.

So we see them every day moving this forward with what I call high speed. Lawyers have been found and appointed and put into motion quickly.

I have 0% doubt that Elon will execute on it. Shorts will continue to doubt it ...."The special committee has not yet received a formal proposal from Mr. Musk".

Every day goes by they do not cover is a day less they have to leave their sinking ship.

Like on the Titanic, first nobody wanted to get into the rescue boats and than they tried all together...... just a few survived....

It seems they are slowly covering:

Ihor Dusaniwsky on Twitter

Though, quiet enough still to avoid a stampede.

 

[rallykeeper]

Second thing to know about Wachtell, it's one of the best corporate law firms, if not the best, in the world. Shareholders should take this as a sign that their best interests are being well represented..

Didn't want a disagree to be misconstrued, but a slight quibble here.

Wachtell (and Munger and Silver Lake and Goldman) is representing Elon, not the other innocent-bystander shareholders. Their job is to get him, and his co-investors, the best possible deal.

The Board, its special committee and their various advisers (including pretty decent law firms in Latham and WSGR) are supposed to look out for us shareholders. It remains to be seen how good a job they'll do.

 

[Skryll]

Well not sure, my 3 will have the same costs as an S. Confirmed by Tesla BTW.

'An S'. But if you want the same specs you pay quite a bit more than that for the S. Looks like less than when I priced it out last but still significant:

Model 3 RWD, 310 mile range, autopilot, FSD, premium package, pearl white $59k (I paid about 60k for it in january)
Model 3 AWD, 310 mile range, autopilot, FSD, premium package, pearl white $64k (all wheel drive to compare better to Model S) same range +5k cost
Model S 75D, 259 mile range, autopilot, FSD, prremium package, pearl white $76k -69 mile range +$17k cost
Model S 100D 335 mile range, autopilot, FSD, prremium package, pearl white $95.5k +25 mile range +$36.5k cost

 

[Buddyroe]

Hate to say it, but we're at the point where EM is detracting from the great vehicles that Tesla builds.

Never thought I would say that.

 

[tinm]

Another possible showcase for Tesla Energy (remember Tesla Energy?)

Hawaii approves 18-cent/kWh solar+storage deal to power Molokai

 

[Buddyroe]

Hate to say it, but we're at the point where EM is detracting from the great vehicles that Tesla builds.

Never thought I would say that.

So someone disagrees. Don't just click the button because you don't like the post, reply and explain why you disagree!

 

[JRP3]

Hate to say it, but we're at the point where EM is detracting from the great vehicles that Tesla builds.

Never thought I would say that.

Wait, you meant that piece of garbage Model X which you keep saying never should have been built and needs a complete redesign?

 

[JRP3]

So someone disagrees. Don't just click the button because you don't like the post, reply and explain why you disagree!

I did.

 

[shortburn]

So someone disagrees. Don't just click the button because you don't like the post, reply and explain why you disagree!

I also disagree and oblige to this. Before EM tweet on taking Tesla private there's 100 articles a day on model 3 fires, stopping safety tests (implying that model 3s are unsafe), mistreating its workers, is going to go bankrupt and therefore you shouldn't order a model 3 because you won't receive it, etc. which imo was really hurting Tesla's brand/reputation. After EM's tweet there's 1000s of articles a day on whether Tesla/Elon can pull it off which is more benign imo.