Short-Term TSLA Price Movements - 2016

[Quesder]

Quesder, this was an easy one. We've seen so many times before when the SP closed one penny or two below the level that the shorts wanted to stay underneath. I'd be a wealthy man now if I could predict SP so closely most of the other times.

Well, if you got some put or call at 219.50 or 220.45 today, would you make 100K already? Or you actually did that?

 

[TMSE]

Is the conversion ratio set to price SolarCity at $25 or is it .11 TSLA shares as of the date the merger is voted on? Or something else?

It is 0.11 shares of TSLA for each share of SCTY. It is already set in stone.

After SEC and shareholder approval, both SCTY and TSLA would track each other closely at 0.11 ratio. Right now, there is some arbitrage opportunity due to a small but finite risk of merger deal falling apart.

 

[rallykeeper]

More convinced than I last week about what's up with Tesla.

1. The proposed merger conversion rate is ~.11 SolarCity for every 1 share of Tesla. I have no idea why journalists still don't understand that Tesla isn't buying SolarCity.

2. Tesla is stuck in a tight range until the merger is complete because Tesla's stock price is tied to SolarCity's stock price.

It's the other way around.

Tesla is definitively buying SolarCity. The deal is structured as a reverse triangular merger. (I.e., (1) Tesla creates a merger subsidiary and capitalizes it with Tesla stock, (2) Merger sub merges into SolarCity, (3) SolarCity exchanges all its outstanding shares (other than the shares held by Tesla) with Tesla stock, and (4) now SolarCity is a wholly-owned subsidiary of Tesla.)

Incidentally, SolarCity's debt remains outstanding and convertible debt becomes convertible into Tesla stock (as adjusted for the .11 exchange ratio).

Merger consideration is .11 shares of Tesla for every one share of SolarCity. As a result, SolarCity's price is tied to Tesla's (it's still trading at a discount to that conversion ratio because of deal uncertainty).

 

[rallykeeper]

It is 0.11 shares of TSLA for each share of SCTY. It is already set in stone.

After SEC and shareholder approval, both SCTY and TSLA would track each other closely at 0.11 ratio. Right now, there is some arbitrage opportunity due to a small but finite risk of merger deal falling apart.

There likely won't be much gap in time between shareholder approval and merger. (Likely just a few days given that other antitrust approval already received).

Also, SCTY will track TSLA, not vice-versa.

 

[MitchJi]

Interesting, but not soon:
Tesla Motors Inc's (TSLA) Model S 100D EPA Range Could Boost Over 400 Miles

Mr. Chowdhry noted that Tesla Model S, P100D version with bigger battery, has 315 miles EPA range. While the range improvement potential of P to D is 9-10%, the analyst is assuming it to be 9%. Also adding range improvement of D over P, he sees that Tesla Model S 100D will have EPA range of 343 miles. Furthermore, he has assumed 15% from the battery form factor improvement of 20700 over the prior 18650, i.e. 15-18%. Mr. Chowdhry said: “Adding range improvement of 20700 cell-form-factor over 18650 cell-form-factor, Tesla Model S 100D will have a range of 395 miles.”

Moreover, the analyst assumes 10% range improvement potential in Electric Motor propulsion with increased copper winding density. “By just making a slight adjustment to the Laminate Winding Machine, Tesla EV Motor propulsion can be improved by 12% to 15%,” commented Mr. Chowdhry. His assumption of 10% improvement is based on 85% EV motor efficiency. If Tesla improves EV motor propulsion, its Model S 100D will have an EPA range of 434 miles, said Trip Chowdhry.

100% efficiency .

 

[hobbes]

Forbes rates Tesla most innovative company:
The World's Most Innovative Companies

Another good article there, looking at development of Model S production cost and extrapolation to Model 3:
Tesla's Innovations Are Transforming The Auto Industry

 

[dandurston]

Shouldn't we be using 13 weeks in Q3? Tesla noted that Q4 would have two vacation weeks, meaning 11 weeks in Q4.

