Short-Term TSLA Price Movements - 2016

[techmaven]

Now, if one assumes that reasonable refresh rate is once per calendar quarter, Tesla needs to sell 1,300 demo cars each and every quarter. These 1,300 cars per quarter *are* part of the demand. Hence my assertion that that "demand can't quite support 2,000 cars/week production" conclusion is not accurate.

This. Maintaining an inventory fleet for demo purposes and as loaners is a cost of doing business. They are bumping back a custom customer order in order to build an inventory car. It's only if they don't have enough custom car orders for a given production slot and then building an inventory car would they then be demand constrained. Given the ongoing wait times and customer deposits, that's very unlikely.

You can subscribe to ev-cpo's historical data (U.S., Europe, and Canada) for a very small fee. The total amount of inventory cars that have been removed over the past 5 quarters, on an average basis per quarter, is way below 1,300. While each car removed might not be a sold car, every sold car must be removed. Terms of service says that I can't report the actual amount, but you can sign up, pay a small fee and see the number for yourself.

 

[racer26]

I think GM deserves some credits for making a good EV. Its unrealistic to expect TSLA to be better than GM

Why do you think the SP will drop if the dealer does not go through ?

The Bolt is a crappy EV for many reasons listed above. I will grant it though, that it is probably the best EV being offered by someone who isn't Tesla, and so it will capture some of the market. Ultimately though, I think that the thing the Bolt will be best at doing, is selling Model 3's. A good portion of people interested in a Bolt, will start doing their homework before dropping $37.5k and realize that the Model 3 represents a much better bang for your buck. Those that don't do their homework will buy a Bolt, and find its shortcomings annoying, and eventually figure out that a Model 3 doesn't have the same drawbacks.

I wholeheartedly disagree with your assertion that its unrealistic to expect TSLA to be better than GM. I believe that its unrealistic to expect any conventional ICEV maker to be able to produce a better EV than TSLA. They have too much investment and shareholder interest tied up in their ICEV monoliths. They can't build a compelling EV without damaging the much more important part of their business, and their shareholders simply won't allow it.

On a more on-topic note: anybody got today's updates on short availability?

 

[schonelucht]

These 1,300 cars per quarter *are* part of the demand. Hence my assertion that that "demand can't quite support 2,000 cars/week production" conclusion is not accurate.

Of course they are part of demand. But the point is that production keeps up. Tesla is able to refresh every quarter. Production is able to fulfil every single order that Tesla receives _and_ refresh demos every quarter. Wait times are not creeping up but follow the regular flow of geographical batching and so does the time between confirmation and start of production.

Well, not if one recognizes that even with all of the demand levers put in place, they do not take a margin "hit", but rather, as I was advocating for some time, that the margin guidance by the company is inclusive of all of the demand levers.

I am not following? Discounts would reflect in GAAP profitability any which way, not sure why you mention margin?

I am not shifting anything. These excellent financial results are not possible unless production rate exceeds roughly 2,000 units per week.

I've done the math here and I get that they can be profitable at 22.5k cars. 21.5k cars even if they'd manage to get gross margin up at their end-of-year guidance. I am not aware of any factory shutdown this quarter, but even if we take the customary week into account it's still less than 2000/week.

 

[neroden]

Without much knowledge on the subject, does anyone know if lawsuits could realistically delay the SCTY deal? I'm sure lawsuits are not out of the ordinary with M&A. I read some rumblings about lawsuits, and that Tesla requires them to be brought up in Delaware.

Well, they *could*, I suppose. In my experience, this kind of lawsuit usually doesn't manage to get a preliminary injunction, they only get cash. Which means the merger happens anyway and the company pays out to the plaintiffs later. That's the typical way it goes.

Plaintiffs would have to have an extra-strong case to get a preliminary injunction, which are normally reserved for cases of "irreparable harm" (such as suing a company which is planning to dump lead or mercury all over your property, which you will never be able to clean up). I just don't see that happening with any possible suit over the merger. This is not legal or investment advice. I just can't think of any way the merger could cause irreparable harm (as in, harm which couldn't be compensated later by a wad of cash).

 

[neroden]

They can always do another down round. Although they are aiming to get out of that habit.

I'm thinking if the deal goes through SCTY will see a big jump if it's visible before the actual merger (I don't know would they announce the results of the vote before the shares are actually merged?) and TSLA won't be effected much, and if SCTY went up enough it would actually move TSLA shares up because then it would look like TSLA underpaid and got a "deal". And if somehow the deal didn't go through SCTY would drop hugely and TSLA might go up a little.

I can make a very strong prediction that TSLA would decline too if TSLA shareholders voted down the merger, due to all the reports of "stockholders reject Musk!!!" Yeah, the effect would disappear in three to six months, but that's what would happen short term. The only reason this would matter is that Musk wants to raise more funds.

 

[Krugerrand]

Chevy Bolt's aero is a 'disaster,' - Fuel Economy, Hypermiling, EcoModding News and Forum - EcoModder.com

Guy's got a point.

 

[vgrinshpun]

INSANELY low volume today! I do not remember ever seeing only 260K shares traded in the first half hour of trading. I think we are seeing a waiting game of biblical proportions...

 

[schonelucht]

As long as the range is there, does it really matter what Cd the Bolt has? After all, when it turned out that an 85kWh battery wasn't really 85kWh, did it really matter since th range was there? We should also stop seeing EVs as cars for the especially efficient. No. An EV car is a normal car and it is perfectly fine to have different models making a different trade-off between interior utility and efficiency.

 

[neroden]

We don't know that. I think plenty of people would have preferred that the deal never was proposed, but now that it has, that voting no would be even worse, given the reputational damage to Elon personally and the continuing need of Tesla to access the capital markets.

That's pretty much where I've been coming from.

