Short-Term TSLA Price Movements - 2016

[esk8mw]

Looks to be a rather specific situation of shares held in a 401(k). I think it's actually pretty unusual to be able to vote your 401(k) shares (or even hold individual stocks at all unless the Reddit poster actually worked for Tesla).

In a typical Fidelity brokerage account, they do not have the ability to vote your shares in the merger. They only have the "broker vote" power in routine matters (e.g., director elections, approval of auditors, etc). They don't have that power in non-routine matters like mergers or approval of additional share issuance.

Agreed on the non-routine matters piece.

One thing on 401(k)s just because I have done a lot of work in this area - it's fairly common for companies to now offer a self-directed brokerage option for the 401(k). In short, this means you can invest your 401(k) in individual stocks rather than the typical mutual funds. In my experience, most employees view this as "too risky" and very few take the opportunity to use the SDA option. I assume that's the situation they are referring to here with Fidelity.

 

[vgrinshpun]

Model year 2018, which are sold in 2017. What they are selling now is model year 2017, under the 14% requirement.

But even if it's still 176,212 * 14%, that's 25k ZEV. Still far less than the balance they are sitting on. Marginal value of ZEV to them still being 0.

Basically just look at the total sales and ZEV balance. The former being 2.1M, the later being 345k, or 16% of the former. This could be the result of OEMs expecting the requirement climbs up from 14% next year. But it actually crashed to 4.5%. ZEV is still valuable to a few OEMs with 0 or low balance compared to requirement, like Mazda, Volvo, even Hyundai. But OTOH, Toyota is generating tons of ZEV too so supply is far greater than demand even for these OEMs.

I believe you are jumping the gun.

Fiat Crysler has balance of 68,308 after transferring 37,450 credits from Tesla, i.e. they had 30,858 ZEV credits prior to transfer. They will be selling 2017 model year vehicles until approximately September 2017 when they will start selling 2018 model year vehicles. So taking your numbers (I am actually going to do due diligence on them, but for now just taking your numbers) they needed approximately 176,212 x 0.14 = 24,669 credits for 2017 year models and 176,212 x 0.045 = 7,929.54 for 2018, i.e. total of 32,599 ZEV credits for 2017 and 2018, while their balance before the latest transfer was 30,858, or 1,741 ZEV credits LESS. So you can't claim that the credits they bought during the last period were worthless to them. As I noted up-thread they would not be buying credits which they will need only during the 2H of 2017 without discount, but suggesting that this is worth $0 or $100 for them does not make any sense.

I believe my conservative $1,500 estimate is close to reality here.

Your $100 estimate, as I mentioned before is also demonstrably wrong. Even if you assume $0 for ZEV credits in Q3, they already booked $65M in credits in Q42015-Q22016, given that they transferred 80,227 credits during this period works out to $65MM / 80,227 = $810 per credit.

So your math just does not work.

 

[rallykeeper]

Agreed on the non-routine matters piece.

One thing on 401(k)s just because I have done a lot of work in this area - it's fairly common for companies to now offer a self-directed brokerage option for the 401(k). In short, this means you can invest your 401(k) in individual stocks rather than the typical mutual funds. In my experience, most employees view this as "too risky" and very few take the opportunity to use the SDA option. I assume that's the situation they are referring to here with Fidelity.

We are clearly in related fields. Agreed, self-directed is almost always offered (though I honestly am not sure who votes in self-directed accounts -- it seems like it should be the plan fiduciary and not the employee).

I actually read the Reddit thread very literally when he said a "company's stock purchase" and assumed it was a direct holding of the plan itself. You're probably right, though, and its an SDA.

As to the other comment on it being good news, I wouldn't read it that way. For fiduciary accounts, it could be that they always vote with management, but that's unlikely. It would be far more likely that they would make an independent decision or punt their decision making to ISS or another proxy-voting service than always voting with management. It's probably just bad language in the instructions.

Fidelity's fund assets are completely different from their brokerage assets and will be voted differently, so nothing to infer there.

(As a reminder, think of Fidelity as two entities -- broker and fund adviser -- with distinctly different requirements and objectives).

 

[hockeythug]

CNBC on the TV side still claiming all deliveries pushed to Mid-2018. Bill Griffeth had a snide remark as well.

 

[Fallenone]

I believe you are jumping the gun.

