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Market is having a big drop today, take this into consideration.
racer26
Active Member
Because the markets can stay irrational longer than you can stay solvent.
Oh, so the company currently nearing cash flow positive operation pre merger, that will see is largest expense (SG&A) decrease significantly after the merger that is the united States leader in an industry growing by massive percentages year over year. Yeah, that's it.
Sounds really awful if you ignore the math and industry growth and pretend it's going bankrupt imminently though I guess.
racer26
Active Member
Its been beaten to death here a million ways from sunday. SCTY is a fine investment. They have changed their model away from the financing of leased panels that got them into this mess, and the panels that they already leased that way are now generating cashflow. As long as they can get reasonable rates for financing that debt (where cash from the PPA exceeds the interest cost to carry it), its a net positive. They should have securitized those on a 20 year term 5 years ago, but they didn't. Now that their financials are in dire straits, they're getting crappy financing terms for the refinancing of those debts. Crappy financing terms can make their problems worse, creating a feedback loop. Merging with TSLA is partly intended to put a stop to that feedback loop, as TSLA is a much bigger company, and so even with SCTY's drag, the financing terms will be much better. Is that a bailout? Ehhh. Kind of. That's the rationale for why SCTY should be eager to be acquired by TSLA. TSLA wants to acquire SCTY for the Silevo tech and the Buffalo factory, because those things might disappear if you wait until SCTY goes BK
racer26
Active Member
MartinAustin
Active Member
TSLA would sell their Tesla Vision product to other manufacturers in order to standardise the industry on the same set of sensors, and the same database of autopilot traffic. Think about a situation where all cars share the same navigation infrstructure and can contribute to each others' safety. Versus... Mercedes cars collecting data, but not sharing it, and not getting the benefit from Ford cars, etc. etc. Somewhere, someone is going to have their life saved by the increased safety. It would be easier for authorities to block off lanes and roads following crashes etc.. If Tesla Vision became the "USB" of the navigation industry, Tesla could do pretty well out of it... look at the benefit Intel has gleaned out of USB.
Now I also agree that if Elon wanted to keep this stuff proprietary to Tesla... fine. I think it'll become obvious over time that Tesla's biggest competitive advantage is their battery/driveline tech.
I think you can safely assume that Elon wouldn't view using the asset backed line as corporate debt. Legally it is, but Tesla really does treat it as a timing facility (to deal with overseas shipments, etc). Tesla will probably still borrow against that. (Financially, this debt falls under short-term borrowings on the balance sheet and that's why they wouldn't really call it corporate debt either).
SolarCity is different when you talk asset-backed. I feel like I'm beating a drum that no one is listening too, but I'll try again...
SolarCity is the seller in its ABS transactions (these are really complicated and I'm simplifying, but for cash flow purposes it is the same thing regardless of how the deal is structured). It is not the borrower -- these transactions are not debt. (Many posters on this forum seem to conflate this issue when they talk about the recent ABL sale to riase $305 million in September and the "interest" rate paid).
In fact, these ABS transactions are likely the primary reason that SolarCity projected that it would be cash flow positive in Q3 and even more so in Q4. Yes, the discount rate is higher than they'd like. In other words, SolarCity is monetizing its huge portfolio of solar leases -- an asset that the market has practically been assuming is worthless.
Putting it all together, I think it's rather significant that Elon made the observation that neither Tesla nor SolarCity will need cash.
He meant it on both a stand-alone and a combined basis. In fact, on a combined basis, Tesla has likely found their short-term source of capital. I mentioned it up-thread, but I'll reiterate it here. Tesla can likely accelerate the process that SolarCity began and liquidate the remaining solar lease portfolio and generate a great deal of positive cash flow (probably more than enough to deal with all near-term cash needs).
SolarCity probably hasn't been inclined to be too aggressive because I believe it would have a worse earnings impact for them. (Tesla is probably writing down all these solar leases as part of the purchase transaction and therefore wouldn't have the earnings impact).
As an aside, few here have mentioned it (and all the articles seem to miss it too), but Elon subsequently replied on Twitter that they "probably" didn't need capital in Q1 17 either. That's almost as big a deal as not needing it this quarter because you should assume most of their M3 capital requirements would occur by Q2 17.
Finally, complete speculation on my part, but I think they believe they have enough cash for 2017 Gigafactory progress and initial M3 launch -- at least enough until Fremont doubling.
It's a product, and unexpected... hmmm.
- 100D regular products--widely expected
- A/P 2- not a product and widely expected.
