JRP3
Hyperactive Member
That was my theory as well, that LG was essentially pricing the cells as a loss leader, or close to it.
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That was my theory as well, that LG was essentially pricing the cells as a loss leader, or close to it.
Except Jesse did not seem to understand entirely what pulled the shorts in (no it wasn't just chasing the price action) or the fact that there is a high and improving chance from a bearish standpoint that their thesis will be validated - which is to say Tesla is burning cash and just missed its Q1 delivery numbers and so it will have to do a distressed capital raise to stay afloat and the stock will finally go to $50 where it belongs. /bear
They don't want out they want a killing on high conviction that they will get one.
Tesla appears perfectly willing to egg them on. Talking about trying to wean off revolving loan facilities etc meanwhile banking the proceeds of three product lines and $400 million of reservations and counting of which one of those product lines is cash flow rich and invisible apparently to auto sector bears - and this is after they stopped spending the final big bucks on Model X program development back in Q4 so there is a cash drain cliff that fell away that the bears apparently have missed while blindly presuming an ongoing uptrend.
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Indeed. LG has just got GM to pay for its vehicle program R&D for LG's benefit from which GM will gain nothing in the long run but a fresh batch of EV competition that it can't control or price match.
FredTMC
Model S VIN #4925
For the DTU scenario, first Q1 revenue and gross profit from cars may be less, but I think they are being disciplined on opex and capex. So cash burn might not be bad at all. Second, given the current short interest and one third of them are underwater (TSLA had about 22m short interest last Aug when SP was 260+, now 32m), shorts would support SP if it goes down and I doubt it would dip as far as low 200's. Third, a big dip and coming back takes time and the lost of shorts who covered lower would delay/lower the SP for management to raise cap so management would try to at least hold the SP as high as possible.
Great! If TM is really willing to release such information, we should hear back from IR/FredTMC soon.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
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 to make things worse, they need to compete over this exit (i.e. buying stock) with new longs coming in to the stock. And I would wager most of these new longs are going to be what I think of as "strong" longs, i.e. longs drawn in by the fundamentals of TSLA rather than technicalities in the stock curve.
I agree that to some extent Tesla is playing on this dynamic, and to some extent Tesla just going about their business of improving, innovating and growing the company has the same effect as if Tesla was willingly trying to make life difficult for the shorts.
IMHO - Down with more shorts or level to up with less shorts is slightly more satisfying to Tesla (Musk anyway) in the down with more shorts scenario. The total available to Tesla is the same in all cases. Just add them together. So why battle for $40 or even $60 when letting the shorts pile in at $180 to $200 just means you get to defund and humiliate more humanity-hating detractors instead of skimming dilution from the philosophically enlightened supporters? They have that level of power to choose, why chose the latter?
Re: Cap raise timing between 1) Imminent and 2) August ER-Q2
I must be missing something for the logic of 1), so need to ask.
No cash raise was to be needed without M3/GF accelerated manufacturing (massive or otherwise), so that's what the Cap raise will be used for. No matter what acceleration or manufacturing capacity multiple is assumed (double the GF, another plant, 10 more GF's, 10 more plants);
what possible expenditures towards that end could even be made (much less urgently needed) in the next 3 months; thereby producing this urgency for the Imminent scenario?
Currently they have cash, current expenditures (without this new use) is falling toward FCF...
AND they just added $400m against future orders to span any early expenditures required of this new endeavor in the next 3 months
[land acquisition? Equipment pre-order? material doubling? little of which would induce a cash outlay in the next 3 months for an expansion occurring over the next 18-24].???
help- I've fallen and can't get up
thanks
I must be missing something for the logic of 1), so need to ask.
No cash raise was to be needed without M3/GF accelerated manufacturing (massive or otherwise), so that's what the Cap raise will be used for. No matter what acceleration or manufacturing capacity multiple is assumed (double the GF, another plant, 10 more GF's, 10 more plants);
what possible expenditures towards that end could even be made (much less urgently needed) in the next 3 months; thereby producing this urgency for the Imminent scenario?
Currently they have cash, current expenditures (without this new use) is falling toward FCF...
AND they just added $400m against future orders to span any early expenditures required of this new endeavor in the next 3 months
[land acquisition? Equipment pre-order? material doubling? little of which would induce a cash outlay in the next 3 months for an expansion occurring over the next 18-24].???
help- I've fallen and can't get up
thanks
Another thought on the info we get today. It seems like they (GM) are thinking how much would it cost them to make the Model 3 and what's the break-even point (~50k). Given Bolt is not as good as the Model 3, I wonder if 37k is the break-even point for Bolt?