Fiat Crysler has balance of 68,308 after transferring 37,450 credits from Tesla, i.e. they had 30,858 ZEV credits prior to transfer. They will be selling 2017 model year vehicles until approximately September 2017 when they will start selling 2018 model year vehicles. So taking your numbers (I am actually going to do due diligence on them, but for now just taking your numbers) they needed approximately 176,212 x 0.14 = 24, credits for 2017 year models and 176,212 x 0.045 = 7,929.54, i.e. total of 32,599 ZEV credits, while their balance before the latest transfer was 30,858, or 1,741 ZEV credits LESS. So you can't claim that the credits they bought during the last period were worthless to them. As I noted up-thread they would not be buying credits which they will need during the 2H of 2017 without discount, but suggesting that this is worth $0 or $100 for them does not make any sense.

I believe my conservative $1,500 estimate is close to reality here.

Your $100 estimate, as I mentioned is demonstrably wrong. Even if you assume $0 for ZEV credits in Q3, they already booked $65M in credits in Q42015-Q22016, given that they transferred 80,227 credits during this period works out to $65MM / 80,227 = $810 per credit.

So your math just does not work.

Where did you get this 37450 credit transfer? When did it happen? Again, the critical time point is Q2 2016. The ZEV market is totally changed at this time point. ZEV value being near 0 now has nothing to do with it being valued at $3-4k in Q4 2015 or Q1 2016, because the new regulation was not out and everyone was anticipating a higher number than 14% next year. But it didn't. Say 68% of the population suddenly went vegetarian, do you still expect the price of beef being half it was? Oil production surplus was something like less than 10% for the past year or so and made the price of oil cut in half. Imagine what 68% will do.

If you think my rationale is not making sense, how do you feel about the "penny on the dollar" from Elon the man himself?

 

[Intl Professor]

I just checked our My Tesla page which shows: "Your Model 3 was reserved on 3/31/2016. Deliveries will begin in late 2017." I'm sure others have confirmed this who are within the 15,000 or so registered that day. (Except for one member who lives, or is registered, in Canada. See his earlier post.)

 

[larmor]

Just out of curiosity is the product: ZEV credits? Really, from a business per

CNBC on the TV side still claiming all deliveries pushed to Mid-2018. Bill Griffeth had a snide remark as well.

CNBC like Top Gear is for entertainment purposes only...

 

[Zhelko Dimic]

Excellent find. My only concern is that dumping a huge amount as Tesla has obviously distorts the market, so I would expect the number to be in the $2500-3000 range. Obviously this is just my guess.

Did you all forget Elon's 'pennies on dollar' statement?

 

[Fallenone]

At 175,000 a year, FCA and Ford have to have:

2018: 7,875
2019: 12,250
2020: 16,625
2021: 21,000
2022: 25,375

Through 2022, they would need 83,125. It is likely they are not expecting to be able to make enough ZEVs versus TZEVs by 2022, hence the high balances. Honda will need something like 130,000 by then, and they have 32.3 thousand now. Toyota needs 217,000 or so... and AT PZEV credits will get discounted by 93.25% at end of 2017.

Yes for some OEMs I think they lack a plan of generating ZEV themselves so they are buying surplus. But what they planned for the next 1-2 year suddenly becomes sufficient for the next 6 years.

I'm not familiar with Honda's plan. Maybe they have one maybe they don't and still need to buy from market.

Toyota's Prius is TZEV, AT PZEV being discounted has nothing to do with their own ZEV generation to meet their requirement.

The problem for the big automakers is that with low gas prices, the sales of pickup trucks, SUVs/CUVs have climbed 5.8% and 7.1% respectively while cars fell 8.8%:

I don't think this has anything to do with ZEV requirement. The requirement doesn't differentiate SUV and pick-up trucks from sedans.

 

[vgrinshpun]

Where did you get this 37450 credit transfer? When did it happen? Again, the critical time point is Q2 2016. The ZEV market is totally changed at this time point. ZEV value being near 0 now has nothing to do with it being valued at $3-4k in Q4 2015 or Q1 2016, because the new regulation was not out and everyone was anticipating a higher number than 14% next year. But it didn't. Say 68% of the population suddenly went vegetarian, do you still expect the price of beef being half it was? Oil production surplus was something like less than 10% for the past year or so and made the price of oil cut in half. Imagine what 68% will do.

If you think my rationale is not making sense, how do you feel about the "penny on the dollar" from Elon the man himself?

$1500 / $5000 = 0.3, i.e. 30 pennies on the dollar.

Once again, neither your rationale nor the numbers work:

Zero Emission Vehicle Credits

 

[vgrinshpun]

Did you all forget Elon's 'pennies on dollar' statement?

No.

What do you think his comment meant, i.e. what do you think the discount off the nominal $5000 is? Can you throw a number?

 

[esk8mw]

We are clearly in related fields. Agreed, self-directed is almost always offered (though I honestly am not sure who votes in self-directed accounts -- it seems like it should be the plan fiduciary and not the employee).

