Short-Term TSLA Price Movements - 2016

[vgrinshpun]

I have no science behind my conclusion/opinion. IMO, I never liked the SCTY business model...no charge product/leasing/becoming in essence, a utility company. I believe their business model would need to be changed or would fail. I know many feel they were a quarter or two away from turning a profit. Personally, I think they were a year away from potential failure. During the next 3-6 months I saw their value dropping dramatically. TM is overpaying (some would call it bailing out) for SCTY.

Now, TM is at a critical stage. They are trying to bridge the gap between bringing the supply/demand up for the S and X to help pay for the
model 3. So, what do they do....let us not only try to fund that but lets overpay for SCTY. I have said before that these decisions/timing are far above my pay grade but personally.....I think this is a *stupid* move.

I have been wrong before and this may turn out to be a brilliant move. I think it would be a good move...in late 2017. They could buy the Buffalo manufacturing facility for next to nothing and add it to TE.

The reason I think that product cycle is indeed had a major contribution to the decision is that new battery pack architecture introduced to the TA is going to have a major impact on TE - I am thinking that the extra space freed in the (Powerwall/Powerpack) "pod" due to new pack architecture can be used for integral bidirectional inverter. Once again, not trying to convince you, just presenting information which you might not considered. Whether you buy this line of thinking or not is totally beyond the point. The point I am trying to make is that Musk and JB did have a specific basis for saying that timing of merger is tied to product cycle, notwithstanding everybody ignoring this fact. Again, whether your considerations outweigh this product cycle considerations or not is subject of entirely different discussion, but that discussion could not even be had, unless there is a recognition that Musk and JB mentioning product cycle was something real especially given the introduction of new pack architecture for P100D.

 

[NOLA_Mike]

I only find this information mildly interesting but for those interested here is the latest on available shares at IB:

 

[TMSE]

I have no science behind my conclusion/opinion. IMO, I never liked the SCTY business model...no charge product/leasing/becoming in essence, a utility company. I believe their business model would need to be changed or would fail. I know many feel they were a quarter or two away from turning a profit. Personally, I think they were a year away from potential failure. During the next 3-6 months I saw their value dropping dramatically. TM is overpaying (some would call it bailing out) for SCTY.

Now, TM is at a critical stage. They are trying to bridge the gap between bringing the supply/demand up for the S and X to help pay for the
model 3. So, what do they do....let us not only try to fund that but lets overpay for SCTY. I have said before that these decisions/timing are far above my pay grade but personally.....I think this is a *stupid* move.

I have been wrong before and this may turn out to be a brilliant move. I think it would be a good move...in late 2017. They could buy the Buffalo manufacturing facility for next to nothing and add it to TE.

While I agree that SolarCity business model started to crumble, thanks to the backstabbing by the Nevada Govt., It still has a finite value.
Their PPA assets generate over $350M/year for the next 20 years. These assets are backed by around $3.5B short term loans.

Two big problems facing SolarCity are:
1) Higher cost of capital - Need to refinance their short-term loans with even higher rates when they mature. Under Tesla they can refinance at lower rate.
2) Very high SG&A costs - Sales folks made an average of $6,000 in commissions, on a $15,000 to $18,000 residential solar project, which is outrageous. Tesla's curator type sales model will take care of this. No more of these nasty commissions.

At the current acquisition exchange rate (0.11), I think the deal is fair. When the deal intent was first announced many months ago, they mentioned about SolarCity becoming non-GAAP profitable by next quarter. That should alleviate most of valuation concerns, if it indeed is true.

 

[brian45011]

If SCTY goes bankrupt the state of NY gets the facility, and can drive a hard bargain with anyone else who wants to rent it.... and the politicos in NY may be completely unwilling to rent it to Tesla if SCTY goes bankrupt.

What is Fort Schuyler Management Corp's, a non-profit subsidiary of the State University’s College of Nanoscale Science and Engineering, BATNA to Tesla?

(BATNA is Roger Fisher's Best Alternative to a Negotiated Agreement in "Getting to Yes" {far better read than "Art of the Deal" })

 

[AlMc]

They can't. I've explained this before. The contracts for the Buffalo facility are set up so that the State of New York owns it and SCTY rents it for basically nothing. If SCTY goes bankrupt the state of NY gets the facility, and can drive a hard bargain with anyone else who wants to rent it.... and the politicos in NY may be completely unwilling to rent it to Tesla if SCTY goes bankrupt. In order to get the Buffalo factory Musk *has* to get Solarcity while it's still a going concern.

Got carried away with my rant. By picking up SCTY for pennies...not dollars....they would 'acquire' the rental agreement, and thus access to the plant, for pennies, not dollars.
IMO, that is SCTY's most valuable 'asset' to TE.

