Short-Term TSLA Price Movements - 2016

[Lump]

I know - the guy makes a wildly optimistic, unsupported prediction and then faults the company for not following through on it.

Are you talking about Jonas or Musk? its hard to tell

 

[Cosmacelf]

Did Jonas really make it point in his report asking where "Tesla Mobility" is? What a clown.

Oh yes he did. His previous report (before this SCTY acqusition) put a lot of weight as an investment thesis for Tesla on a future Uber-like competitor that Tesla would run when their fully automated cars came out. That's so speculative right now, it shouldn't be on ANYONE's radar. There's long term, and then there is Tesla Mobility...

 

[Cosmacelf]

BTW, a few people here have been repeating that "SolarCity Bonds" are yielding 20%. I just did a look up, and for the most part, true corporate SolarCity bonds are trading at investment grade yields - like 2%-3% for 4 year bonds. There are some odd bonds here and there that trade at 14% yield, but they are converts, or have other odd things in the prospectus. Run of the mill SCTY bonds seem fine...

 

[dakh]

Do you have the full picture? Mr Musk says he hasn't disclosed it yet:

I don't, but you repeat the same doomsday scenario script with zero proof. What you quoted from the conf call is not even about SCTY numbers, it's about the projected numbers that are expected after the merge. Unless you are really capable of connecting the dots to justify your insinuation, it's just that, an empty insinuation that the whole thing is a cover-up for SCTY failure.

Occam's razor says it's just an acquisition and there are direct and practical reasons for it. You'd have to go to some length to justify any claim that it's not.

 

[MitchJi]

SCTY will be cash flow positive before Tesla. It will happen between 3 and 5 months from now. Your "massive cash burn" is exactly as wrong as sorts complaining about Tesla and it's "massive cash burn" or "losing 20k per car".

By itself that should add more to the SP than the current hit?

Thanks Dave!

This presentation from Solarcity (dated June 2016, see link below) gives a good overview of their business from Solarcity's perspective. I think it's a must-read primer. I personally have mixed feelings about Solarcity (as a stockholder since IPO). IMHO I think Solarcity does have a workable business model (see presentation) with the existence of Solar ITC (investment tax credit). Without ITC, it becomes less clear. Also, Solarcity has some major, deep-rooted problems.

First and foremost, their product is not very compelling and that's why their sales costs are so high (and they're not able to reduce them).

Elon has plans to massively reduce the panel costs and sales costs (synergy).

Second, their management has been overly optimistic and hasn't shown they can innovate in a way to fix the #1 issue (lack of compelling product).

Third, management appears to have been overly-rosy with their financial projections and growth plans, and has had to scale back.

Overall, I understand some people who think that Solarcity is a "loser" of a company but I don't necessarily agree. I look at Solarcity as a mediocre company, not terrible and not great. Without Elon on the board, I would not have an interest in Solarcity. But with Elon, Solarcity has the backing of one of the savviest investors and innovators of our time, which means something to me. I think in this case, Solarcity would really benefit by coming under Tesla. Elon could spearhead a product overhaul for Solarcity and turn things around for them. But also Tesla would benefit by gaining the personnel and infrastructure to be able to scale Tesla Energy much, much faster than if they had to do it on their own. Also, without Solarcity, Tesla has their hands-tied in a sense because they're not able to go into energy production (due to Elon's ties with Solarcity) and this hampers their Tesla Energy growth potential as there needs to be an integration between energy production and energy storage.

Solarcity brings obvious negatives to Tesla as well... financial complexity and risk, unclear business model post-ITC, non-compelling product that requires high sales cost, etc.

To me it looks like the financial risks are at least a year or two away and things that will (interest rates and a major recession), that we will have time to respond to? Most of the angst here seems to be short and medium term. By Q1 2017 Tesla will have TE 2.0, with at 10-15% greater capacity, and the cells will cost Tesla 35%-45% less. They will be able announce that SCTY is cash flow positive, if they want to do that. At that point SCTY should be adding to Tesla's SP. If not by Q2-Q4 2017 they will have a complete product solution, utilizing the new panels. So IMO the worst case scenario is that SCTY adds at least 15-20% to the SP by the end of 2017. Big picture though I don't think that is very important, because by the end of 2017 TE will be making tons of cash.

But one needs to weigh that against the positives - best-in-class installation and infrastructure to support installs, mounting tech, solar panel tech (ie., Silevo), new solar plant being built, management in place that can take Elon's orders, etc. So, the question is can Tesla take what Solarcity gives them, both positives and negatives, and turn it into value that is multiple times the amount that they're paying for Solarcity.

Of course they can !

