Short-Term TSLA Price Movements - 2016

[Vitold]

I'm guessing that Tesla production numbers are surprisingly strong to make such a move before Q2 numbers..

 

[eloder]

All I can say is (short-term), thank you Brexit for making me exit my shorter-term positions in TSLA last week!

Now the only problem is should I re-enter, when I should re-enter, and how much I should re-enter with as I'm not a fan of taking on Solar City in its current state and in this current time. (My capital will be deployed to TSLA or to paying off a chunk of my mortgage). Is anyone worried about significant further falls due to possible contagion associated with taking on SCTY, or is the concern more that growth will be heavily slowed/diluted due to the significant market cap increase?

 

[hockeythug]

I basically trusted Elon with my retirement money by going long on TSLA.

I thought this was universally known but it's a pretty bad retirement investment strategy to put all your eggs in one basket.

 

[Foghat]

So, time to open up the SCTY financials, unless that would unduly allow outside manipulators to contagion the debt; of course, without even knowing what's inside, it's hard to even know if that's likely. If the institutional investors have enough votes AND have access to this information in a secure manner, then I could see that being enough, but it wouldn't be enough for me to vote YES.

I think Elon has eluded to making a whole new solar panel design more then a few times now. Even Lyndon rive has alluded to a unique panel design, system design that is completely differentiated compared to all other mass market systems. This includes a powerwall with every install.

Solarcity has alluded to a networked energy production/storage systems (aggregation) for a long time now including stating they will include powerwall with every solar install as default. This networked system will be able to sell electricity peer to peer, opening up a whole electricity market where the consumer themselves earn money(and Solarcity/tesla will mange these sales for them).

In addition, Solarcity will have multi decade relationships with all its customers (1 million by 2019) which opens the door to future product purchases for a very long time. At a minimum, customers will be exposed to Solarcity/tesla marketing once a month for twenty years. Since the average home owner sells a house every seven year, one system could expose three seperate families to the marketing directly. Elon has said he lives and dies on innovation, so this might be where the "yes" vote is most compelling for those on the fence.

I'm expecting the powerwall 2.0 to be revealed soon which may be another reason Solarcity aquisitiion is timed for now(in addition to Elon saying Solarcity is wildly undervalued for a while now).

California and New York commissions are/have made commitments to distributed energy resource grid integration and valuing that capacity on the whole sale market so the environment is changing for a massive new opportunity for Solarcity/tesla to quickly take advantage at scale.

I've bought Solarcity since ipo up and down the price scale, and this hurts my short term goals for scty, but the long term goals are much better with this aquisitiion so again "yes" on merger may be best for those long term shareholders out there like me.

 

[techmaven]

It may make all the sense in the world for TSLA to acquire SCTY at some point. However, I don't think that point was today, barring some non-public information.

At the beginning of July, we get two critical pieces of data... the Q2 delivery numbers and the Q2 status report on the progress of the Gigafactory. Also, there is a Gigafactory grand opening event at the end July, and then the Q2 ER in August.

If the first two data points are excellent and we continue to see improvement in Model X deliveries as well as other signs that Tesla's business is doing well, then we could be near ATH going into the Gigafactory grand opening event. Then, if Tesla firms up the data on the status of the Gigafactory, the capacity of the pilot phase rocking at something like 20 GWh, and the expected production levels of TE and margins for 2017 at something like 10 GWh with a 30-50% margin, no one would be questioning the need to acquire SCTY. After all, to shift 10 GWh of product would require a lot of infrastructure. The existing residential PPA business that we're all somewhat skeptical/afraid/unable to grasp would be then a side show to the main event - utility scale energy storage. If Tesla is looking at 50 GWh of stationary storage out of the first Gigafactory by 2020, we're talking $3.75 billion in gross profit a year in 2020 at a 30% margin. At 20% margin, it's still $2.5 billion in gross profit.

My feeling is that the solar industry has gotten not respect on the street in the past 2 years or so... and that would likely stay the same for the next 1-2 quarters. SCTY would likely still be cheap if Tesla held off the acquisition for another quarter or two.

If Mr. Musk can make the case tomorrow morning, then great. I hope he can articulate not just why acquiring SCTY makes sense, which it likely does at some point. It's about why he's doing it now - both why it needs to be done now for Tesla's business and how this is a good price for SCTY. Maybe Tesla could acquire SCTY for $18-20/share after next quarter's ER. Tell us how this was the optimal price to pay for SCTY and how it wouldn't be the optimal price in a quarter or two.

 

[NOLA_Mike]

I can't fathom why this move couldn't wait until TSLA SP was in a far better position.

Probably because SCTY would be broke and gone by then.

I can't shake the nagging feeling that this proposed deal is a good deal for SCTY and a bad deal for TSLA. I can't shake the feeling the Elon is bailing out his relatives at the expense of TSLA. I hope, if it goes through, I'm proven wrong.

Mike

 

[geneclean55]

All I can say is (short-term), thank you Brexit for making me exit my shorter-term positions in TSLA last week!