Indeed a year divided by 4 is 13 weeks per quarter. However Tesla has shutdowns or slowdowns all the time, and most manufacturers are down for one reason or another, so it's more reasonable to use 12.

In Tesla's case, they commonly shut down in the first month of a new quarter. They crank production to a high rate to blast cars out at the end of the quarter, then announce the high rate they're almost at, we all get excited, and then in the new quarter they take a breather to assess the new production process, fine tune things and then resume. This was very pronounced with the X launch, but early quarter shutdowns are the norm to some extent. It was probably only 2-3 weeks ago that Tesla really got blasting on Q3 cars at a rate >2000.

 

[dandurston]

Interesting, but not soon:
Tesla Motors Inc's (TSLA) Model S 100D EPA Range Could Boost Over 400 Miles

The authors (based on Trip Chowdhury) see the S100D getting ~343 miles/charge EPA based on the advantage the 90D has over the P90D and adding that to the 315 mile EPA of the P100D. Fair enough.

Then they argue for another ~17% improvement with the new 20700 batteries to conclude 400 miles. This also should happen, but the 20700 batteries increase capacity so the car won't be a 100 kWh anymore but rather a 117D. So it may be accurate to say we could have a 400 mile Tesla next year, but it's inaccurate to say the 100D is going to have 400 miles.

 

[MitchJi]

A few interesting quotes:
TSLA Stock: Elon Musk’s “Secret Ingredient” for Tesla Motors Inc

Despite its raging popularity,Tesla Motors Inc(NASDAQ:TSLA) is still underappreciated. Bearish investors don’t realize that TSLA stock is so much more than a car company; it’s an end-to-end energy company.

Unfortunately, that ignorance comes at a steep price. Tesla stock has grown 1,066% since its introduction onto the NASDAQ stock exchange, meaning that those bearish investors have cost themselves a lot of money. A lot of money.

But it’s okay. According to Elon Musk’s “Master Plan, Part Deux,” TSLA stock still has a ton of unexplored upside potential. (Source:“Master Plan, Part Deux,”Tesla Motors Inc, July 20, 2016).

There is a “secret ingredient” that ensures continued success, and it has nothing to do with the reasons you normally hear. It’s not the driverless technology, nor the impending acquisition of SolarCity Corp(NASDAQ:SCTY).

Both those tailwinds can buffet Tesla stock to a higher price, but they are not the “secret ingredient” I’m talking about. Just read the recent master plan more closely. It’s all there, hiding in plain sight, but investors are too tunnel-visioned to see it.

They have drawn definitive lines around TSLA stock as an emerging carmaker. As a result, the only valuation they’re capable of is that of an emerging carmaker. It’s not rocket science; just good ol’ fashioned logic.

Sure, it has a higher price-to-earnings multiple than other car companies, but that’s not because of my “secret ingredient”. Investors are simply bullish on Elon Musk’s chances of scaling up Tesla. They have finally accepted that he can do it.

The “secret ingredient” to TSLA stock is that Tesla rethinks a business from the bottom up. Its approach is always unique and different. In other words, Elon Musk has bottled genius, packaged it into a company, and offered it to investors in the form of Tesla stock.

 

[ZenMan]

Check.

So I didn't want to roll forward today's 220 short put till next week because I already wrote $220s for next Friday. Interactive Brokers will assign a put as long at it is $0.01 in the money. I didn't want to increase my share position as I have other short puts next week and want a margin cushion. So I had to buy my puts back with 2 minutes left. Cost me $0.40. Is there any other broker that would allow a cash payment in lieu of purchasing the stock? If I could have settled 1 second after the closing price, it would have saved me $0.39/share.

Anyone have any other ways to minimize assignment risk when the share price seems to be zeroed in on your strike price and you don't know if you are in the money until the exact closing second?