 

[schonelucht]

I know many feel they were a quarter or two away from turning a profit. Personally, I think they were a year away from potential failure.

A year? More like 3 weeks. Their cash position at the end of the quarter was abysmal, they are not even able to sell a $125M debt at 6.5% for 18 months with a take-over deal by a well-funded company in the pocket except to insiders. They are not even getting a loan from those who have Tesla's inventory as a collateral. If not for Elon stepping in, they would be in breach of all sorts of debt convenants about now already. When that happens with this much liabilities on the books, it's game over. Those who think the timing of this deal is due to 'products' are deluding themselves. There are no products on the time line that require this close integration. Companies do and can work together very closely while keeping fully independent ownership (Panasonic and Tesla being a prime example). The reality is that the 'product lineup' of SolarCity is non-existent. Their original business plan was a hard sell on financially questionable deals to unsuspecting homeowners at a premium. Continued weakness and honest competition made that work for only a short while. Their own gigafactory is largely a paid-for-by-taxpayers extravaganza that will put out products for which the price premium will not reflect the added value. It's hopelessly postponed and manufacturing hiring promises to the state were instead filled with salespeople instead (seriously, solarcity boots are everywhere in the state). Now it's going to be 'beautiful' solar roofs, batteries and inverters. Basically all kinds of IP that comes from Tesla instead of Solarcity. Standalone they would be toast. Enough already.

Personally I didn't give a dime for SolarCity so I ignored it right up to the point where I couldn't because Tesla decided they needed to buy them. Since then I've been following the company and there is not a SINGLE shred of good news that came from the company. Not a single shred of good news. Financials went down even worse, product timelines more confusing, downsizing costs are looming, interest rates rising and capital markets closing willing to have to do less and less with the company.

 

[AlMc]

A year? More like 3 weeks. Their cash position at the end of the quarter was abysmal, they are not even able to sell a $125M debt at 6.5% for 18 months with a take-over deal by a well-funded company in the pocket except to insiders. They are not even getting a loan from those who have Tesla's inventory as a collateral. If not for Elon stepping in, they would be in breach of all sorts of debt convenants about now already. When that happens with this much liabilities on the books, it's game over. Those who think the timing of this deal is due to 'products' are deluding themselves. There are no products on the time line that require this close integration. Companies do and can work together very closely while keeping fully independent ownership (Panasonic and Tesla being a prime example). The reality is that the 'product lineup' of SolarCity is non-existent. Their original business plan was a hard sell on financially questionable deals to unsuspecting homeowners at a premium. Continued weakness and honest competition made that work for only a short while. Their own gigafactory is largely a paid-for-by-taxpayers extravaganza that will put out products for which the price premium will not reflect the added value. It's hopelessly postponed and manufacturing hiring promises to the state were instead filled with salespeople instead (seriously, solarcity boots are everywhere in the state). Now it's going to be 'beautiful' solar roofs, batteries and inverters. Basically all kinds of IP that comes from Tesla instead of Solarcity. Standalone they would be toast. Enough already.

Personally I didn't give a dime for SolarCity so I ignored it right up to the point where I couldn't because Tesla decided they needed to buy them. Since then I've been following the company and there is not a SINGLE shred of good news that came from the company. Not a single shred of good news. Financials went down even worse, product timelines more confusing, downsizing costs are looming, interest rates rising and capital markets closing willing to have to do less and less with the company.

Don't 'beat around the bush'. Tell us what you really think about SCTY

 

[RobStark]

Their own gigafactory is largely a paid-for-by-taxpayers extravaganza that will put out products for which the price premium will not reflect the added value.

1) It is impossible for you to know this until we have specifications and price.

2) If governments are giving valuable stuff away it is stupid to reject it.

 

[bonaire]

Somebody bought Oct 21 $235-250 spreads (10K contracts) - a play on the pre-record date SP move?

Unusual options buying: Tesla

There was a 10k block of 255 Calls traded today. But the open interest was already 10710.
Two half blocks of that (5000 and 4700) volume spikes were traded on 8/18 for $2. The 255 today was at .52.

Who's to say they just didn't by to close their position and took the counterparty's $?

Look tomorrow to see what open interest is.
If it is only 710 or so - then the calls were bought-to-close, not bought looking for upside. Most likely a roll down to 235 Covered Calls by the large holder trying to make some money during the downswing. The 235 were traded in small blocks, the 255 was one trade.

235 Oct calls had open interest of 725 entering today, now with 11748 volume. That would be a roll-down to me. Looks like $2.10 is roughly their roll/sell point on these covered calls.

