Short-Term TSLA Price Movements - 2016

[geneclean55]

He doesn't care about predicting market reaction and he's been quite clear about that in the past. He'd rather Tesla be a private company. He made it public because he had to or it would have died. It's that simple.

Elon has also made comments about short-sellers during interviews and through tweets. I suspect he has some interest in the stock price and market reaction but its not what guides him.

 

[Vitold]

The SCTY contract has a 3% escalator, so in 10 years the price is 34% higher than today, and in 20 years the price will be nearly double that of today.

Up to 2.9% escalator has been used with myPower which some estimate to be only 20% of the future SCTY business.

 

[Perfectlogic]

Lastly, powerwall is a big upsell opportunity for all solar only customers. Once powerwall is integrated and as more people have powerwall, Solarcity is in discussions to be allow for home owners to sell energy capacity to the utility. Current contracts are a 50/50 compensation split with Solarcity on monies from the utility deal for access to a certain amount of your electricity generated. This translates into even lower home electricity consumption costs.

You seem very biased. Why would the utility pay for powerwall storage at $430/kWh ($3k for 7kwh) instead of building their own using powerpacks for $250/kwh?

This is the general problem with both residential solar and battery storage, the small scale just can't compete with utility scale on price. Which is why we have utilities in the first place, solar doesn't change this fact.

 

[Foghat]

The SCTY contract has a 3% escalator, so in 10 years the price is 34% higher than today, and in 20 years the price will be nearly double that of today.

According to latest data, The average Solarcity escalator chosen by its customers is 1.7%.
2.9% is the highest they can chose which translates into a lower cost/kWh at initial commencement of the contract.

Escalator ranges from 0-2.9% depending on where the consumer what's to pay along that scale per/kWh.

Again, the average is 1.7% across all Solarcity ppa/leases, not 3%

 

[Krugerrand]

Elon has also made comments about short-sellers during interviews and through tweets. I suspect he has some interest in the stock price and market reaction but its not what guides him.

Yes he has and it's usually an off-the-cuff remark. He knows where he's headed, time will care of the short sellers.

 

[Perfectlogic]

Up to 2.9% escalator has been used with myPower which some estimate to be only 20% of the future SCTY business.

"Customers can choose a lease or PPA with no upfront cost and with payments escalating at a set rate, typically 2.9% per year, or they can select a lease or PPA that has some upfront cost and no annual increase in payments."

Judging from this piece from their website it looks like you either go with the escalator or you pay some upfront. I'm sure by far most customers choose to go with the escalator, the only selling point seems to be no upfront cost and cheaper than the utility (today).

@Foghat

1.7%/y will probably still end up being significantly more expensive than the grid over the next 20 years judging by the current pace of innovation in energy.

 

[Foghat]

You seem very biased. Why would the utility pay for powerwall storage at $430/kWh instead of building their own using powerpacks for $250/kwh?

This is the general problem with both residential solar and battery storage, the small scale just can't compete with utility scale on price. Which is why we have utilities in the first place, solar doesn't change this fact.

I don't know what data you are referencing, but DER aggregation compensation/pricing is not available as far as I have found. Documentation would be great if you could provide it.

As far as I know, Solarcity contracts offer 50/50 split on any aggrements with utilities for demand response and other customer sided services.

At present, recent Solarcity sponsored data suggests their are 11 values DERs offer the grid which translates into a higher then current retail(specifically in Nevada). Obviously, there is discussion on the compensation level of these 11 DER values from the utility point of view, but still no definitive value as of yet. Thanks in advance if you have those references I could look at.

 

[30seconds]

Why are people acting like SCTY could go bankrupt very soon, i thought the risk is only if we have a recession and or rising interest rates? Which are possible but probably not in the next few quarters, correct?

Rising interest rates would not bankrupt SCTY and I don't think a normal recession would either (2008 was far from normal). In either case re-financing will be available, just at higher rates. The company has escalators built into the existing contracts that could be utilized if needed. The company can shut down new residential installs, scale down employee base and focus on industrial / utility markets if needed.

I don't believe there is much default risk with the current contracts. These are high FICO homeowners paying their electricity bill. Why would they default? In order to live without power or turn around and start paying their local electric company more?

Unfortunately the company's financials are far from simple and it is not easy to determine how much higher or lower (on quarterly basis) the payment obligations are in excess of their cash flows.

 

[pGo]

Tesla's board do not vote on it. It is the owners, the shareholders, who vote. Elon, his cousins, and a few more with conflict of interest will not exercise their votes. The decision to either go or no-go is with a select few large shareholders. I believe many of them are already on board with Elon on this.

Did you guys notice how angry Andrew Left sound in this interview with CNBC today? He has shorted both SCTY and TSLA. Tesla Motors (TSLA) Videos Is his anger an indication that he feel checkmated by Elon?

Sorry, I am not a short.. However I share the same thing about solar city.

 

[Vitold]

"Customers can choose a lease or PPA with no upfront cost and with payments escalating at a set rate, typically 2.9% per year, or they can select a lease or PPA that has some upfront cost and no annual increase in payments."

