Short-Term TSLA Price Movements - 2016

[SBenson]

Well, this is consistent with short sellers returning your shares at the time of their choosing and then IB lending them again as they are in the pool. Once lent, they are removed from the pool, so the available shares, at least at Fidelity, is a reliable metric because it is a part of what one sees when actually setting a short trade.

You got to look at information I posted up-thread. What I saw yesterday is very much consistent with info provided by Ihor Dusaniwsky. So the metric of shares available to short is reliable indeed.

My shares are returned to me in 2 to 3 days "all the time". Never more. Its can't be that all my counterparts are interested in shorting only for 2 to 3 days "all the time".

Maybe things are different at Fidelity. But IB's available shares for shorting maybe quite distorted.

 

[MitchJi]

I mean c'mon it does not take a freaking genius to do your own due diligence

It's beyond many of the posters on this forum. Every time anything happens that could possibly cause a short term hit to the SP, even before any details are known, we get at least 80 emotional posts stating that it's an awful deal etc. A recent example was all the negativity surrounding the Panasonic production of solar modules in NY. During the CC an analyst who covers both SCTY and TSLA said that was what convinced him that the SCTY plant in Buffalo was a good thing. A couple of days ago Vlad, Shoneluct and I disagreed on what the Panasonic partnership means. The analyst could be wrong of course, but 80 emotional posts complaining about something that could be a huge plus before we even know what it means clearly demonstrates a lack of due diligence.

TSLA is a gamble. I don't think that is in dispute.

I think that the only substantial risk is short term, with options.

What I don't think is in dispute is that Elon Musk is incredibly driven, ruthless, and an extreme risk taker. People like this don't show up very often, perhaps once every 20 years. If he wins (and that's still a big if), his investors will win big. The tremendous upside to Tesla is IMO worth the risk of 0% ROI. I just wouldn't bet the farm, because anything can happen. None of my retirement accounts have any TSLA. I only buy individual stocks with $ I can afford to lose.

I'm doing exactly the opposite.

No, Tommorow's event is just about Solar and Powerwall. He'll mention Powerpack, but that's about it... no pricing or sales guidance for Powerpack

Are you sure?

Electrek had an article on PowerPack 2 a few weeks ago. The 2x increase in energy density is mostly because there's a lot less air inside. They load trays of batteries inside the powerpack box and now the trays are much closer together. This is the main cause of the double of energy density. The cells themselves are probably similar.

That's probably incorrect, unless there's a powerpack 3 coming soon, because the new cells, by themselves, will provide about a 20 percent greater capacity.

 

[FredTMC]

That would be noble but how exactly would he do that? He has no liquid cash. He lives on borrowed money, has 100s of millions of borrowing at individual level. Where will he get 1B from?

His fortune is all Tesla/SpaceX shares. He would have to sell the shares to raise any capital. Defeats the purpose of taking the burden off TSLA right?

Here's a few...

Sell a stake in Spacex to Larry (or anyone else), Larry is a friend. He'd probably let him buy it back later...

Borrow some mo. He's net worth is over $10B. WallSt happy to loan him. I'd instantly get it back in TSLA stock price pop.

 

[vgrinshpun]

My shares are returned to me in 2 to 3 days "all the time". Never more. Its can't be that all my counterparts are interested in shorting only for 2 to 3 days "all the time".

Maybe things are different at Fidelity. But IB's available shares for shorting maybe quite distorted.

This is exactly type of trading @Papafox was describing, and data observed by me and now provided by Ihor Dusaniwsky support it. See my post up-thread.

 

[racer26]

Yeah... crazy but...

As others have said, we wouldn't be having this discussion if SCTY acq wasn't happening. TSLA would be > $240

Sad, but the Acq announcement destroyed way more TSLA market cap than the ~$2B mkt cap of SCTY.

Elon probably has some regrets over the way he did this acquisition. Wall St banks clearly aren't happy.

I'm thinking at this point, Elon should consider allocating $1B or so of his own fortune to this merger. Take the burden off TSLA. Just a thought.

I'm hoping tonight will do a lot to erase that.

Elon says SCTY is a no brainer. It obviously is for him - his personal fortune is heavily hitched to both wagons.

I don't think that's what he means when he says its a no brainer though. Evidently, some of TSLA and SCTY's largest investors agree with him. A highly-differentiated end-to-end product with a consistent customer-facing image throughout is only possible when you have both the batteries AND the solar under one roof. Additionally, buying a Tesla car dramatically changes a customer's electricity usage profile, and so many of them will reconsider where their energy comes from at the same time.

I absolutely agree that SCTY is having a boat anchor effect on TSLA, but I believe that reaction on the part of the market is wholly unfounded, disconnected from any real risk profile that might be associated with it. That means its the sort of misvaluation that's ripe for taking advantage of - as many of us have been doing with the arbitrage play. Its amazing to me that the arbitrage gap is still so large. Sometime in the next 20 days, it will become apparent that this is a done deal, and the gap will close (though I'm not sure which stock moves to close the gap - I'm hoping SCTY, since its the smaller of the two). SCTY looks like a money pit on paper, but its being exceptionally hamstrung by the capital markets. They're creating a self-fulfilling prophecy by raising SCTY's rates in response to a perceived increase in risk. SCTY has risk-free cashflows for the next 20 years but is financing the asset that generates them. Bad rates can turn that investment upside down, and so banks raising SCTY's rates is actually CAUSING the meltdown they're trying to guard themselves against. If TSLA can secure better financing rates, those assets easily generate positive cashflow during TSLAs most capital intensive time period.