 

[vgrinshpun]

So I didn't want to roll forward today's 220 short put till next week because I already wrote $220s for next Friday. Interactive Brokers will assign a put as long at it is $0.01 in the money. I didn't want to increase my share position as I have other short puts next week and want a margin cushion. So I had to buy my puts back with 2 minutes left. Cost me $0.40. Is there any other broker that would allow a cash payment in lieu of purchasing the stock? If I could have settled 1 second after the closing price, it would have saved me $0.39/share.

Anyone have any other ways to minimize assignment risk when the share price seems to be zeroed in on your strike price and you don't know if you are in the money until the exact closing second?

You can just roll ITM put to the next week. So instead of selling put for the next Friday, you can use one transaction called "roll". It involves buying back put for the week and selling put for the next one. Instead of limit price, you'll need to specify target "credit" price - the difference between the premium for the written next week put and how much it costs to buy back this week's.

I have been rolling $235 and $240 puts for many weeks now...

 

[RubberToe]

I do know that because ZEV is not BEV. And FCEV is explicitly in the documents you have quoted in multiple places on TMC. Alternative fuels, partial zero emission vehicles, and plug-in hybrids get partial zero emission credits all over the US. Explicitly in the documents you quoted. Zero emission for 10 miles for heavy duty or 35 for light duty. It is naivete and/or willful ignorance to suggest all $2B will go towards batter electric vehicle charging.

Eloder says concerning Tesla's Supercharger network: "I can say with 100% absolute certainty that no comparable network will be going up in the next three years..."

RubberToe: Unsure of how often the short term investors thread crew heads over to the Energy, Environment and Policy sub-forum, responds to Eloder and points out that a rather large sum of money is about to be doled out for various ZEV projects. "Remember, there is $200,000,000 of VW settlement money going to be spent in California alone in the next 30 months for EV infrastructure. That amount of money could theoretically build a Supercharger like DCFC equivalent here if that's what they chose to do. We will see later this year what the proposed spending plan is. Then another 3 tranches at $200 million each every 30 months."

RobStark: "You know very well a portion of that money will go to H2 Fuel Cell infrastructure..."

RubberToe points out to RobStark: "I don't "know" that, and neither do you, unless you happen to work for VW and are preparing the infrastructure project list"

There is another entire thread concerning keeping track of how this money is going to be spent, who gets to have the final say, what the definitions of BEV, ZEV, FCEV, creditable costs, and every other acronym you happen to find in the settlement agreement. The "basic" point of my original post being that even a small portion of that money could indeed build out a nice DC fast charging network here in California. Thats a simple fact, nobody is going to argue that. I said nothing about all of the money being spent only on battery electric vehicle charging.

There are a whole slew of things that the money can be spent on. And no doubt FCEV's may get some of that depending on what VW and CARB decide on. Any short term investors interested in the details of the $800,000,000 plan for the VW California Settlement funds, or wondering if that amount of money might have anything to do with their investments, can peruse the thread right here:

VW Fallout: $2.0 Billion for ZEV Infrastructure Buildout

RobStark says: "And FCEV is explicitly in the documents you have quoted in multiple places on TMC".

Indeed it is, and the purpose of "ZEV investments" is for the design, planning, construction, installation, operation and maintenance of : BEV, FEV (their term), 35+ mile PHEV, and heavy duty vehicles with electric powered takeoff. Including 1) Level 2 chargers, 2) DC fast charging facilities, 3) heavy-duty ZEV fueling infrastructure. FCEV infrastructure qualifies as you state. Another section allows for education, EV ridesharing services, etc.

So whats the point of all this, specifically with respect to FCEV money versus DCFC money, versus education?

The absolute biggest drawback to owning and operating a ZEV in California is the lack of infrastructure available for long distance travel. This is not a well kept secret. So given that there are over 150,000 BEV/PHEV in California and a total of 250 fuel cell cars, how do you think CARB is going to allocate the funds?