This is the kind of information that CNBC should be telling you. They didn't mention the open interest on both sides of the spread for this video blurb - only the trade volume of the 255s.

 

[Papafox]

Elon Musk (@@elonmusk): Major improvements to Autopilot coming with V8.0 and 8.1 software (std OTA update) primarily through advanced processing of radar signals

Elon Musk (@@elonmusk): Writing post now with details. Will publish on Tesla website later today.

Elon Musk (@@elonmusk): We need to do one more minor rev on 8.0 and then will go to wide release in a few weeks

It's important for Musk to tweet about this feature of AP 8.0 or 8.1 software because it addresses the problem that led to the Josh Brown accident, which is the autopilot being susceptible to blindness through glare. If the radar alone is allowed to draw images of what lies ahead, even rather crude images, then the problem of a white truck with a glaring white background is addressed.

For shareholders, the importance is that addressing this weakness removes a reason for the NHTSA slapping any prohibition upon the use of autopilot. Autopilot is highly-appreciated by a large portion of Tesla owners, and it is a demand lever, particularly with continued updates. It is vital to keeping demand for S and X ahead of production capability. Tesla's quick response to using the radar alone to create images (as opposed to the previous method of creating images that required input from the camera), demonstrates why it made sense for Tesla to decouple from Mobileye.

 

[Matias]

When the deal intent was first announced many months ago, they mentioned about SolarCity becoming non-GAAP profitable by next quarter. That should alleviate most of valuation concerns, if it indeed is true.

Tesla has been supposed to be cash flow positive in the next quarter for several quarters

 

[schonelucht]

1) It is impossible for you to know this until we have specifications and price.

2) If governments are giving valuable stuff away it is stupid to reject it.

1) Maybe if Hillary slaps a 1000% punitive import tax on all foreign produced panels.

2) At this point, the asset may be valuable but not productive. SolarCity has plenty of stuff on the books already of the former but it desperately needs the latter instead if it were to want to survive the crunch alone. Worse, the asset is anti-productive since it's been mainly a money sink up to this point.

 

[3Victoria]

@Papafox. Agree with your comments. Not 'seeing' the truck was not a failure, since the system was not designed to see crossing traffic, and therefore it operated within its specifications. However, coming up with a proactive solution to the problem is good, for the reasons you elucidate. ( I think that MobilEye was going to address this same problem in their next system, albeit with the camera --- but that is moot since the two have separated. )

 

[bonaire]

This is crossing traffic, isn't it? Video: Tesla Autopilot Saves Uber Driver From Crash

 

[Matias]

This is crossing traffic, isn't it? Video: Tesla Autopilot Saves Uber Driver From Crash

It is "just" AEB. Car reacts to the fact that there is a large metal object right in the front of the car and collision is imminent. That is almost one year old case.

 

[Lump]

Tesla separates from Mobileye if & when they create or find a new platform, until then they will be using EyeQ3.

 

[neroden]

It does really feel like this. But I cannot reconcile this with the fact that TM doesn't seem to be working very hard to generate sales.

They're still having trouble providing sufficient service centers. It may be unwise to try too hard to generate more sales until that's solved.

 

[Lump]

Musk Talked Merger With SolarCity CEO Before Tesla Stock Sale

Musk, Tesla’s chief executive officer and SolarCity’s chairman and largest shareholder, had the discussion with his cousin, SolarCity CEO Lyndon Rive, sometime before Feb. 29 when Tesla’s board was briefed on the idea, which it turned down at the time, according to a document filed Wednesday with the Securities and Exchange Commission.

That means that Musk and Tesla’s board had considered a merger with SolarCity before its May stock offering without disclosing it to potential buyers of the new shares.

 

[neroden]

What is Fort Schuyler Management Corp's, a non-profit subsidiary of the State University’s College of Nanoscale Science and Engineering, BATNA to Tesla?

Very good question, given that their real boss is Andew Cuomo, who is quite unpredictable...

Would you be surprised if someone like SunPower offered to pick up the factory? Because I wouldn't be surprised.

Would you be surprised if -- following an SCTY bankruptcy -- the State Senate decided to take a dead loss on the factory rather than let Musk operate it? I would not be surprised; these guys can be viciously counterproductive sometimes.

 

[neroden]

Got carried away with my rant. By picking up SCTY for pennies...not dollars....they would 'acquire' the rental agreement, and thus access to the plant, for pennies, not dollars.
IMO, that is SCTY's most valuable 'asset' to TE.

Honestly, I think SCTY was in such bad cash-flow shape that the offer had to be made now. If they'd waited, SCTY might have had to declare bankruptcy before they could finish the deal. And I think from what he said that Musk really really wants that factory. :shrug: I don't want it that badly, but he sure does.