I actually read the Reddit thread very literally when he said a "company's stock purchase" and assumed it was a direct holding of the plan itself. You're probably right, though, and its an SDA.

As to the other comment on it being good news, I wouldn't read it that way. For fiduciary accounts, it could be that they always vote with management, but that's unlikely. It would be far more likely that they would make an independent decision or punt their decision making to ISS or another proxy-voting service than always voting with management. It's probably just bad language in the instructions.

Fidelity's fund assets are completely different from their brokerage assets and will be voted differently, so nothing to infer there.

(As a reminder, think of Fidelity as two entities -- broker and fund adviser -- with distinctly different requirements and objectives).

On Fidelity, I can tell you they do not punt to ISS or GL. They develop their own proxy voting guidelines in house. I've talked to their proxy voting decisionmakers a number of times and always come away impressed. They really do their homework, are easy to work with and are appropriately deferential to management. Probably my favorite group of institutional investors to work with.

 

[Intl Professor]

Wonders never cease, positive article in SA.

Fitch: Batteries could be key disruptor to oil industry in

 

[30seconds]

Elon said he talked to large shareholders. He did not say he gave them confidential information.

It would have been highly illegal for Elon to give them that information -- and even more highly illegal for them to act on that information (and they've apparently bought more shares -- though that's unclear at this point).

Large holders and street analysts get longer answers with the same underlying publicly-available information -- sometimes they also get a better-explained roadmap to understanding that information. They hardly ever receive material nonpublic information from mid to large cap companies. That's standard industry practice.

Incorrect, it would not have been illegal for the company to give material non-public information in such a setting, however they would need to immediately file a public disclosure of the same information. If they failed to make such a filing then it would be against Reg-FD

 

[esk8mw]

Did you all forget Elon's 'pennies on dollar' statement?

No, I've actually mentioned it in several posts. I also know Elon is prone to hyperbole when he's heated and making non-exact statements like "the standards are pathetic" and "pennies on the dollar." The 2500 estimate I gave initially was before Fallenone gave the valuable ZEV reduction information - and I immediately thanked him and noted that I need to revise my model and rethink buying calls.

Subject to more diligence, I think the $1500 figure is more accurate and will probably update my numbers to reflect that. I'm trying to see if there's anything else out there about ZEV prices first.

 

[landis]

I'm sure others have confirmed this who are within the 15,000 or so registered that day

yes, my tesla page still shows deliveries begin late 2017.

Did you drop a digit and really mean 115k?

 

[Curt Renz]

CNBC on the TV side still claiming all deliveries pushed to Mid-2018. Bill Griffeth had a snide remark as well.

Some weak longs would have had their stop loss limits triggered during the brief midday selloff following the originally incorrect and misleading CNBC article that got hedge fund algobots to react immediately with sell orders. The price may have quickly recovered, but those who were stopped out would not have been pleased. It will be interesting to learn how CNBC responds to those who were affected.

Stop loss limits may appear to provide some protection, but in cases like this they can instead be costly.

 

[Gerardf]

In a typical Fidelity brokerage account, they do not have the ability to vote your shares in the merger. They only have the "broker vote" power in routine matters (e.g., director elections, approval of auditors, etc). They don't have that power in non-routine matters like mergers or approval of additional share issuance.

My (Dutch) broker "Degiro" told me I can not vote with my TSLA and SCTY shares. They do not give out proxies or any other way so their customers can vote. They stated that all TSLA and SCTY their customers have will not be voted.
I was quit surprised about this.

I hold a few 1000 shares, a lot for me but small on the full scale of the total, but as there are many Tesla customers here in NL they will have shares for other Dutch shareholders as well. Shareholders whos votes will not be counted.

BTW, thanks for the interesting ZEV discussion

 

[esk8mw]

My (Dutch) broker "Degiro" told me I can not vote with my TSLA and SCTY shares. They do not give out proxies or any other way so their customers can vote. They stated that all TSLA and SCTY their customers have will not be voted.
I was quit surprised about this.

I hold a few 1000 shares, a lot for me but small on the full scale of the total, but as there are many Tesla customers here in NL they will have shares for other Dutch shareholders as well. Shareholders whos votes will not be counted.

BTW, thank for the interesting ZEV discussion

I would email Tesla IR or check the voting website (I assume there's one? usually its proxyvote.com).

 

[dalalsid]

No. I am referring to Musk's announcement about an announcement.

But since you raise it, yes, Musk is just like other car companies trying to hype things (although I thought they were trying to be different). That doesn't mean what Audi is doing is not hype just because Musk does it too.

You fail to notice the difference. The r8 eTron was shelved. The others are unlikely to show up. All Tesla has issues with is timing, not with absence of the announced product.