Now the only problem is should I re-enter, when I should re-enter, and how much I should re-enter with as I'm not a fan of taking on Solar City in its current state and in this current time. (My capital will be deployed to TSLA or to paying off a chunk of my mortgage). Is anyone worried about significant further falls due to possible contagion associated with taking on SCTY, or is the concern more that growth will be heavily slowed/diluted due to the significant market cap increase?

My problem also. I have a decent amount of dry powder on hand. It has to be a lock now that q2 deliveries will be good for Tesla, otherwise the timing of todays announcement would be pretty shocking to me. However, with this new uncertainty added to the mix does that mean any good news in the next week or two for Tesla will be met with muted price action?

 

[AlMc]

It may make all the sense in the world for TSLA to acquire SCTY at some point. However, I don't think that point was today, barring some non-public information.

At the beginning of July, we get two critical pieces of data... the Q2 delivery numbers and the Q2 status report on the progress of the Gigafactory. Also, there is a Gigafactory grand opening event at the end July, and then the Q2 ER in August.

If the first two data points are excellent and we continue to see improvement in Model X deliveries as well as other signs that Tesla's business is doing well, then we could be near ATH going into the Gigafactory grand opening event. Then, if Tesla firms up the data on the status of the Gigafactory, the capacity of the pilot phase rocking at something like 20 GWh, and the expected production levels of TE and margins for 2017 at something like 10 GWh with a 30-50% margin, no one would be questioning the need to acquire SCTY. After all, to shift 10 GWh of product would require a lot of infrastructure. The existing residential PPA business that we're all somewhat skeptical/afraid/unable to grasp would be then a side show to the main event - utility scale energy storage. If Tesla is looking at 50 GWh of stationary storage out of the first Gigafactory by 2020, we're talking $3.75 billion in gross profit a year in 2020 at a 30% margin. At 20% margin, it's still $2.5 billion in gross profit.

My feeling is that the solar industry has gotten not respect on the street in the past 2 years or so... and that would likely stay the same for the next 1-2 quarters. SCTY would likely still be cheap if Tesla held off the acquisition for another quarter or two.

If Mr. Musk can make the case tomorrow morning, then great. I hope he can articulate not just why acquiring SCTY makes sense, which it likely does at some point. It's about why he's doing it now - both why it needs to be done now for Tesla's business and how this is a good price for SCTY. Maybe Tesla could acquire SCTY for $18-20/share after next quarter's ER. Tell us how this was the optimal price to pay for SCTY and how it wouldn't be the optimal price in a quarter or two.

I have no problem wit the acquisition. I have lots of concerns about the timing.

Recurrent EM theme: Timing is off ('soon' is not really soon when it comes to predictions) and cash raise recently at $215 (not $250) ??

edit: I will be a buyer at $180 tomorrow if we see it.

 

[Krugerrand]

However, I don't think that point was today, barring some non-public information.

<snip>

SCTY would likely still be cheap if Tesla held off the acquisition for another quarter or two.

People who wait for the perfect time, wait forever. Because it's never a perfect time, there's always some reason to hold off and waiting for a 'likely' scenario is such a reason.

As someone up thread a few pages pointed out (and linked an article), Elon mentioned combining his companies. He bought two huge whacks of SCTY shares. Many interviews/discussions with JB about solar, integration, synergies. And people didn't see this coming?

 

[EinSV]

I have no problem wit the acquisition. I have lots of concerns about the timing.

Recurrent EM theme: Timing is off ('soon' is not really soon when it comes to predictions) and cash raise recently at $215 (not $250) ??

That is a fair assessment but I think Elon cares more about his long-term vision of what is right for the company than how the stock market will react in the short term.

I actually love that he is focused on building an amazing business 5-10 years down the road instead of hyperventilating over how the stock market will react to every move. I think the market should wear a dunce cap (or 10) for viewing the accelerated Model 3 ramp as a negative and couldn't be happier about that decision.

I will be interested to hear the report tomorrow on how SCTY fits into the puzzle. I have not been a huge fan of SCTY because it is so hard to understand the financials but the marriage of solar/TE/EV has potential.

This is not a stock for the faint of heart. But I don't know of another company of its size that has anywhere near the long-term promise. I hope Elon keeps doing what he thinks is right for the company, even if the stock takes a hit in the short term while the market catches up.

Edit: I would be a buyer tomorrow if I had any dry powder left

 

[Causalien]

OK, I'll give the counterargument for why it *could be* material.

SolarCity has an awful lot of complex financing arrangements. While the *net* value of these financing arrangements is quite low, the *gross* value is enormous. Solarcity is a "shadow bank". If they are stuck trying to refinance a large amount of debt (including refinancing various "special purpose entities" which are not on their books) they could end up with an enormous need for cash, be unable to refinance it at reasonable interest rates, and either cause a bankruptcy or turn into a serious money drain.

