Short-Term TSLA Price Movements - 2016

[The Blue Owl]

In regards to capital raise *soon* belief, it is just wrong at so many levels I don't know where to even begin:

Firstly there is an underlying assumption that they actually *need* capital really soon for them to raise the capital soon. How does anyone know that? Q2, which is currently running, is already designed to be cash flow positive with X revenues (and maybe some minor TE revenues). Moreover there has been an influx of $400mln capital through 3 reservations. Wouldn't all this be enough for an additional 3 months of buying time? What's the urgency for a capital raise? No one here laid out the case with enough detail for it but pretty much everyone is clamoring for capital raise soon.

Secondly, here is an *educated* guess of how capital raises work: The issuers sit-down with the underwriters (banks) to structure the deal. The underwriters are in turn responsible for finding the counter-parties who would buy the issue straight in the primary market. Easier the job of finding the counter-parties, the better the deal will be for the issuers. Now if there is a huge run up in the stock, big-shorts will be scared to death to cover their positions in the open market (secondary market) on the exchanges. In fact it might simply be unfeasible to do so (see volkswagen short squeeze). So these big-shorts will effectively end up becoming the counter-parties to the deal.

For all intended purposes delivering a shock-and-awe to the shorts works best in getting a very good deal on the capital raise. It is silly to imagine that Musk and co won't fully utilize this opportunity.

Why take up a poor deal and make shorts reasonably happy? That makes no sense. Management will try to fully crush them out and in due process raise capital at terrific terms. In effect, shorts will pay for the factories. This is what happened in early 13 and this is what is destined to happen mid 16. I just don't see otherwise.

I laid out the same case here. Ignore the specific catalyst that I mentioned; it can be that one, or something else, but I think there will be one.

 

[SBenson]

Tesla needs constant cash infusion to replenish its non-stop cash bleed of nearly half a billion each quarter. Do some research on how it spent the $2B raised via bonds in 2014 for the supposed GF. Only 14% built, and they had to raise another $750 million. FCF is a mirage. A good read from David Stockman on this "bonfire of vanities".
Tesla: Bonfire Of The Money Printers’ Vanities

Good. I certainly do hope a lot of people with big money stay firm with a view like this.

or else where is the fun?

 

[Julian Cox]

Tesla needs constant cash infusion to replenish its non-stop cash bleed of nearly half a billion each quarter. Do some research on how it spent the $2B raised via bonds in 2014 for the supposed GF. Only 14% built, and they had to raise another $750 million. FCF is a mirage. A good read from David Stockman on this "bonfire of vanities".
Tesla: Bonfire Of The Money Printers’ Vanities

See what I mean. These guys are this totally fu****g cluless by their own admission. This poster is not unrepresentative of 30 million+ shares sold short!!!!!!!!! Like shut up and take their money - in that order.

Jesse and all who worship him, hear me on this - these people are not sophisticated chart traders they are to an overwhelming extent in TSLA unsophisticated sorry, morons, like this and not just on the retail side of the trading spectrum. That thing he linked to is from David Alan Stockman, Director of the Office of Management and Budget under President Ronald Reagan - not some spotty faced teenager with a low SAT score and an e-Trade account, these are serious people of wealth and influence that are this f*****g deluded!

@Dr ValueSeeker

Thank you for making an example of yourself - and thanks for cash donation too. Perhaps I'll buy the Mrs a fist full of rocks and a new Rolex and tell her you sent it - want me to write something on the card?

 

[EinSV]

In regards to capital raise *soon* belief, it is just wrong at so many levels I don't know where to even begin:

Why take up a poor deal and make shorts reasonably happy? That makes no sense. Management will try to fully crush them out and in due process raise capital at terrific terms. In effect, shorts will pay for the factories. This is what happened in early 13 and this is what is destined to happen mid 16. I just don't see otherwise.

To clarify my earlier posting: If TE economics and a firm date for GF are disclosed at the ER IMO that very likely will trigger a short squeeze.

I don't have a good enough handle on the timing of necessary capital outlays to speculate on how that factors in.

But to me Tesla's recent behavior is new information that could suggest a higher likelihood that they are planning to move sooner than anticipated to trigger the squeeze.

 

[SW2Fiddler]

Ha Ha Ha! Wasn't it exactly a year ago, that Elon tweeted $200/kwh pricing for power packs? I am waiting to see his tweet, announcing the new $470/kwh pricing.
A few hundred dollars on the total pack won't make any difference. Tesla will still lose a ton of money on each Model 3.

