Short-Term TSLA Price Movements - 2016

[mejojo]

There have got to be shorts throwing in the towel somewhere.

They are holding out for the bankruptcy scenario...just as many here are holding out for the stratosphere case.

 

[Fallenone]

I have been trying to make sense of the strategy. I had been predicting they would engineer a great Q2, goose up the price and do a cap raise, being less dilutive and better for shareholders. The problem(s) with that theory are that it is really specifically good for existing stock holders and not really for anyone else. If it forced a short squeeze that would allow a larger total haul in the cap raise, but who would participate in the secondary at the top of a squeeze...

So...

NEW THEORY, GET YOUR FOIL HATS ON:

They floated this idea to GS and GS said "yeah right, you want us to offer shares in Sept at an all time high. No thanks, our buyers would prefer to buy now and also enjoy the runup you say you can engineer. Do the cap raise now, getting slightly less money with eager buyers instead of later with buyers who will not understand why they should buy at $290." So to grease the wheels they sold the good 6 month story and got slightly less money, but much earlier. Elon and team are still on the hook to deliver gangbuster Q2/Q3 results to cover the asses of those who just came in on the secondary.

Also, market makers kept their thumb on the scale yesterday AH, this morning premarket and today during the trading day to make sure the reaction was seen as positive.

Yeh back in March or sometime around that I was also wondering how the big investment banks will game with TSLA on the price of cap raise. On the one hand they already have exposure to the stock so they want it to be as high as possible, but OTOH, their clients and themselves would like to add more at lower price.

I too thought a raise after great Q2 ER would be optimum for the company. But the company is not the only player here.

Another reason I thought they can afford to wait till Q2 ER, which is in Aug, was they won't need to spend heavily before. You know, talk with suppliers and such about the details of contracts etc. But, given the Hankook news, I suspect some contracts have already been done and they need to pay deposit for the parts of Model 3, so that's a drain on their cash. Also, they said Model 3 design will be finalized before the end of June. And once that done, they need to order new robots and tooling for the production line. As we all know, those ain't cheap. And the lead time could also be pretty long. Therefore, they may need to write some big checks as early as the beginning of July, before Q2 ER.

Anyway, what's done is done and I think unless the market crashes altogether, we're at a pretty good shape for now.

 

[austinEV]

Yeh back in March or sometime around that I was also wondering how the big investment banks will game with TSLA on the price of cap raise. On the one hand they already have exposure to the stock so they want it to be as high as possible, but OTOH, their clients and themselves would like to add more at lower price.

I too thought a raise after great Q2 ER would be optimum for the company. But the company is not the only player here.

Another reason I thought they can afford to wait till Q2 ER, which is in Aug, was they won't need to spend heavily before. You know, talk with suppliers and such about the details of contracts etc. But, given the Hankook news, I suspect some contracts have already been done and they need to pay deposit for the parts of Model 3, so that's a drain on their cash. Also, they said Model 3 design will be finalized before the end of June. And once that done, they need to order new robots and tooling for the production line. As we all know, those ain't cheap. And the lead time could also be pretty long. Therefore, they may need to write some big checks as early as the beginning of July, before Q2 ER.

Anyway, what's done is done and I think unless the market crashes altogether, we're at a pretty good shape for now.

The upshot if you like my theory is that we are still in for a "TU" in Aug. One could trade on such a hunch.

 

[Fallenone]

The upshot if you like my theory is that we are still in for a "TU" in Aug. One could trade on such a hunch.

Yep, I'm thinking we can reach ATH in Aug.

 

[Irishjugg]

Yep, I'm thinking we can reach ATH in Aug.

To me that sounds like a stretch. I don't think the market will allow us ATH until model 3 is shipping or something like that, unless we get a short squeeze or a cash flow positive / non GAAP positive quarter. A GAAP positive would do it too, but I don't think that's in the cards anytime soon

 

[austinEV]

To me that sounds like a stretch. I don't think the market will allow us ATH until model 3 is shipping or something like that, unless we get a short squeeze or a cash flow positive / non GAAP positive quarter. A GAAP positive would do it too, but I don't think that's in the cards anytime soon

Well there are some members modelling a profitable quarter for Q2. The idea is that TM can use high throughput of the X to beat the delivery goal by a few thousand vehicles, which could generate a profit if they haven't began major spending on the 3 yet.

My additional observation is that this could be sort of validated by the cap raise now. The roadshow for the secondary basically told the same story.

 

[Fallenone]

To me that sounds like a stretch. I don't think the market will allow us ATH until model 3 is shipping or something like that, unless we get a short squeeze or a cash flow positive / non GAAP positive quarter. A GAAP positive would do it too, but I don't think that's in the cards anytime soon

The core of the bear thesis are:
1. No demand for Tesla EV.
2. Even if there is, Tesla can't produce.
3. Even if they can, they can't be profitable on it.

