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Rushed Model X to hold up the share price had opposite effect

Discussion in 'TSLA Investor Discussions' started by lango, Feb 5, 2016.

  1. lango

    lango Member

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    #1 lango, Feb 5, 2016
    Last edited: Feb 5, 2016
    The Model X timescale starting end of August with the reveal event and the deliveries in Q4 seems to have been going too fast. Judging by some post on the forums some early X cars should have never been delivered from the factory. Some errors on those cars are very apparent and the whole story about the cars being in delivery centers for weeks adds to it.

    If Tesla weren't a public company I don't think this would have happened, but instead they would have taken a couple of more months. So this was probably done for reasons related to the share price, one being the timeline and goals for options for management and the other being to keep the promises to the street so the share price could remain high. However, I think this has now backfired and in the end the share price has been lowered because of it. It looks now to the outside like they don't know how to properly handle a launch of a new model and it raises concerns about Model 3 (not for me personally). It also puts all focus on the problems rather than things that is going really well, like production and demand for Model S.

    This is also important because at least to me it seems the development and launch of Model X has not been as problematic as is sometimes indicated, but instead they just cut time short and moved the timeline one quarter too fast all because of the stock market, and the progress has been steady all along and it will most likely soon be solved.

    One concern is that the same thing will happen with Model 3, for example a reveal event that happens too soon with a not ready car. I hope I am wrong on this as they now supposedly have worked on Model 3 for years leading up to the March date.

    They are doing this because the eventual need to raise equity. At this level the dilution is much worse obviously than before. That is the only explanation I can find anyway. I like to think they are not running the company too much on a quarter to quarter basis. Another interesting question is what the reaction would have been if they in June or July would have said the X was delayed a further 2-3 months and the reveal would have happened in November, December or January. Most likely the stock would have taken a big hit, but it is possible we would have been better off at this time.
     
  2. Quant

    Quant Member

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    1. I agree with you on the rushed Model X.

    2. But, I disagree with you re raising equity. That is complete BS. There will be no need to raise equity in 2016. Perhaps, you don't understand cash flow and forecasting vs. cash and marketable securities , plus credit lines that are avail to Tesla. The numbers say that any need to raise equity in 2016 is compete BS.
     
  3. lango

    lango Member

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    If the stock had been over $250 I think they would have done a equity raise after Model 3 reveal. It is about risk management, tapping the credit line only and the whole cash balance coming from liability is problematic.

    I agree with you that they will not need to raise cash in 2016 if they don't want to. But that will also slow down growth.

    Why do you think they seem to be optimizing so much for the short term share price? Because that is the only explanation I have for Model X being rushed, and you agreed on that.
     
  4. electracity

    electracity Active Member

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    I agree with their probable need to raise capital. But even as a private company, the delay in X might have increased their capital cost. Tesla as a manufacturer has to show that they can manufacture. Musk didn't choose to start a boutique luxury car company. I think by the second half of the year all the Model X launch problems will be forgotten.


     
  5. pGo

    pGo Member

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    Question for you. If MX ramp does not happen sooner, where do you think the money is coming from? Out of $1.4B left at the end of q3, they were going to spend 0.5B in q4. If q1 doesn't give them FCF due to poor ramp for MX, will Tesla stop investments in GF and M3?

    If so, good. If not, they will need constant stream of cash to invest. GF and M3 investments are huge compared to whatever Tesla has done so far. They have only invested 0.3 B in GF out of 2B. Yes, a lot of that money is not required in 2016, but M3 requires a lot of investments in 2016 and 2017. Please show how MS and MX will offset these amount. Thanks.
     
  6. Quant

    Quant Member

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    As far as cash goes, you are wrong ! They did over 17K in deliveries in 4Q and right now they are pretty much sold out of MODEL S ( yes S not X) deliveries for 1Q '16 and soon they will also be sold out of deliveries for 2 Q '16 ( look at website wait times for the S ). So, I expect they will do at least 34 K deliveries in total in the first half ( vs, about 21 K in the first half of 2015 ).

    So, as long as S deliveries makes up for the most of the X thru 2 Q ( and Tesla finally gets X deliveries straightened out by end of June '16) , and Tesla is doing over 17 k deliveries ( 95 PC Model S ) in 1 Q ans 2 Q '16, there will no major incremental cash burn on production unit costs . But, there will be on fixing X production problems , and say this is another $200 million. Then , if Tesla energy makes up say just $100 M by end of 3 Q ( which is minimally forecasted now) , and they have just begun deliveries, then they will be not be very significantly under their original net cash burn projections. Revenues in 1Q and 2 Q ' 16 will still be well over 50 PC qtr over qtr growth ( since in '15 they were at about 10 k deliveries each in the first 2 quarters. ).

    And finally, no one knows how the Model 3 reservations will pan out in the first 6 months and how much the deposit take will be ( they can get addl credit lines if needed based on say $200 M in deposits ). So, net, net , given what they have in cash now ( after 4 Q burn), and existing unused credit lines , no equity raise will be needed in 2016.

    And, I will NOT be responding any more to this thread because people here are not CFO types and many seem math challenged. I have zero patience for math challenged folks and I am a finance guy.....fwiw.
     
  7. pGo

    pGo Member

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    Difference here is that I don't think MS sales at 17k is sustainable. Specially when they rushed to empty the pipeline. This is why MX ramp is equally important.

    The estimated dates moved recently weeks within 4 or so days. This to me shows shift in prioritizing markets and not everything related to MS sales though I do believe 40-50k MS sale is possible, not 68k.
     
  8. lango

    lango Member

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    The demand for 60k S is there, the question is production.
    S body is produced on the old line afaik, so peak is about 1200 a week. Then the general assembly is shared with X. At any rate 1000-1200 a week is a given for S right now. That would put yearly a bit over 50k.
     
  9. GSP

    GSP Member

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    If I remember correctly, Tesla's new body line can make both the X and S. That would allow greater production of the S.

    GSP
     

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