Ho Ho Ho!
"For more info on Tesla Energy, check out press kit. $250/kWh for utility scale is the real kicker"

Hee Hee Hee! Your PhD in ValueSeeking should inform you that many many MANY things are cheaper by the dozen.
Utility Scale: $250/kWh (not $200)
Small Order: $470/kWh if you're buying 2 or 4 or so. Neighborhood scale. No contradiction here. What Utility would only buy a handful of Powerpacks?

Ha ha HA. Goo-goo goo-joob. /walrus

 

[austinEV]

Tesla needs constant cash infusion to replenish its non-stop cash bleed of nearly half a billion each quarter. Do some research on how it spent the $2B raised via bonds in 2014 for the supposed GF. Only 14% built, and they had to raise another $750 million. FCF is a mirage. A good read from David Stockman on this "bonfire of vanities".
Tesla: Bonfire Of The Money Printers’ Vanities

THIS article is the reason I want Elon and Wheeler to deliberately burn the shorts. Have blowout profits in Q2 and Q3 just to freaking show that they can. So much unreasoned hate! "Carnival barker CEO". EV's have been around for decades. Great. Insight.

 

[FredTMC]

In regards to capital raise *soon* belief, it is just wrong at so many levels I don't know where to even begin:

Firstly there is an underlying assumption that they actually *need* capital really soon for them to raise the capital soon. How does anyone know that? Q2, which is currently running, is already designed to be cash flow positive with X revenues (and maybe some minor TE revenues). Moreover there has been an influx of $400mln capital through 3 reservations. Wouldn't all this be enough for an additional 3 months of buying time? What's the urgency for a capital raise?? No one here laid out the case with enough detail for it but pretty much everyone is clamoring for capital raise soon.

Secondly, here is an *educated* guess of how capital raises work: The issuers sit-down with the underwriters (banks) to structure the deal. The underwriters are in turn responsible for finding the counter-parties who would buy the issue straight in the primary market. Easier the job of finding the counter-parties, the better the deal will be for the issuers. Now if there is a huge run up in the stock, big-shorts will be scared to death to cover their positions in the open market (secondary market) on the exchanges. In fact it might simply be unfeasible to do so (see volkswagen short squeeze). So these big-shorts will effectively end up becoming the counter-parties to the deal.

For all intended purposes delivering a shock-and-awe to the shorts works best in getting a very good deal on the capital raise. It is silly to imagine that Musk and co won't fully utilize this opportunity.

Why take up a poor deal and make shorts reasonably happy? That makes no sense. Management will try to fully crush them out and in due process raise capital at terrific terms. In effect, shorts will pay for the factories. This is what happened in early 13 and this is what is destined to happen mid 16. I just don't see otherwise.

Thanks SBenson,

I feel a cap-raise now is very useful.

Until the Model 3 reservations (400K) event occurred, Tesla didnt need more capital to make it to Model 3 production (as they said). Tesla CFO said on last call they would focus on manufacturing efficiencies and get to FCF this year. Positive FCF largely removes the risk of running out of cash. It's only a question of keeping CapEx burn low enough that cash-on-hand remains comfortably high (e,g, more than $500m) before M3 launch. This was "the plan" on last call. What changed? 400k reservations... Vastly greater than expected.

So, with 400k model 3 reservations, it's clear that Model3 is hugely desirable.
This being the case, Tesla seems very willing to accelerate their CapEx beyond their Q1 earnings call plans. If they are able to raise cash with reasonable terms (highly likely), why wouldn't tesla rush to grow? This is what Elon and team always wanted: "accelerate the advent of sustainable transportation".

So, in summary, with a capital raise and X more billions of cash on hand, tesla is free to "get big quick(er) than originally expected". As Jesse said, throw out the old 500K cars in 2020... It's possible for tesla to set higher production goals. Something like 1M cars in 2020 and higher annual numbers between now and then.

 

[windgrins]

A new Tesla fire (well not so much). It looks like the ICE didn't fare well in the encounter. Someone else may have posted this already.

Crash Involving Tesla Model S And Gas-Fueled Car Results In ICE Vehicle Fire

 

[MitchJi]

You're talking about one type of short: the fundamental short, the one banking on TSLA finally finding its way back to its proper valuation at around $50. These are the people reading every piece of news wrong. Jesse was talking about another type of short, one lured in mostly on technicals without having properly done their homework on the company and vision that is TSLA. There really is no disagreement between the two of you, and I'm sure both of you would agree that you have both types of shorts (i.e. the "strong" shorts and the "weak" shorts). What you may disagree about is the ratio between the two and in reality we all know most shorts are some kind of hybrid version of the two extreme cases. The dynamic however is that it doesn't matter, because as the short position starts to hurt (there is a constant rather high cost to holding a short position even as the stock trades flatly for a while) both these shorts are looking to squeeze out through the same exit.