In Elon's mind, it's a "no-brainer" because with Solarcity under Tesla, Elon thinks he can fix the product through engineering, innovation and combining with storage and Elon thinks Tesla will be able to unlock a lot of potential of Tesla Energy since they'll be able to go after the energy production side as well as storage. Just that potential unlocks hundreds of billions of dollars, in Elon's mind. As for the negatives, Elon probably doesn't see many and for those that he does see (ie., high sales cost, product, etc) he thinks he can fix relatively easily/quickly. Personally, I think Solarcity's problems are very deep-rooted, and I think it's going to take a lot for Tesla to turn things around. It'll probably suck more time, energy and resources that Tesla is initially expecting. However, I do agree that by acquiring SCTY, it will free Tesla to go after energy production and just that is probably worth the price tag. I think the potential is immense for Tesla to lead the way in energy and they need to freedom to control the whole gamut of energy so they can apply the SpaceX-approach of bringing down costs (ie., via efficiency) and creating improvements through continual and ruthless iteration. This is a big play (in investment talk) for Elon... paying a few billion to go after hundreds of billions, and it's a mission he believes in more than anything. He doesn't see much downside and if he gets his way, then the deal will happen.

I do wish that Elon and his team did a better job in communicating the need to acquire Solarcity. They presented no financials on what the impact will be over the next 1-2 years, and they haven't even presented what the impact will be in regards to Tesla Energy's revenue projections. In some ways, I think Elon intuitively knows that this is the right move, but he and his team haven't worked out all the numbers and hasn't presented anything that is remotely convincing for the number-crunching analyst/investor. And Wall Street is a numbers-driven phenomena, that tends to look only 12-18 months out. Through those eyes, this deal looks horrible. And I don't blame the analysts for being critical or negative. To all this, Elon says "trust me" and "I know what I'm doing". So the investors who invest w/faith, choose to believe and follow. Others are left disgruntled and confused. Cheers, friends.

IMO this is a no-brainer!

http://files.shareholder.com/downlo...7DD00B/2016.06_SCTY_Investor_Presentation.pdf

 

[Gerasimental]

Brexit is looking bad, by the way.

 

[Jayjs20]

That would explain the dip in the last minutes of AH

 

[Causalien]

Much of Solarcity board are tesla centric investors/employees. They see this as a good deal because it benefits tesla significantly, however this is not a good deal for Solarcity investors at all. I think the big players which are overwhelmingly skewed tesla interests are looking out for Tesla's point of view far more then Solarcity's investors. Solarcity long investors understand what's happening here and it is not a fair deal as it stands now.

Survey any long Solarcity investor and you'll learn quickly these deal terms are an insult. Again, aquisition a great idea, the deal terms are not.

Foghat since you are the resident permabull on SCTY. Please explain SolarCity financing for us. It'll help us speed up the understanding cause I am struggling.

 

[150 kWh]

This presentation from Solarcity (dated June 2016, see link below) gives a good overview of their business from Solarcity's perspective. I think it's a must-read primer. I personally have mixed feelings about Solarcity (as a stockholder since IPO). IMHO I think Solarcity does have a workable business model (see presentation) with the existence of Solar ITC (investment tax credit). Without ITC, it becomes less clear. Also, Solarcity has some major, deep-rooted problems. First and foremost, their product is not very compelling and that's why their sales costs are so high (and they're not able to reduce them). Second, their management has been overly optimistic and hasn't shown they can innovate in a way to fix the #1 issue (lack of compelling product). Third, management appears to have been overly-rosy with their financial projections and growth plans, and has had to scale back. Overall, I understand some people who think that Solarcity is a "loser" of a company but I don't necessarily agree. I look at Solarcity as a mediocre company, not terrible and not great. Without Elon on the board, I would not have an interest in Solarcity. But with Elon, Solarcity has the backing of one of the savviest investors and innovators of our time, which means something to me. I think in this case, Solarcity would really benefit by coming under Tesla. Elon could spearhead a product overhaul for Solarcity and turn things around for them. But also Tesla would benefit by gaining the personnel and infrastructure to be able to scale Tesla Energy much, much faster than if they had to do it on their own. Also, without Solarcity, Tesla has their hands-tied in a sense because they're not able to go into energy production (due to Elon's ties with Solarcity) and this hampers their Tesla Energy growth potential as there needs to be an integration between energy production and energy storage. Solarcity brings obvious negatives to Tesla as well... financial complexity and risk, unclear business model post-ITC, non-compelling product that requires high sales cost, etc. But one needs to weigh that against the positives - best-in-class installation and infrastructure to support installs, mounting tech, solar panel tech (ie., Silevo), new solar plant being built, management in place that can take Elon's orders, etc. So, the question is can Tesla take what Solarcity gives them, both positives and negatives, and turn it into value that is multiple times the amount that they're paying for Solarcity. In Elon's mind, it's a "no-brainer" because with Solarcity under Tesla, Elon thinks he can fix the product through engineering, innovation and combining with storage and Elon thinks Tesla will be able to unlock a lot of potential of Tesla Energy since they'll be able to go after the energy production side as well as storage. Just that potential unlocks hundreds of billions of dollars, in Elon's mind. As for the negatives, Elon probably doesn't see many and for those that he does see (ie., high sales cost, product, etc) he thinks he can fix relatively easily/quickly. Personally, I think Solarcity's problems are very deep-rooted, and I think it's going to take a lot for Tesla to turn things around. It'll probably suck more time, energy and resources that Tesla is initially expecting. However, I do agree that by acquiring SCTY, it will free Tesla to go after energy production and just that is probably worth the price tag. I think the potential is immense for Tesla to lead the way in energy and they need to freedom to control the whole gamut of energy so they can apply the SpaceX-approach of bringing down costs (ie., via efficiency) and creating improvements through continual and ruthless iteration. This is a big play (in investment talk) for Elon... paying a few billion to go after hundreds of billions, and it's a mission he believes in more than anything. He doesn't see much downside and if he gets his way, then the deal will happen. I do wish that Elon and his team did a better job in communicating the need to acquire Solarcity. They presented no financials on what the impact will be over the next 1-2 years, and they haven't even presented what the impact will be in regards to Tesla Energy's revenue projections. In some ways, I think Elon intuitively knows that this is the right move, but he and his team haven't worked out all the numbers and hasn't presented anything that is remotely convincing for the number-crunching analyst/investor. And Wall Street is a numbers-driven phenomena, that tends to look only 12-18 months out. Through those eyes, this deal looks horrible. And I don't blame the analysts for being critical or negative. To all this, Elon says "trust me" and "I know what I'm doing". So the investors who invest w/faith, choose to believe and follow. Others are left disgruntled and confused. Cheers, friends.

