In Defense of Releasing M3 Numbers
Prior to the reveal, I expressed my not-so-crazy-after-all hope that Tesla would display a cumulative counter of Model 3 deposits at the reveal. Bravo for their decision to do this. I believe that Tesla was motivated to do so for two reasons:
* This shock-and-awe approach would speed up the move to sustainable electric vehicle transport and
* TSLA stock would be positively affected. Tesla needs the stock to rise because they will likely do a capital raise this year
Think back to the 4Q15 ER on Feb 10, 2016, when Musk felt a need to reassure shareholders that Tesla had a solid plan for 2016. The bears were claiming that with the macro environment in the dumps, TSLA could not raise needed capital and it needed to raise capital because it was burning through cash too quickly. Musk and Wheeler showed that cash-flow from operations had turned the corner already and was positive, there was less CapEx planned for 2016 than in 2015, and Tesla would generate enough cash internally so that it didn't need a capital raise this year. They also showed plans for a huge increase in vehicle deliveries during 2016. Check out the chart below. That ER marked the turnaround point where TSLA's plunge to below 150 did an abrupt reversal and has been nipping at 240 lately. The Q1 ER carried the day.
These reassuring comments came with a price, though. They somewhat committed Tesla to a self-funding approach during 2016. When Tesla realized that Model 3 reservations would be at Hogfighter-epic numbers, they had to start paving the way for a reversal on the self-funding statement, because more cash would be needed for a large increase in production capabilities. Remember Elon's tweet when the CNBC poll of 12,000 showed high interest in Model 3? He was only half-joking when he hinted at the need to rethink production plans. The reservation numbers for Model 3 turned out to be both the reason for abandoning the self-funding in 2016 strategy as well as a reasonable explanation for abandoning the approach. Nothing will, of course, be mentioned that the capital-raising mood of the markets were in disarray on Feb 10 but have since recovered nicely. Sharing the Model 3 reservation numbers is the necessary step for reversing the self-funding statement of Feb 10.
Since the last capital raise took place at about a stock price of 240, the next raise should take place at a price noticeably above $240, but the shorts have been dead-set on keeping TSLA below 240. Notice how TSLA has twice now closed at about 237.50. I believe the shorts had quite a sell-the-news event planned for April 1, but it was thwarted by releasing the Model 3 reservations numbers. Instead of a downtrend, we saw an uptrend on Friday. They've dug their trenches just south of 240 and if we breach their lines for more than a day you are going to see shorts abandoning their posts and as the retreat escalates, more and more shorts will join them. The stage is set for nice appreciation in TSLA value if the Q1 delivery numbers turn out to be okay. Releasing the Model 3 deposit numbers is the artillery which will allow TSLA to overrun the 240 trenches manned by the shorts and press onward. It will allow TSLA to climb in value, which will enable a new capital raise, which will enable Tesla to deliver such a slew of Model 3s not long after we hit 200,000 U.S. deliveries that a large number of non-Tesla owners will enjoy at least a large federal tax credit (50% of $7500 or above), due to the time-based drawdown methodology of the credit. The year 2016 should be a great year for TSLA longs, but I now believe 2018 will be amazing too, because that's the year when Model 3 deliveries will go nuts.
I hope they release the "we will spend ourselves into the ground" report on a well-known date so we can all sell before that and then let the bears have a field day ... and then get back in. Lots of variables there.
