Short-Term TSLA Price Movements - 2016

[Fallenone]

@esk8mw I have a question and would like to learn from your expertise. Given we already have the S-4, is there any chance that the exchange ratio might change in the future?

 

[esk8mw]

@esk8mw I have a question and would like to learn from your expertise. Given we already have the S-4, is there any chance that the exchange ratio might change in the future?

I'd say 99% no. They have a firm deal deal now that the shop period is over so everything should be set from here on. Any change would have to be agreed on by both sides or else there'd be a breach.

Of course, there's always a possibility of changes to the contract if economic conditions change dramatically and both sides still want to do the deal - and mutually agree to change the terms. This is quite rare.

 

[Fallenone]

I'd say 99% no. They have a firm deal deal now that the shop period is over so everything should be set from here on. Any change would have to be agreed on by both sides or else there'd be a breach.

Of course, there's always a possibility of changes to the contract if economic conditions change dramatically and both sides still want to do the deal - and mutually agree to change the terms. This is quite rare.

Thanks. So if both sides agree, the ratio can still change without violating any SEC rules or other laws. I'm thinking maybe we have a risk here?

 

[anon]

Good question -- I have no idea. Even at $300/kWh it is a $24M system (plus some great PR for storage products).

Not too shabby for one contract.

I imagine that Tesla is supplying the inverter too, so the value is likely higher.

 

[EinSV]

I imagine that Tesla is supplying the inverter too, so the value is likely higher.

True. I just picked a low/conservative number -- I assume the actual figure is quite a bit higher.

 

[esk8mw]

Thanks. So if both sides agree, the ratio can still change without violating any SEC rules or other laws. I'm thinking maybe we have a risk here?

Well, every contract in the world has that risk. Generally anything can be changed if both sides agree.

 

[Fallenone]

Well, every contract in the world has that risk. Generally anything can be changed if both sides agree.

Could some big TSLA holders make a deal with Elon? Something like, we will vote no unless you change the exchange ratio.

So I calculated the expected profit of arbitraging SCTY under different scenarios
1. Fail. SCTY goes to 0. Exchange ratio would be something like 0.0001. Probability 5%.
2. Pass, but exchange ratio changed to 0.08. Probability 5%.
3. Pass, but exchange ratio changed to 0.09. Probability 10%.
4. Pass, but exchange ratio changed to 0.10. Probability 20%.
5. Pass, exchange ratio unchanged at 0.11. Probability 55%.
Given the current prices of these two names, the expected profit would then be 7.48%. Then you also need to take into the risk of TSLA itself and the time premium of several months.

 

[vgrinshpun]

Wow, that's an impressive system! Hopefully a sign that TE will be off to the races soon ....

Edit: Looks like it is:

"Following the leak, California Governor Jerry Brown issued a state of emergency, and in May, the California Public Utilities Commission mandated an accelerated procurement for energy storage. Southern California Edison, among other utilities, was directed to solicit a utility-scale storage solution that could be operational by December 31, 2016. Unlike traditional electric generators, batteries can be deployed quickly at scale and do not require any water or gas pipelines.

<snip>

"The Gigafactory's ability to produce at a large scale will allow this system to be manufactured, shipped, installed and commissioned in three months. The system will charge using electricity from the grid during off-peak hours and then deliver electricity during peak hours to help maintain the reliable operation of Southern California Edison's electrical infrastructure which feeds more than 15 million residents. By doing so, the Tesla Powerpack system will reduce the need for electricity generated by natural gas and further the advancement of a resilient and modern grid."​

There is an additional significance to this project, as it is awarded under the 2013 order by the state Public Utilities Commission to install 1,325MW of Energy Storage across three California Utilities: Southern California Edison, Pacific Gas and Electric and San Diego Gas & Electric by 2020. Note that this project fulfills only 1.5% of this mandate. Here is the slide from my Battery Energy Storage presentation that I did for the company I am working for back in March of this year with the summary of the CPUC Energy Storage Mandate. Note that all procurement targets are in MW, NOT MWh.

EDIT: scratch 6%, this Project actually represents only 1.5% of the Mandate.

 

[MitchJi]

X

I wonder what the total contract award was? Curious how it compares to the $470/kWh.

I wonder if it's based on newer less expensive TE 2 specifications and the higher V1 prices.

At these share prices, the market has completely discounted future Tesla Energy revenues as even being a thing. This is like a wake-up call that they are indeed coming soon and could be a massive profit center. Imagine when Tesla decides to push the accelerator there - Techmaven's prognostications of staggering revenues hitting the TSLA bottom line could come to fruition.