And hopefully we'll all profit on our trades. Like a few months ago when some of us bought in at $207, some at $160-$170 and a few of us at $149. We all are doing very well now.

 

[lango]

I think it is safe to say they will accelerate the vehicle and battery factories expansion plans as much as they can, but I highly doubt they are as far gone that a capital raise now is necessary to not hold those plans back.

So given that with all positive news coming there is no reason to raise capital until after said news. The longer they wait though the bigger risk of macro and general market problems which add to risk. Second half I think is a safe bet, sometime in August or September.

 

[The Blue Owl]

And hopefully we'll all profit on our trades. Like a few months ago when some of us bought in at $207, some at $160-$170 and a few of us at $149. We all are doing very well now.

Well, except for the value seeking doctors among us.

 

[SBenson]

... If they are able to raise cash with reasonable terms (highly likely), why wouldn't tesla rush to grow? ...

Sorry, but I don't agree. Re-read that sentence for yourself. There in lies the assumption that the constraining factor for 'rush to growth' is capital!! How does anyone here know that? Show me the math.

Tesla can easily spend $300mln off the $400mln from reservations. Isn't that like good money to get started with 'rush to growth'?

Even if the 2020 goal is changed from 500K to 1mln cars I think the market reaction will be very muted. It's just another "goal". Tesla has missed quite a lot of goals overtime. Market will shrug it off. Just like it did with the Model 3 reservation count announcements.

BUT showing a +EPS and +FCF is *real*. Its not some goal in distant future that market needs to believe. When this *real* thing really kicks in, the stock will spike. Thanks to shorts, as clearly illustrated by DrValueSeeker here.

 

[BriansTesla]

Thanks SBenson,

I feel a cap-raise now is very useful.

Until the Model 3 reservations (400K) event occurred, Tesla didnt need more capital to make it to Model 3 production (as they said). Tesla CFO said on last call they would focus on manufacturing efficiencies and get to FCF this year. Positive FCF largely removes the risk of running out of cash. It's only a question of keeping CapEx burn low enough that cash-on-hand remains comfortably high (e,g, more than $500m) before M3 launch. This was "the plan" on last call. What changed? 400k reservations... Vastly greater than expected.

So, with 400k model 3 reservations, it's clear that Model3 is hugely desirable.
This being the case, Tesla seems very willing to accelerate their CapEx beyond their Q1 earnings call plans. If they are able to raise cash with reasonable terms (highly likely), why wouldn't tesla rush to grow? This is what Elon and team always wanted: "accelerate the advent of sustainable transportation".

So, in summary, with a capital raise and X more billions of cash on hand, tesla is free to "get big quick(er) than originally expected". As Jesse said, throw out the old 500K cars in 2020... It's possible for tesla to set higher production goals. Something like 1M cars in 2020 and higher annual numbers between now and then.

I believe this is correct. I don't think Elon has the patience to wait very long to ramp things up. I predict a capital raise sooner than later although I don't know how soon of course. I think he is itching to go as fast as possible.

 

[Johan]

Well, except for the value seeker doctors among us.

I feel sorry for the guy, he walked in to the wrong lion's den.

Sorry, but I don't agree. Re-read that sentence for yourself. There in lies the assumption that the constraining factor for 'rush to growth' is capital!!

This is where the crux lies, isn't it? Is acceleration of Model 3 a "problem" that can be "solved by throwing money at it" or not? IMO, if by acceleration we mean bringing it to market earlier than late 2017 then no, that will not be helped by raising cash now. If by acceleration we mean increasing the slope of the ramp, so that we hit 1 million cars in 2020 instead of 500k then yes, maybe that can be solved by raising cash now, I mean like a lot of cash, and putting it straight to work in buying or building a second vehicle factory somewhere in the world. And a second Gigafactory too. If you're going to do these things and have them be operational in the 2018-2020 time span you can't start later than NOW.

 

[MitchJi]

Interesting BMW Blog posts. He makes a fairly good case that BMW can deliver a car that would be competitive with the M3 by 2019. Of course he thinks it will take that long for Tesla to ramp M3 production.