I should point out that it's bizarrely common for markets to misprice stocks leading up to a merger. Typically the discount for merger failure possibility is too high. It's possible for some people to make *consistent money* on merger arbitrage -- one of the short list of consistent beat-the-market strategies -- because of this. There are a number of books which discuss this. It's been documented as a strategy as far back as Benjamin Graham's 1949 edition of _The Intelligent Investor_ and as recently as _Merger Arbitrage 2nd Edition_ (2016).

Obviously there are no guarantees. Maybe this is one of the deals which won't go through; merger arb specialists make many such trades each year and if one fails, they make the money back on the others. My point is that it's *normal* for the smaller company's stock to trade at an unreasonably large discount even *if* the merger is highly likely to go through. It doesn't necessarily indicate that the big traders know anything we don't (it could indicate that but it doesn't necessarily indicate that).

I'm not entirely sure why merger arbitrage inefficiences persist, but they do.

 

[Yggdrasill]

As long as the range is there, does it really matter what Cd the Bolt has? After all, when it turned out that an 85kWh battery wasn't really 85kWh, did it really matter since th range was there? We should also stop seeing EVs as cars for the especially efficient. No. An EV car is a normal car and it is perfectly fine to have different models making a different trade-off between interior utility and efficiency.

Cd matters because aerodynamic resistance increases rapidly with higher velocity.

What may be 238 miles at 40 mph might become 100 miles at 75 mph.

 

[W84M3]

As long as the range is there, does it really matter what Cd the Bolt has? After all, when it turned out that an 85kWh battery wasn't really 85kWh, did it really matter since th range was there? We should also stop seeing EVs as cars for the especially efficient. No. An EV car is a normal car and it is perfectly fine to have different models making a different trade-off between interior utility and efficiency.

Ofcourse but high cd results in lower efficiency which in turn means higher battery costs to have an equal range with a vehicle with lower cd (yes - not taking into account all the other factors).

So I think what others want to say is, if you've got a $37,5k vehicle with considerable battery pack costs, you'll have a very low (negative) margin or use parts of inferior quality (vs vehicle with lower battery costs & same price)

 

[Chickenlittle]

Interesting as I suspected 35K is bare bones bolt. Got e mail from cm yesterday with some features AVAILABLE not listed as standard. Code word for paying more for these options. Included collision avoidance and other safety features. Will wait for model 3 but I do not see tesla making safety options optional

 

[vgrinshpun]

As long as the range is there, does it really matter what Cd the Bolt has? After all, when it turned out that an 85kWh battery wasn't really 85kWh, did it really matter since th range was there? We should also stop seeing EVs as cars for the especially efficient. No. An EV car is a normal car and it is perfectly fine to have different models making a different trade-off between interior utility and efficiency.

Adding interior volume at the expense of aerodynamics is a gimmick which is incorporated at the expense of the efficiency. Adding interior volume on top of somebody's head does not add practicality - one still can't fit three adults across the rear seat in the Bolt, but Anthon Whalman can make meaningless claim that interior volume of sub-compact Bolt is the same as large Model S. Meanwhile the efficiency is sacrificed. Looks like all the steam was spent into the whistle...

 

[racer26]

I'm not entirely sure why merger arbitrage inefficiences persist, but they do.

Simple. Unlike normal arbitrage opportunities (such as trading USD for EUR, EUR for GBP, GBP back to USD if the prices are right), its not a sure thing.

Since the uncertainty in a merger is difficult to gauge unless you have insider information, the result is a difficult to predict thing. Difficult to predict equals hard to assess risk of failure of the merger, means an arbitrage gap that is bigger than it probably should be. Right now, TSLA/SCTY are trading as though the merger ratio was 0.085, not the 0.11 it is. A reasonable metric of the risk profile would probably be more like 0.10.

Humans are really bad at assessing and mitigating risk in a sane and sensible manner. This is why people are afraid to go on airplanes, but not to drive to the airport. Statistically, airplane is a safer mode of travel than cars by several orders of magnitude, so the money we spent on beefing up airport security post-9/11 would have TOTALLY been better spent on making our roads safer. More lives would be saved. We should do things to mitigate risk to human life based on a function of dollars spent to lives saved. Spending millions of dollars to make nuclear plants less likely to leak radiation is inefficient, when the largest source of ionizing radiation that anyone gets is the radon seeping into your basement. The test to check for radon in your basement costs about $2, but nobody uses it.

 

[racer26]

Interior volume is not the important metric. Utility of that volume is.

 

[esk8mw]

BTW, there's a few shares to short at IB now (12.6k) but the rate ticked up another 110bp to 13.2%. Looks like there's some covering going on.

 

[Krugerrand]

As long as the range is there, does it really matter what Cd the Bolt has?

Intent counts.

After all, when it turned out that an 85kWh battery wasn't really 85kWh, did it really matter since th range was there?

Yeah, actually it mattered to some people; we've got epic long threads on the forum about it.

An EV car is a normal car...

Um... No, it's not a normal car. That's the whole point that GM et al aren't grasping. An EV is a whole other level of car.

 

[Krugerrand]

Adding interior volume on top of somebody's head does not add practicality...

Well, it's kind of an awesome feature if you're stuck in the 80's and have big hair. It would also be an awesome feature if you're into top hats.

 

[vgrinshpun]

Well, it's kind of an awesome feature if you're stuck in the 80's and have big hair. It would also be an awesome feature if you're into top hats.

Ha, 21st century car accommodating the 80-ies hairstyles and top hats (for those without hair) - D E L I C I O U S !

 

[vgrinshpun]

BTW, there's a few shares to short at IB now (12.6k) but the rate ticked up another 110bp to 13.2%. Looks like there's some covering going on.

Zero shares available for shorting at Fidelity, estimated interest steady at 10.5%