There will be more of this, and it will be good.

Techmaven made one mistake. He stated that they would use cells for TE until the M3 ramps, then switch to cells from Japan. But Elon and JB both said that they will have sufficient cells for both. When the market realizes that TE is real and when it starts rival cars for revenue it's going to have a huge impact on the SP IMO.

No way this could be done with 2170 cells from the GigaFactory based on the state of things in the Panasonic portion at the GigaParty. I think they are just stretching a little bit since the assembly of PowerPacks is done at the GigaFactory.

Tesla has stated that cell production will start in 2016 and Elon said that they expect to ramp production in November-December so it seems likely that it's using GF produced cells. Would they have access to that many cells from Japan?

 

[Fallenone]

I like how Tesla wrote the update on the TE deal with SCE.

"Upon completion, this system will be the largest lithium ion battery storage project in the world. When fully charged, this system will hold enough energy to power more than 2,500 households for a day or charge 1,000 Tesla vehicles."

Putting the "largest" into perspective. Only 2500 households or 1000 Tesla vehicles. Gives a good idea about how large the TE could potentially be.

 

[Fallenone]

TA-wise, we broke the trend line on 1 hour chart to the upside. Compared to the jump on Monday, the jump was turned down exactly at the 1 hour chart trend line.

Short term looks better. Not going to sell covered calls for a while.

 

[EinSV]

There is an additional significance to this project, as it is awarded under the 2013 order by the state Public Utilities Commission to install 1,325MW of Energy Storage across three California Utilities: Southern California Edison, Pacific Gas and Electric and San Diego Gas & Electric by 2020. Note that this project fulfills only 6% of this mandate. Here is the slide from my Battery Energy Storage presentation that I did for my company back in March of this year with the summary of the CPUC Energy Storage Mandate. Note that all procurement targets are in MW, NOT MWh.

View attachment 194584

We so rarely get the opportunity to correct your usually impeccable math, but if the units are all MW, then this is only 1.5% of the mandate. (20MW/1325MW). So even more opportunity by a factor of 4 unless I missed something.

 

[Papafox]

No way this could be done with 2170 cells from the GigaFactory based on the state of things in the Panasonic portion at the GigaParty. I think they are just stretching a little bit since the assembly of PowerPacks is done at the GigaFactory.

This brings up the question then of when the gigafactory will actually begin producing the 2170 cells. We've been led to believe that it'll be before the end of the year. Might Tesla and Panasonic fill part of the order with 2170 cells? It seems that shipping 80MWh of older style cells from japan for the project and completing before end of year would be problematic.

 

[Jayjs20]

Fricken hell, I knew I was going to buy in at a peak

 

[TrendTrader007]

TSLA keeps on improving technically
I'm thrilled to see how nicely the quarterly candle is shaping up so far
With 11 more trading days left in this quarter if the stock continues to hang in there or improves in price action from here (as I strongly suspect) then next quarter is going to be huge and October may bring about a short squeeze of epic proportions
I still believe that TSLA is history in the making and in a few years from now buying TSLA now will seem like a stroke of genius, not unlike buying AAPL in 2004

 

[MitchJi]

This brings up the question then of when the gigafactory will actually begin producing the 2170 cells. We've been led to believe that it'll be before the end of the year. Might Tesla and Panasonic fill part of the order with 2170 cells? It seems that shipping 80MWh of older style cells from japan for the project and completing before end of year would be problematic.

I think this tends to confirm Cell production and TE ramping are on schedule.

 

[Intl Professor]

Your thoughts?

One of you rich longs sold some to buy SCTY?

 

[MitchJi]

I still believe that TSLA is history in the making and in a few years from now buying TSLA now will seem like a stroke of genius, not unlike buying AAPL in 2004

I don't think it's a stroke of genius. Not that hard to see. I think what will be confirmed is that shorting Tesla for the long term was idiocy squared.

 

[vgrinshpun]

We so rarely get the opportunity to correct your usually impeccable math, but if the units are all MW, then this is only 1.5% of the mandate. (20MW/1325MW). So even more opportunity by a factor of 4 unless I missed something.

Looks like you beat me to it. Was a little excited to post and made an error. You are not missing anything - it is indeed only 1.5%, not 6%.

Thanks for keeping an eye on my musings and keeping me straight.

 

[FredTMC]

I think this tends to confirm Cell production and TE ramping are on schedule.

Sorry. When is this new 80MWh storage scheduled to be completed?