Once each of these three points are destroyed, there's no stopping on the share price. So let's look at them one by one.

1. RIP'd by the reservation numbers.

2. X problematic ramp-up reinforced this point. Tesla's cash burn and negative FCF reinforce this point. Now the cap raise weakened this point. And when the X ramp-up is smooth as the S, which I believe is progressing quite well in the past few weeks, weakens this point. But we need to wait till the numbers are out for the market to get a confirmed data point that counter this bear thesis point.

3. Non-GAAP profitable will weaken this point, even if it's just one quarter.

So if Q2 had a nice delivery number and the X quality issues didn't eat too much into gross margin, point 2 and 3 would get heavily damaged. An ATH in turn wouldn't be too much of a stretch IMO.

 

[Irishjugg]

Well there are some members modelling a profitable quarter for Q2. The idea is that TM can use high throughput of the X to beat the delivery goal by a few thousand vehicles, which could generate a profit if they haven't began major spending on the 3 yet.

My additional observation is that this could be sort of validated by the cap raise now. The roadshow for the secondary basically told the same story.

I agree with the likelihood of a profitable Q2 unless they really spend some of this 1.4B darn quickly. I just don't think it would be enough for ATH. I'd probably sell half of the trading shares around 280 and hope it does break ATH though. Get out of the rest if it hits 270 downwards.

 

[Irishjugg]

The core of the bear thesis are:
1. No demand for Tesla EV.
2. Even if there is, Tesla can't produce.
3. Even if they can, they can't be profitable on it.

Once each of these three points are destroyed, there's no stopping on the share price. So let's look at them one by one.

1. RIP'd by the reservation numbers.

2. X problematic ramp-up reinforced this point. Tesla's cash burn and negative FCF reinforce this point. Now the cap raise weakened this point. And when the X ramp-up is smooth as the S, which I believe is progressing quite well in the past few weeks, weakens this point. But we need to wait till the numbers are out for the market to get a confirmed data point that counter this bear thesis point.

3. Non-GAAP profitable will weaken this point, even if it's just one quarter.

So if Q2 had a nice delivery number and the X quality issues didn't eat too much into gross margin, point 2 and 3 would get heavily damaged. An ATH in turn wouldn't be too much of a stretch IMO.

I think the most important bear thesis being left out here is the "it's overvalued even if they were doing perfectly right now" and that's why I think it will not break ATH. The selling pressure would likely get massive around 280, and that's gonna be hard to break unless we are close to it already before excellent news. Not impossible, but Tesla is valued very highly, so breaking that 290 is going to be tough.

 

[Fallenone]

I think the most important bear thesis being left out here is the "it's overvalued even if they were doing perfectly right now" and that's why I think it will not break ATH. The selling pressure would likely get massive around 280, and that's gonna be hard to break unless we are close to it already before excellent news. Not impossible, but Tesla is valued very highly, so breaking that 290 is going to be tough.

Yes I totally agree it would be tough. But given the reservations of Model 3 I think it has a good chance. The "perfect" overvaluation didn't foresee the demand for Model 3.

 

[austinEV]

I think the most important bear thesis being left out here is the "it's overvalued even if they were doing perfectly right now" and that's why I think it will not break ATH. The selling pressure would likely get massive around 280, and that's gonna be hard to break unless we are close to it already before excellent news. Not impossible, but Tesla is valued very highly, so breaking that 290 is going to be tough.

At 290, the shorts would be the ones buying. They take over from weak longs. Also, those of us that would be selling calls and down-leveraging to common shares

 

[drinkerofkoolaid]

As strange as this may sound, I think Elon might have reduced the risk presented by him needing to sell stock to pay taxes on his options that were set to expire at the end of 2016. The capital raise also increases Elon's stake at ~$215, strengthening the foundation at $215.

Anyone else think Elon might donate the 1.2million shares to SolarCity's charity, The Give Power Foundation, that provides free solar power to schools that lack access to energy. This would allow Elon to transfer ~$300million to SolarCity, reduce the amount Elon will need to pay in taxes from the execution of his options, and provide enough capital for a ton of schools to receive free Solar Power forever.

 

[MitchJi]

From the press reports Archambault seemed to think they could fund the rest of the $ needed for the Model 3 ramp from earnings plus the ABL. Not sure what assumptions he was using for TE or S/X profits.

I think the most important bear thesis being left out here is the "it's overvalued even if they were doing perfectly right now" and that's why I think it will not break ATH. The selling pressure would likely get massive around 280, and that's gonna be hard to break unless we are close to it already before excellent news. Not impossible, but Tesla is valued very highly, so breaking that 290 is going to be tough.

I don't know how much, but if the believes that Archambault is correct, and M-X production starts to go smoothly and Tesla Energy starts to show substantial income I think $260 is a safe minimum prediction, and enough to make me smile.