Can BMW Fend Off The Charge of the Tesla Model 3? - PART 1
Can BMW Fend Off The Charge of the Tesla Model 3? - Part 2

• Five door hatchback w/seating for five
• Aluminum frame, CFRP body same as i3 & i8
• 78.75 kWh battery pack, with 70kWh is usable
• EPA rated range of 245 MPC
• Capable of charging at 150kW.
• 345 hp and 375 lb-ft torque. 0-62 mph in 5.0 seconds
• All wheel drive option
• Options include HUD, panoramic roof, various “BMW Driver Assistant” autonomous driving featuresSo why doesn’t BMW bring the i5 to market sooner and beat Tesla to the punch? Is it because they don’t think the market is ready, or they just don’t believe in long range electric cars just yet? The answer to both of those questions is no. It’s all about the batteries. Tesla knows this, and refused to wait for the market to bring cutting edge battery cells to them. Instead they are building what will be the largest battery factory in the world, to supply their cars with the best batteries as soon as they are available. BMW, along with the rest of the OEMs, will rely on third party suppliers for their battery cells. It’s too early to tell which strategy is best, but once the Gigafactory is operational, it should provide Tesla with the advantage of having the best cells available and at a lower cost, but that has not yet been proven.

Why 2019? That’s because Samsung SDI, BMW’s battery partner is scheduled to bring to market their next generation lithium ion battery cell sometime in 2019. These new cells have been described by Samsung as the “Low Height Pack” cell generation because they aren’t nearly as tall as the batteries currently used in the i3 which will allow for a lower seating position. However, the real progress is in the specific energy of the cells and the cost. The current i3 uses 60Ah cells that are believed to have a specific energy of 130 Wh/kg. The 2017 i3 is rumored to be using the latest Samsung SDI cells that are the same physical size as the 60Ah cells, but are 94Ah with a specific energy of about 190 Wh/kg. These new cells are going to increase the i3’s range from 81 miles per charge to about 120 MPC. However that still isn’t good enough for the long range Model 3 competitor that the i5 needs to be. The 2020 i5 will use Samsung’s Low Height Pack cells that are estimated to be about 125Ah with a specific energy of about 250Wh/kg, nearly double the energy density of what the current i3 batteries have and cost less than the current 60Ah cells do. These cells will allow BMW to stuff a 78.75kWh battery pack in the i5 and still keep the weight at about 4,000lbs.

He suggests that BMW might decide to partner with Tesla on superchargers and he mentions a high speed DC fast charge association, and I noticed that Tesla is a member:
News: Charging Interface Initiative e. V. (CharIN e. V.)

 

[lango]

I believe this is correct. I don't think Elon has the patience to wait very long to ramp things up. I predict a capital raise sooner than later although I don't know how soon of course. I think he is itching to go as fast as possible.

This assumes capital is what is holding them back which is unlikely to be the case. They need to plan the accelerated production of vehicles and batteries and most of those costs happens after construction has started.

 

[BriansTesla]

I feel sorry for the guy, he walked in to the wrong lion's den.



This is where the crux lies, isn't it? Is acceleration of Model 3 a "problem" that can be "solved by throwing money at it" or not? IMO, if by acceleration we mean bringing it to market earlier than late 2017 then no, that will not be helped by raising cash now. If by acceleration we mean increasing the slope of the ramp, so that we hit 1 million cars in 2020 instead of 500k then yes, maybe that can be solved by raising cash now, I mean like a lot of cash, and putting it straight to work in buying or building a second vehicle factory somewhere in the world. And a second Gigafactory too. If you're going to do these things and have them be operational in the 2018-2020 time span you can't start later than NOW.

Exactly! The only thing that Tesla won't be able to buy with a cap raise is time.

 

[SBenson]

The other subtlety with capital raise discussion.

So lets say some of you folks who are arguing for faster-spending-earlier indeed are right. That may mean no more +FCF.

But there can still be +EPS. That is still enough to cause a good short squeeze. So capital raise can still be delayed for post squeeze from +EPS of Q2.

Yes, capital can be spent earlier, faster, if needed, for a faster model 3 ramp. Then the capital raise can still be delayed by 3 months or so to wait for Q2 ER.

 

[jesselivenomore]

So, with 400k model 3 reservations, it's clear that Model3 is hugely desirable.
This being the case, Tesla seems very willing to accelerate their CapEx beyond their Q1 earnings call plans. If they are able to raise cash with reasonable terms (highly likely), why wouldn't tesla rush to grow? This is what Elon and team always wanted: "accelerate the advent of sustainable transportation".

I really like the way you put it. The answer is right in Tesla's mission statement.

That's not to say SBenson is wrong. Just that this is the obvious counter-argument. Also amen to Johan's post too.

 

[geneclean55]

Yes, they were building the packs manually in Fremont. Set up an automated assembly line at the GF.

So hopefully an ability to fulfill orders more quickly and ramp up business.