- Model Y: not a chance. way too soon and not necessary to show at all. risk of osborning. Plus that would be a big party.
- Semi/Bus: too early. Again, I think it would be a big party. Remember the referreral program prize for 10 is literally a ticket to the next big reveal party so this is a thing they are continuing.
- Powerwall 2.0: widely expected
- New inverter? Maybe and just dull enough to warrant a call event but not a party. But that should be bundled into SCTY product talk.
- Model 3 part 2: not a product, widely expected.
"product" here does not need to be a vehicle certainly, but it might be. What does Tesla really need... I think they are long over their battery constraints; Panasonic is supplying them well. They have lots of stamping and line capacity. They have choke points at the S/X final assembly line, customer delivery and maybe toppy consumer demand (I might get hate for this, but I think they are pretty close to the demand for their current markets).
So how about a lightly modified current vehicle, with less final assembly needed? Something you could sell in bulk to fewer fleet customers?
Black sheep, left field theory: Short range utility cargo van. A Model X, with a sliding door with only front seats. 40-60kWh batteries for <100 miles per day service and daily recharging. Uses spare capacity on line 2. Bypasses the really annoying chokepoints for S/X.
The big reason to call BS on this theory is that it would still take a fair amount of design and line rework to make it happen.
...
This might not be so simple. There's already a precedent of Tesla stating MobilEye is suffering from low development velocity due to having to deal with legacy products. Allegedly there's nobody on the market that moves as fast as Tesla so it will be difficult for them to not get hampered by having to deal with a bunch of slow-moving customers that want certain support levels written into the contracts far into the future.
This might not be so simple. There's already a precedent of Tesla stating MobilEye is suffering from low development velocity due to having to deal with legacy products. Allegedly there's nobody on the market that moves as fast as Tesla so it will be difficult for them to not get hampered by having to deal with a bunch of slow-moving customers that want certain support levels written into the contracts far into the future.
My view:
Given Tesla's present cash position and approximate need of only $2 billion
until model 3 completion (my guess estimate), I expect the recent gap down to be offset.
De-risking the firm by producing above breakeven coupled with no near term capital
raise does reduce the firm's risk profile, allowing it to proceed along the path of meeting
its model 3 objective.
i will not add on to my position until we negate the gap. Negating the gap makes the
goldman downgrade irrelevant.
Given Tesla's present cash position and approximate need of only $2 billion
until model 3 completion (my guess estimate), I expect the recent gap down to be offset.
De-risking the firm by producing above breakeven coupled with no near term capital
raise does reduce the firm's risk profile, allowing it to proceed along the path of meeting
its model 3 objective.
i will not add on to my position until we negate the gap. Negating the gap makes the
goldman downgrade irrelevant.
A note related to discussions on the effect that merger finalization could have. If markets were rational I think it would have to boost the stock price. At this point there are product announcements, staff reshuffling, financial concerns that all depend on the merger going through. Of course the market isn't rational so I'm not making much of a prediction.
Might be as simple as Elon not liking misinformation hanging around out there. He reacted similarly to various other misconceptions that got spread around.
That depends. If you are not too heavily into margin or OTM calls you can basically sit tight and wait for rationality to prevail.
Not necessarily true with shorts, who are typically paying interest to short shares or time decay on puts.
In other words, if you are long this really only applies if you are leveraged.
I think a Truck and Coupe are just too hard. Model X territory. All new body, interiors etc. The cargo van could be a mostly stripped down model X with the expensive windscreen swapped out and simple doors. Then the interior could be done on a sort of ad-hoc final assembly line with much simpler parts. Yeah, not a likely theory but fun to consider. It would be a really efficient way to increase the unit volume and make use of their existing capacity, while addressing an untapped market.
racer26
Active Member
I think a coupe-S, or convertible-S, or any other S-variant is orders of magnitude more likely than any X-variant. They only just got the X line running properly.
That being said, I think both are very unlikely, and this announcement is probably AP2/TeslaVision (and maybe HUD/Tesla Glass)
A coupe-S would be weird - for it to have enough parts in common with S as we know it, you'd have to keep the skateboard and the wheelbase/track width the same. That would make for a weirdly long 2 door car.
Convertible-S is similarly weird. When was the last time you saw a convertible 4 door sedan? The only ones I know of in recent history are the Maybach Landaulet, and the Cadillac Ciel Concept. In the 60s Lincoln Continentals came in a 4 door ragtop variant, but had serious structural stability concerns.
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