 

[Crowded Mind]

I have been trying to make sense of the strategy. I had been predicting they would engineer a great Q2, goose up the price and do a cap raise, being less dilutive and better for shareholders. The problem(s) with that theory are that it is really specifically good for existing stock holders and not really for anyone else. If it forced a short squeeze that would allow a larger total haul in the cap raise, but who would participate in the secondary at the top of a squeeze...

So...

NEW THEORY, GET YOUR FOIL HATS ON:

They floated this idea to GS and GS said "yeah right, you want us to offer shares in Sept at an all time high. No thanks, our buyers would prefer to buy now and also enjoy the runup you say you can engineer. Do the cap raise now, getting slightly less money with eager buyers instead of later with buyers who will not understand why they should buy at $290." So to grease the wheels they sold the good 6 month story and got slightly less money, but much earlier. Elon and team are still on the hook to deliver gangbuster Q2/Q3 results to cover the asses of those who just came in on the secondary.

Also, market makers kept their thumb on the scale yesterday AH, this morning premarket and today during the trading day to make sure the reaction was seen as positive.

This theory would also fit well with a scenario in which Tesla still plans to raise more capital. They agree to do this round now, crush the numbers and drive the stock up, and then as the market's concerns are being quelled and the uncertainty turns back to excitement (proven by the increase in stock price) they announce another round for any number of other reasons. Perhaps GF2, Europe/Asia factory, Model Y, Truck, etc. Then we are seeing that opportunistic raise, asking for money when they don't need it, that we have been expecting.

 

[electracity]

NEW THEORY, GET YOUR FOIL HATS ON:

They floated this idea to GS and GS said "yeah right, you want us to offer shares in Sept at an all time high. No thanks, our buyers would prefer to buy now and also enjoy the runup you say you can engineer. Do the cap raise now, getting slightly less money with eager buyers instead of later with buyers who will not understand why they should buy at $290." So to grease the wheels they sold the good 6 month story and got slightly less money, but much earlier. Elon and team are still on the hook to deliver gangbuster Q2/Q3 results to cover the asses of those who just came in on the secondary.

Or
They aren't certain of the model 3 reveal impact on S/X demand
Or
They aren't confident of market conditions later in the year.

Your theory is good too. I'm sure Musk prefers to get the money so he can put his head down and go hard at the model 3.

This theory would also fit well with a scenario in which Tesla still plans to raise more capital. .............

Oh yes, there will be more capital raises. Musk has lots to build.

 

[EinSV]

From the press reports Archambault seemed to think they could fund the rest of the $ needed for the Model 3 ramp from earnings plus the ABL. Not sure what assumptions he was using for TE or S/X profits.

Sorry not to post earlier (busy day) but this is one of the articles I saw re GS's Archambault suggesting only 1 cap raise needed with the rest funded out of earnings (mostly) and the ABL. Maybe someone with access to the report can confirm: Goldman Sachs' $250 Tesla Price Target Uses A Unique Calculation

 

[sunhelm]

Well there are some members modelling a profitable quarter for Q2. The idea is that TM can use high throughput of the X to beat the delivery goal by a few thousand vehicles, which could generate a profit if they haven't began major spending on the 3 yet.

My additional observation is that this could be sort of validated by the cap raise now. The roadshow for the secondary basically told the same story.

I agree with this. Q2 results have got to be the carrot stick that GS proposed will entice buyers of the secondary offering to get in now and strap in for the SP propelling to geo stationary orbit in 6 weeks!

 

[ludicrousspeed]

CNBC comparing Tesla to Valeant right now. This, along with criticizing them for their risk disclosures, are some of the most desperate bear cases I can remember.

 

[larmor]

CNBC comparing Tesla to Valeant right now. This, along with criticizing them for their risk disclosures, are some of the most desperate bear cases I can remember.

Appearance on CNBC is when the equity is greatly over or under valued. Given the hysteresis involved in setting up a tv show vs. sending out clickbait, i would have to say this a CNBC undervalue alert. imho....

 

[The Blue Owl]

Here is Matt Levine at Bloomberg, on why the timing of the Goldman TSLA upgrade just before the secondary offering is not necessarily suspicious (and if anything, it's evidence of good behaviour).

Obviously if Goldman is selling Tesla shares to its customers, it is helpful -- though oddly not essential -- that Goldman's research analysts think that the customers should buy those shares. But the timing is weird: Goldman research was officially meh on Tesla shares until yesterday morning, and then became enthusiastic just before Goldman's bankers were officially mandated on the deal. Is that ... suspicious?

I mean, no, not really, but let's work through why.
​

For those who don't know, Matt Levine is one of the best financial writers around.

Goldman Picked a Good Time to Like Tesla's Stock