Basically, a good portion of that $200 million is going to be used to start construction of a DCFC network here in California. CARB is taking public comment on both the VW proposed allocation plan, and their response to it. Anyone who thinks FCEV's or education are going to get more money than the DCFC network are kidding themselves. And no, I don't "know" that for sure , but no one is going to let VW or anyone else waste $200 million that could be better spent.

Enjoy your weekend.

RT

 

[Intl Professor]

Another good article there, looking at development of Model S production cost and extrapolation to Model 3:
Tesla's Innovations Are Transforming The Auto Industry

Forbes has at least one error here, assuming the car's roof will have solar, when Musk was talking about roofs for buildings. Picky, picky, I know.

 

[MartinAustin]

Ahh.... the weekend. We don't have to talk about the stock

(right?)

I think we should put a P100D into the hands of Casey Spencer and see what he can do with it.
Tesla Model S 85D Goes 550 Miles On Single Charge

 

[sunhelm]

Indeed a year divided by 4 is 13 weeks per quarter. However Tesla has shutdowns or slowdowns all the time, and most manufacturers are down for one reason or another, so it's more reasonable to use 12.

In Tesla's case, they commonly shut down in the first month of a new quarter. They crank production to a high rate to blast cars out at the end of the quarter, then announce the high rate they're almost at, we all get excited, and then in the new quarter they take a breather to assess the new production process, fine tune things and then resume. This was very pronounced with the X launch, but early quarter shutdowns are the norm to some extent. It was probably only 2-3 weeks ago that Tesla really got blasting on Q3 cars at a rate >2000.

If this data point were any indication, it appears the crank up has begun mid-August, from Model X September deliveries thread (a flurry of updates there btw):

I reserved on 8/11, confirmed on 8/18, Vin assigned on 8/19, expected delivery on 9/30. Vin # 180XX. I ordered 6 seat (blue/white) 60D.

 

[ggr]

A number of people have written above "20700". The new format is actually called "21-70". Written the old way, it would be 21700, not 20700. Just being picky. Elon mumbled something about being able to squeeze an extra millimeter of diameter.

 

[TMSE]

Holy guacamole!!! Both MS and MX delivery estimates for the continental US have moved to October! Time for demand naysayers to eat some crow!

 

[Incredulocious]

sdtslafan said: ↑
Schwab just returned all the shares which I had lent out at their request. They only kept my shares for a few weeks. I am surprised since they were so eager to borrow them a few weeks ago. Maybe anecdotal evidence of short covering.

Ditto here. Both with my Schwab and Fidelity accounts. Also, SCTY lending rate is down to 7% now at Fidelity.

Hmmm... never mind, looks like Fidelity found somebody to loan my TSLA shares to again. Just in time for the weekend!

 

[FredTMC]

Holy guacamole!!! Both MS and MX delivery estimates for the continental US have moved to October! Time for demand naysayers to eat some crow!

Really?! No joke?! If so that's really good news!
(I still find this hard to believe. I'm checking right now)

Okay, I just verified. YES, MS and MS have now moved to October delivery estimates. WAS September.

This is really good news. I can hardly believe it.

 

[hobbes]

Really?! No joke?! If so that's really good news!
(I still find this hard to believe. I'm checking right now)

Okay, I just verified. YES, MS and MS have now moved to October delivery estimates. WAS September.

This is really good news. I can hardly believe it.

Sounds good, but as they only report in increments of a whole month the change might only have been from Sep 31 to Oct 1 really... So hard to tell what that really means.

Another data point for demand is the Norwegian registration numbers which can be seen live here (X/S):
Registreringer av nye elbiler i Norge
Registreringer av nye elbiler i Norge
This is the only hard info we have in real time. Right now the total for Aug stands at 223. For comparison, the total numbers for the 2nd months of the previous quarters starting Q1/2015 were 321/346/220/225//113/156, so we will be above the levels of Q3/Q4 2015 there. Also note the X/S share is about 50/50. But it is still only one country with the special case of first month with volume X deliveries.