Agreed. Jesse's statements imply both directly and by omission that 100% of the motivation for the shorts is chasing the charts - strong or not strong does not change that). I agree with you (and reiterate what I said before about this) that I agree with Jesse to an extent about chart chasing shorts. But the key observation here in my view is the existence of a truly abnormal percentage on TSLA of philosophical Short Selling that sets it apart from certainly any other publicly traded stock with possible exceptions of things like Herbalife.
jesselivenomore
Member
To be clear, I did not specify that they were technical shorts either. Some surely were, but technical traders are the minority in the market, and they have long covered by now if they are good enough to be trading any size.
I merely said that as such a polarizing stock, there is a contingent of bears waiting on the sidelines to enter at any sign of weakness, and the Jan macro turmoil provided that entry.
It is unclear whether a break of 200 or 180 provided them with this go ahead signal, or if the perceived tightening of credit markets thus lack of funding sources was what caused the break in the first place. In truth it was a combination of both feeding into eachother.
What is very clear is that whether you shorted on a technical breakdown or on the fundamental basis of a credit freeze, neither of those thesis is still valid today. Technically we are in a heavy uptrend after that false breakdown. And the general capital environment has loosened back up, not to mention the 400k reservations providing a backdrop for any capital raise. Instead of distressed, it is the easiest environment in the world right now for Tesla to raise money.
There is no valid reason left to hang on to for a short who entered during the Jan crash. This is why they are vulnerable here. And would be let off easy on any decline from here as they surely would scramble to cover and cut their losses. A decline from here would decrease short interest, not increase.
Now, I agree that there is about a 20 million share core fundamental short contingent that have been around in one form or another for the past 4 years now, who aren't going anywhere unless there is a major fundamental catalyst. These are not who I was referring to.
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See above.
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Let's assume the base model 3 will have a pack size of 50kWh times $150 that means the pack will be less than $7500. ICE price parity will be here sooner than even we think.
Boom! Someone gets it.
This:
"No matter what acceleration or manufacturing capacity multiple is assumed (double the GF, another plant, 10 more GF's, 10 more plants); what possible expenditures towards that end could even be made (much less urgently needed) in the next 3 months"
And if they blurt out all of their ammo that they can use to skim the market at an ATH now they miss a few key datapoints - steady state M3 reservation run rate for starters - to know how much money they can justify based on known demand and prove it to institutions. Hey look we had a flash in the pan - not quite the same thing. Actual positive FCF numbers, Actual Profits (or confidently guided) - that stuff tends to help - and right now they probably don't have it and in a few months they definitely will. Plus a flock of white swans to go with it. Only a complete klutz of a CEO would rush into a raise right now which whatever you think of Musk I doubt anyone but a bear representing the kind of institution with straps on the beds would disagree - that a complete klutz of a CEO he isn't.
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I have been agnostic on the "Down Then Up" or "Just Up, Don't Know When" issue, but it seems to me that time is starting to run out for the "DTU" scenario. Tesla is going to want to do a cap raise soon. They have just released a mind blowing combination of low costs and high margins for PowerPacks, and started taking orders. Perhaps the former was a mistake, perhaps not. But the only thing left to say now is "we have received X PowerPack orders in the first few weeks, and the GF will open in June with a production capacity of XXXX."
Connecting the dots at that point is fourth grade math. Maybe throw in a few other goodies and go out and raise $.
Maybe they will hold the order numbers close to the vest, maybe they won't, but the timing of the new Tesla Energy web page and PowerPack pricing plus the release of soon-to-be outdated battery pack costs just before the ER is certainly an interesting coincidence.
MartinAustin
Active Member
55,000Wh spread over 215 miles is 232Wh/mile - a totally believable figure for the Model 3. (With those aerodynamics, I wouldn't be surprised if it can drive for less. 45kWh battery?)
Did anyone find a link to a recording, or a transcript, of the UBS call with Jeff Evanson?
TSLA is seeing a very nice climb at the moment, I hope it holds
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 on the exchanges (secondary market). 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.
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 on the exchanges (secondary market). 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.
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Um. Reality check. Model 3 is a lot cheaper than an ICE vehicle. It is ICE that is hurting for price parity that it can never achieve ever again. The lag for this to be universally understood is a thing. So is the factual nature of the preceding statement.
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".
http://davidstockmanscontracorner.com/tesla-bonfire-of-the-money-printers-vanities/
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