Judging from this piece from their website it looks like you either go with the escalator or you pay some upfront. I'm sure by far most customers choose to go with the escalator, the only selling point seems to be no upfront cost and cheaper than the utility (today).

@Foghat

1.7%/y will probably still end up being significantly more expensive than the grid over the next 20 years judging by the current pace of innovation in energy.

UK agreed to pay 15c/kWh (indexed to inflation) for 3.2GW of nuclear power for next 20 years. I think this gives some indication where prices are heading.

 

[Perfectlogic]

I don't know what data you are referencing, but DER aggregation compensation/pricing is not available as far as I have found. Documentation would be great if you could provide it.

As far as I know, Solarcity contracts offer 50/50 split on any aggrements with utilities for demand response and other customer sided services.

At present, recent Solarcity sponsored data suggests their are 11 values DERs offer the grid which translates into a higher then current retail(specifically in Nevada). Obviously, there is discussion on the compensation level of these 11 DER values from the utility point of view, but still no definitive value as of yet. Thanks in advance if you have those references I could look at.

I'm talking about the price per kwh of storage for the Powerwall compared to Tesla's bigger utility scale Powerpack. The pack is $250/kwh while the wall is $430/kwh, therefore the utilities won't be lining up to use the wall as they have a cheaper option.

 

[Zhelko Dimic]

He doesn't care about predicting market reaction and he's been quite clear about that in the past. He'd rather Tesla be a private company. He made it public because he had to or it would have died. It's that simple.

If you're a shareholder and didn't know his feelings on the whole stock market thing, you didn't do your due diligence. And he's already apologized about the X and taken the blame. You want a pound of flesh?

Kruggerand, let me acknowledge that I've heard your viewpoints several times. I understood that you feel only enlightened are supposed to dare become Tesla shareholders. I disagree. Not every shareholder will have intricate understanding of Elon's psyche, and honestly, I think you're wrong on couple points. I agree Elon would prefer Tesla be private, but since it's not, he does care about the price, and has been active in shepherding it, both up and down. This is not an accusation, I believe he does it for valid reasons - wildly incorrect pricing could create big problems. For example, too high of a price can lead to an ugly collapse, too low price would endanger the mission, finance rounds etc.

And yeah, he took blame for X, great! Why, oh why continue beating on shareholders with this move then?

 

[Foghat]

"Customers can choose a lease or PPA with no upfront cost and with payments escalating at a set rate, typically 2.9% per year, or they can select a lease or PPA that has some upfront cost and no annual increase in payments."

Judging from this piece from their website it looks like you either go with the escalator or you pay some upfront. I'm sure by far most customers choose to go with the escalator, the only selling point seems to be no upfront cost and cheaper than the utility (today).

@Foghat

1.7%/y will probably still end up being significantly more expensive than the grid over the next 20 years judging by the current pace of innovation in energy.

It is important to look at the capital investment requests/resource planning requests utilities are proposing to their commission to understand what directions rates will trend. From my investigation in Solarcity markets, those trends are much higher then 1.7% annualized on average. Some utilties don't raise rates as much over a stretch, but ask for massive ones in many rate reviews over the longer haul. Take for example what is happening in Arizona territories, in New Mexico, Nevada, California, and pretty much all Solarcity territories. Rate increase requests across the board and their capital investment requirements/requests reflect this will only continue into the foreseeable decades to come. (Unless, of course, they begin to be allowed to make a profit off DER demand response service purchased from companies like Solarcity)

Again, Solarcity average escalator is well well below traditional rate increases. Also, consumers have a choice. They don't have to chose an escalator at all with Solarcity. Unfortunately, traditional rate increases will happen whether you like it or not.

 

[TMSE]

Elon has also made comments about short-sellers during interviews and through tweets. I suspect he has some interest in the stock price and market reaction but its not what guides him.

Yes he has and it's usually an off-the-cuff remark. He knows where he's headed, time will care of the short sellers.

Did Elon answer about the timing of this move? My apologies if it is already been hashed out here.

I think timing is everything, especially with Tesla. Just until yesterday we were all busy talking about delivery numbers for Q2. The vibe I got is that we will see at least a modest beat, or hopefully a big positive surprise, over 18500 deliveries.

I think Elon was waiting for some milestone be crossed before making this hugely controversial move. What would that milestone be? Meeting the Q2 guidance? Tesla must have crossed 17K deliveries by now. With about 10 more days to go, Tesla could deliver ~2500 to 3000 cars more before quarter ends. Of course, that speculation has no basis. We will know in 10 days.

 

[Seesaw]

It is important to look at the capital investment requests/resource planning requests utilities are proposing to their commission to understand what directions rates will trend. From my investigation in Solarcity markets, those trends are much higher then 1.7% annualized on average. Some utilties don't raise rates as much over a stretch, but ask for massive ones in many rate reviews over the longer haul. Take for example what is happening in Arizona territories, in New Mexico, Nevada, California, and pretty much all Solarcity territories. Rate increase requests across the board and their capital investment requirements/requests reflect this will only continue into the foreseeable decades to come.

