Julian Cox
Banned
Guidance is owed to Longs etc.
OK I think it is possible to start getting some clarity from following this trail.
As touched on before it is weird to guide longs to building factory capacity etc when you don't yet have the money to execute.
In fact it is not even guidance in the classic sense of the term. This is actually stated in the form of an investor pitch which says: "If we had the money, this is what we would like to spend it on". Before the answer to that is known, and known to be a yes, then naturally prior guidance remains unchanged. You can't guide shareholders to a changed business plan when the change in the business plan is predicated on securing money from the shareholders. It's a circular argument, not guidance.
As previously discussed it was a huge advantage for Tesla to retain its Q3 and Q4 FCF and profit guidance (issued on Q4 '15 ER during Q1) because this of course is what Tesla actually is offering to the Shareholders when pitching for more cash.
This is basic Dragon's Den and Shark Tank stuff: "Don't sell me a share of what the business is going to look like after you have my money because you don't have that to offer. Sell me a share of what you as a business are offering me as an potential investor. What do you have now and what are your current projections and then tell me what you want in return for a share of that? After you have done that, tell me how I am going to see a return on my money assuming I say yes."
Now in the case of Tesla. Selling a picture of the business in 2016 without the new money in it (and hence no accelerated spending) was actually a much better investment pitch to the markets than the picture of the business after presuming the new money was in it and hence the spending - money that on face value that isn't there yet. There was simply no advantage from a stock market fundraising perspective to state this post-funding version of the investing pitch as guidance.
I don't know about anyone else but what I see here is one of those things that makes a person feel more stupid the more they think about it (at least without changing the frame of reference). Considering this business is not known for low intellect management is vastly more likely in my opinion that there is something else going on here. Something unseen. A hidden hand.
Someone asked up-thread if it would have been honest of Musk to pretend that Q3 and Q4 guidance still stood knowing that he planned to spend lots of money. Well the answer to that is yes because pre-funding it's the way it is. Moreover he would have been having an integrity problem to guide to spending money he didn't have UNLESS he already knew exactly where the money was coming from on the ER call.
There is no other rational explanation I can decipher for Musk's behavior here unless there is some other form of funding that Musk is VERY confident about independently of any need to pander to Wall Street or the stock market. There effectively must be another source of funding essentially secured already. A White Swan with somewhere between eight and nine zeros attached inbound at terminal velocity that has nothing to do with asking the public markets for cash. Musk has already told the markets what will happen, if he needed to ask the markets he would have had to pick a moment to ask, and not tell on an ER call in the form of guidance.
Gentlemen, Either Musk has gone soft (unlikely) or there is inbound ballistic ordinance for the shorts that was inbound before Q1 ER. Something like an endowment from Larry and Sergey or a closed bond funding round with DFJ and Fidelity.
Suggest it is probably not the worst idea to place bets accordingly in a logic dictates kind of a way.
JC
OK I think it is possible to start getting some clarity from following this trail.
As touched on before it is weird to guide longs to building factory capacity etc when you don't yet have the money to execute.
In fact it is not even guidance in the classic sense of the term. This is actually stated in the form of an investor pitch which says: "If we had the money, this is what we would like to spend it on". Before the answer to that is known, and known to be a yes, then naturally prior guidance remains unchanged. You can't guide shareholders to a changed business plan when the change in the business plan is predicated on securing money from the shareholders. It's a circular argument, not guidance.
As previously discussed it was a huge advantage for Tesla to retain its Q3 and Q4 FCF and profit guidance (issued on Q4 '15 ER during Q1) because this of course is what Tesla actually is offering to the Shareholders when pitching for more cash.
This is basic Dragon's Den and Shark Tank stuff: "Don't sell me a share of what the business is going to look like after you have my money because you don't have that to offer. Sell me a share of what you as a business are offering me as an potential investor. What do you have now and what are your current projections and then tell me what you want in return for a share of that? After you have done that, tell me how I am going to see a return on my money assuming I say yes."
Now in the case of Tesla. Selling a picture of the business in 2016 without the new money in it (and hence no accelerated spending) was actually a much better investment pitch to the markets than the picture of the business after presuming the new money was in it and hence the spending - money that on face value that isn't there yet. There was simply no advantage from a stock market fundraising perspective to state this post-funding version of the investing pitch as guidance.
I don't know about anyone else but what I see here is one of those things that makes a person feel more stupid the more they think about it (at least without changing the frame of reference). Considering this business is not known for low intellect management is vastly more likely in my opinion that there is something else going on here. Something unseen. A hidden hand.
Someone asked up-thread if it would have been honest of Musk to pretend that Q3 and Q4 guidance still stood knowing that he planned to spend lots of money. Well the answer to that is yes because pre-funding it's the way it is. Moreover he would have been having an integrity problem to guide to spending money he didn't have UNLESS he already knew exactly where the money was coming from on the ER call.
There is no other rational explanation I can decipher for Musk's behavior here unless there is some other form of funding that Musk is VERY confident about independently of any need to pander to Wall Street or the stock market. There effectively must be another source of funding essentially secured already. A White Swan with somewhere between eight and nine zeros attached inbound at terminal velocity that has nothing to do with asking the public markets for cash. Musk has already told the markets what will happen, if he needed to ask the markets he would have had to pick a moment to ask, and not tell on an ER call in the form of guidance.
Gentlemen, Either Musk has gone soft (unlikely) or there is inbound ballistic ordinance for the shorts that was inbound before Q1 ER. Something like an endowment from Larry and Sergey or a closed bond funding round with DFJ and Fidelity.
Suggest it is probably not the worst idea to place bets accordingly in a logic dictates kind of a way.
JC
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