This is basically the only scenario under which it could be materially harmful to Tesla. The solar panel, racking, and installation businesses really can't lose very much money per year even in the worst case scenario -- little enough that it would be immaterial to Tesla. But the financing business *could*.

It is a material change for the following reasons:

-It was not part of the master plan nor a key part of making it successful. The only argument is it will make the whole thing cheaper. It is not the thin red line between being able to sell an EV at a competitive enough price.
-It does nothing to advance the green future. If SCTY dies, there will be other solar company to take its place. TSLA is the only one of its kind succeeding. If TSLA dies, electric car advancement will be set back for at least 10 years. It means in my life time, oil will have significant influence through it all. If SCTY dies, it does not matter.
-A material change is also going to happen in the financial structure of TESLA. Up to this point, tesla's debt is easy to model and understand. There are no trigger events that will bring about a forced sale, a forced recall on loan or a sudden loss of credit rating. It is predictable. You add in SCTY securitization, you change the financial structure. Material change in how things operate.
-Composition of stock holder will change. Now the longs are spread between a yes and no camp. The longs are no longer coherent in the direction of the company. This is actually important in a very subtle way. You do not force a division between your supporters.


Disclosure: I only own TSLA shares and am a model 3 reservation holder.

 

[DaveT]

Good article, Tesla Takeover of SolarCity Not a ‘No-Brainer’ for Investors

 

[sub]

As far as I know TE wasn't a part of the secret master plan either?

I don't know how I feel about this right now but I do wish I was more in TSLA shares rather than leaps!

 

[Krugerrand]

I think the market should wear a dunce cap (or 10) for viewing the accelerated Model 3 ramp as a negative and couldn't be happier about that decision.

Which makes me totally want a dunce cap button!

 

[Vitold]

TE needs SolarCity for residential batteries. If SCTY is in trouble - TE is in trouble.

 

[Causalien]

People who wait for the perfect time, wait forever. Because it's never a perfect time, there's always some reason to hold off and waiting for a 'likely' scenario is such a reason.

As someone up thread a few pages pointed out (and linked an article), Elon mentioned combining his companies. He bought two huge whacks of SCTY shares. Many interviews/discussions with JB about solar, integration, synergies. And people didn't see this coming?

It is not about waiting for a perfect time. But rather, acting at the worst timing.

 

[neroden]

As I sit here 7.5 hours before tonight's conference call, I'm wondering what it would be like to open up SCTY's financials more;

I'm not sure it's entirely possible -- the investors on the other side of the various special purpose entities may actually have been the ones who demanded confidentiality of interest rates etc. :-(

perhaps that would unduly allow outside manipulators to contagion the debt; without even knowing what's inside, it's hard to even know if that's likely. If the institutional investors have enough votes AND have access to this information in a secure manner, then I could see that being enough for this to go through (or not as the case might be) by itself, which, in that case, what is tonight's conference call for?

Additional clarity on exactly what's going on with SCTY's *numerous* financing deals would probably be enough to allay most worries; it would certainly allay mine.

A sensitivity analysis to various possible shocks would actually be sufficient. (What happens if PPA default rates spike up to 5%? What happens if the interest rates SCTY can get go up by 5% and they have to refinance all their shorter-term bonds at the higher rates?). Tesla and SolarCity could probably produce and release that analysis without releasing individual details of particular deals.

 

[neroden]

Solarcity is an extremely high value business. That's not really up for debate in rational circles.

GE's also an extremely high value business, but GE Capital almost sank them.

Because of the nature of banking, it has unique risks. A problem in a banking business can sink the holding company even if the underlying business is great. I believe this is the main risk factor of SolarCity.

 

[LargeHamCollider]

I worked late today and got home to be greeted by 20 new pages in the ST thread. What a bombshell.

I like TSLA and have owned it with a few short breaks since March 2013. I have great situational awareness wrt Tesla's financials and products. I've owned SCTY just once where I made a quick buck on a volatility play.

SCTY does address the right problem, which is that the irrationally short time preferences of consumers are hindering the adoption of solar.

But I'm against this move for a couple reasons.

1. Tesla Owners love Tesla, Solar City owners often hate Solar City; this is a huge negative, that ill-will will not disappear.
2. As has been noted by many already, Solar City's financials are opaque, I don't understand them so I haven't held SCTY long term. In my brain SCTY financials are somewhere beyond the "here be dragons" area.

I do like the idea of Tesla owning the "solar gigafactory" and the further vertical integration that would bring. I also like the idea of integrated TE-PV products.

My big question is: What percentage overlap is there between the institutional investors in these two companies? These guys will determine if the vote passes.

I suspect anyone who has significant positions in both companies will vote for the aquisition because Tesla brings greatly increased credit stability to SCTY.

If a solid plan to de-mystify SCTY finances emerges I may change my mind...

Edit: And seriously the timing sucks.

 

[Krugerrand]

It is not about waiting for a perfect time. But rather, acting at the worst timing.

So you've said. I'm going to go with the guy who has the vision, all the information, the most to lose, and the chutzpah to see it through to the end.