Again, Solarcity average escalator is well well below traditional rate increases. Also, consumers have a choice. They don't have to chose an escalator at all with Solarcity. Unfortunately, traditional rate increases will happen whether you like it or not.

Just reading this makes me realise this is a business I don't want to be a part of

 

[Vitold]

I'm talking about the price per kwh of storage for the Powerwall compared to Tesla's bigger utility scale Powerpack. The pack is $250/kwh while the wall is $430/kwh, therefore the utilities won't be lining up to use the wall as they have a cheaper option.

250/kWh you mention is an old estimate which turned out to be not true. Currently TE is charging between $550 - 900/kWh for Powerpack solution.

Link to the article: Tesla Energy Reveals Powerpack Pricing, Starting From 200 kWh Of Storage

Link to Tesla page: Build your Powerpack Energy Storage Solution | Tesla Motors

 

[tftf]

FICO scores, retention rates, energy pricing, regulatory issues etc.

You are all overthinking this. Don't get lost in the SCTY small print. It's confusing and irrelevant for retail investors.

Here's the big picture:

1. Musk is a visionary CEO who steered Tesla through hard times in 2008 and 2013. No liquidity problems.
2. He is chairman at SCTY and knows all about the small print and the revolutionary upcoming Silevo tech
3. His long-term conclusion is simple, the new Tesla is soon worth a TRILLION $ thanks to all the synergies:

Elon Musk Says Tesla, with SolarCity, Could Be A Trillion Dollar Company

Therefore a no brainer. Some dilution and minor speed bumps in exchange for a trillion $ market cap in a few years?

Yes, please!

Everybody opposing this deal likely doesn't get Musk's grand vision - nor has his unique insider knowledge.

He will save the planet and make you (very) rich along the way.

 

[Krugerrand]

Not every shareholder will have intricate understanding of Elon's psyche...

And as I said, if you don't know about the man behind the company and then complain when he calls an audible, that's on you not him.

I agree Elon would prefer Tesla be private, but since it's not, he does care about the price, and has been active in shepherding it, both up and down.

Yeah, we totally disagree on that point.

And yeah, he took blame for X, great! Why, oh why continue beating on shareholders with this move then?

That's clearly your opinion being on the wrong side of the trade. He thinks he's looking after long term shareholders by moving his company in the direction that nets it a $1 TRILLON company. Yeah, he's totally against his shareholders.

 

[Foghat]

I'm talking about the price per kwh of storage for the Powerwall compared to Tesla's bigger utility scale Powerpack. The pack is $250/kwh while the wall is $430/kwh, therefore the utilities won't be lining up to use the wall as they have a cheaper option.

What the utilities buy is demand response from aggregated DER customer-generators. They don't buy powerwalls, they buy demand response capabilities from a group of residents with solar+storage+smart inverter as a whole. This is where Solarcity comes in as the single point of contact aggregator.

The question posed to the utility is is this cheaper to procure demand response services from this aggregator or is it cheaper to build and operate a new nat gas peaker plant for the demand response requirement?

 

[tlo]

The opinion on these threads is far too shortsighted.

Key points paraphrased from Elon on this morning's call:
- "decision was unanimous on the boards of both companies"
- "Tesla has the potential to be a trillion dollar company"
- "SolarCity financials are healthy, will be cash flow positive in a few months."
- "we have plans that will make things clear but we cannot announce it until the deal is done"

First point is significant because it shows the board is unanimously onboard and it is not just "Elon bailing out cousin". The board is motivated by long term strategy and profits. Now, if you don't believe what the CEO says and the company's ability to execute, why are you invested in Tesla in the first place? I have been a shareholder since 2011 and will be voting in favor of what the CEO recommends.

My personal guess of what's going on:
- deal has been in the works for some time
- SCTY's emphasis to become cash flow positive was in preparation of this deal
- SCTY's Q1 letter shows negative cash of just $21MM and quote "Positive Cash Generation before Manufacturing-Related Investment", so they are on track and Elon is not lying
- SCTY is not on brink of collapse, however it became apparent that SCTY's mission is under-appreciated by the market and unable to thrive as a public company, hence the decision to sell to Tesla, which is mutually beneficial

Why Tesla is doing this:
- Tesla Energy is key part of mission, but the battery is just half the product without solar
- Tesla needs ability to sell end-to-end solution and control entire customer experience under Tesla brand
- SolarCity happens to be Tesla Energy's primary partner already, the biggest solar installer in the world, has the best solar panel technology and manufacturing capability, and Elon is already on the board and is the largest shareholder

Why now:
- waited for SolarCity to clean house and be close to positive cash flow
- imminent plans to aggressive ramp of Tesla Energy products
- SolarCity technicians valuable for installation of TE products, supercharger network, Model S/X/3 home chargers
- yet to be announced products/plans hinted by Elon

IMO yes this is a no-brainer deal. Long-term potential far greater than short-term backlash. I also believe they have done their homework and have high confidence that the deal will go through before putting this to a shareholder vote.