http://files.shareholder.com/downlo...7DD00B/2016.06_SCTY_Investor_Presentation.pdf

I will just add to the last part. Elon mentioned that they will present all the financials after the due diligence is over.

 

[Zhelko Dimic]

Tesla is unstoppable and impervious to forces outside it - short of earthquake. Based on technology lead, talent and culture, as observed from existing achievements; this was my investment thesis.

That thesis crumbles with SCTY acquisition, as SCTY could be hurt and even bankrupted with massive rate change and/or market/political changes.

This is Elon needing to inject danger and risk, to get adrenaline dose, as things were getting too easy. Elon, why don't you start car racing, or at least high-performance driving events instead, for god sake?

 

[Cosmacelf]

Incidentally, will the due diligence really show us anything all that new? After all, both SCTY and TSLA are public companies, so anything material that isn't confidential has already been disclosed...

 

[Jayjs20]

Well, the Brexit 'leave the EU' side just expanded its lead a bit. I know only 2.6% have been counted, but if they end up leaving, how bad will that affect the sp?

 

[Foghat]

Foghat since you are the resident permabull on SCTY. Please explain SolarCity financing for us. It'll help us speed up the understanding cause I am struggling.

What is your struggle?

 

[geneclean55]

Brexit is looking bad, by the way.

Definitely tight right now. Need a couple more hours of results before solid predictions can be made.

 

[Cattledog]

Brexit is looking bad, by the way.

Prediction - By the skin of their teeth, Stay 50.2%, Leave 49.8%.
Trump 0%.

 

[Causalien]

What is your struggle?

For now. Explain to me how the securitization process works at SCTY. Who owns what. Who is doing the servicing. Who is doing the packaging and selling of the uderlying security.

For the pass through and lease back. Who are the people usually referred to as "funds". I understand that SCTY themselves can be the "fund" party. Are these "funds" mostly composed of banks? Or are these retail customers or corporate end customers?

For others who haven't delved into it. I think a simple step by step guide on how SCTY makes money will work. What percentage is from all the government incentives and what percentage is through credit arbitrage of the different rates. I can also see if I got anything wrong here.

 

[X Yes?]

I don't, but you repeat the same doomsday scenario script with zero proof. What you quoted from the conf call is not even about SCTY numbers, it's about the projected numbers that are expected after the merge. Unless you are really capable of connecting the dots to justify your insinuation, it's just that, an empty insinuation that the whole thing is a cover-up for SCTY failure.

Occam's razor says it's just an acquisition and there are direct and practical reasons for it. You'd have to go to some length to justify any claim that it's not.

Tesla shareholders hate this deal and it got worse after Elon's CC. For Tesla shareholders, why not wait a few months and create an alliance or pick this up in bankruptcy. If you are Elon or his cousins, or you are an SCTY shareholder, you certainly have different agendas.

 

[Causalien]

Definitely tight right now. Need a couple more hours of results before solid predictions can be made.

Leave's lead in vote count is increasing.

 

[dakh]

Tesla shareholders hate this deal and it got worse after Elon's CC. For Tesla shareholders, why not wait a few month and create an alliance or pick this up in bankruptcy. If you are Elon or his cousins, or you are an SCTY shareholder, you certainly have different agendas.

Speak for yourself. AFAIR largest shareholders already expressed their approval. Many on this forum too. To be clear, I don't rule out the scenario you're talking about, but so far there's zero proof of it.

 

[X Yes?]

Speak for yourself. AFAIR largest shareholders already expressed their approval. Many on this forum too.

We'll see how it goes, I think I'll go with the vote of the market. Won't be pretty either way.