I actually think that TSLA buying SCTY now is one of the more brilliant business moves of my lifetime, in part because of how widely misunderstood it is. I suspect it will not be appreciated for its brilliance for quite some time. That's pretty typical of things Elon does though. It isn't until way too much later for anyone to catch up that they realize how ahead of the curve his decision making was.

 

[FredTMC]

Are you sure?

Yes. I'm sure he won't focus on PowerPack. That would be "off-script"

Don't get me wrong, I'd be thrilled if he revealed something material about TE, but I doubt it.

 

[FredTMC]

I'm hoping tonight will do a lot to erase that.

Elon says SCTY is a no brainer. It obviously is for him - his personal fortune is heavily hitched to both wagons.

I don't think that's what he means when he says its a no brainer though. Evidently, some of TSLA and SCTY's largest investors agree with him. A highly-differentiated end-to-end product with a consistent customer-facing image throughout is only possible when you have both the batteries AND the solar under one roof. Additionally, buying a Tesla car dramatically changes a customer's electricity usage profile, and so many of them will reconsider where their energy comes from at the same time.

I absolutely agree that SCTY is having a boat anchor effect on TSLA, but I believe that reaction on the part of the market is wholly unfounded, disconnected from any real risk profile that might be associated with it. That means its the sort of misvaluation that's ripe for taking advantage of - as many of us have been doing with the arbitrage play. Its amazing to me that the arbitrage gap is still so large. Sometime in the next 20 days, it will become apparent that this is a done deal, and the gap will close (though I'm not sure which stock moves to close the gap - I'm hoping SCTY, since its the smaller of the two). SCTY looks like a money pit on paper, but its being exceptionally hamstrung by the capital markets. They're creating a self-fulfilling prophecy by raising SCTY's rates in response to a perceived increase in risk. SCTY has risk-free cashflows for the next 20 years but is financing the asset that generates them. Bad rates can turn that investment upside down, and so banks raising SCTY's rates is actually CAUSING the meltdown they're trying to guard themselves against. If TSLA can secure better financing rates, those assets easily generate positive cashflow during TSLAs most capital intensive time period.

I actually think that TSLA buying SCTY now is one of the more brilliant business moves, in part because of how widely misunderstood it is.

Yep, it'll work out in the long run for sure. Caused waaay more pain for him and longs than he imagined.

I don't doubt that Solar will do fine under the tesla brand.

 

[sinv]

...and?

Those cars are worth materially less than a brand new car - you have to discount it or nobody will buy it when they can buy the new car sitting right beside it for the same money.

If they DIDN'T discount them by 2%, you'd lose the entire sale of that car, and be far worse off.

Go ask a GM dealer what their ASP is relative to MSRP on showroom floor models and test drive cars. It will be far greater than 2% different.

I don't want to make to much of this, however it is not negligible like some people seem to think. When I read your answer I am not sure if you understood that the cars which have been discounted have been discounted far more than 2 %. Let's assume that 10 % of the total sold model S cars have been discounted, then the average discount of these subgroup has been 20 %.

 

[EinSV]

I thought the shareholder letter already addressed that:

Model S average prices decreased 6.5% sequentially, primarily due to the introduction of the 60 kWh models and production of the 100 kWh variants only starting late in Q3, which would otherwise have balanced that out. 2% of the decline was due to price adjustments that were made for inventory cars that already had mileage on them, showroom cars with wear, and cars that were built before product transitions, such as those with the original fascia. Model X average prices declined 1.2% sequentially as we increased production beyond just the highest-priced Q2 Signature builds.

So much less than 2% effect overall due to "unauthorized discounting".

This makes sense to me.

I changed the highlighting above as I had not really focused before on the italicized language. It seems to be saying:

(1) Model S prices decreased by 4.5% (6.5%-2%) for reasons other than inventory sales,
(2) most of that was due to S60 sales, and
(3) if the P100s had been available that would not have been an issue.​

So I wonder if availability of P100Ds alone could raise margins by 2-3% in Q4 (or more) compared to Q3. The significant impact of P100Ds on overall margins would help explain Elon's comment in the ER call that he was spending so much time personally on 100kWh production -- I initially thought thought was a curious way for him to be spending his time.

 

[Value Ev]

And as Apple has just proven, it takes (much) more than trowing money at it to build up a car manufacturing company. Having multi-Billion $ budgets helps, but is not decisive. It takes more, much more.

The main thing it requires is a belief that the hill is worth the climb.
They have plenty of other things to do and in a couple of years, they can decide the timing is right and throw $100M at a recruiting event in Fremont.
As for now, they seem to be heavily recruiting at Stanford for ML/AI grads and the comp packages are amazing.

 

[SBenson]

This is exactly type of trading @Papafox was describing, and data observed by me and now provided by Ihor Dusaniwsky support it. See my post up-thread.

Ok, lets go with that. So if some folks are repeatedly shorting and covering, shorting again and covering again. If they are repeatedly doing it at the most oppurtunate moments... That would just be "trading" right? how is this different from actively buying/selling (instead of shorting/covering)... What I thought you are making a claim is that shorts are suppressing the stock price. I am having a hard time connecting the dots to that.

Yesterday's volume was 13mil shares. Could shorts really "control" the price with that kind of volume?

 

[MitchJi]

This makes sense to me.

I changed the highlighting above as I had not really focused before on the italicized language. It seems to be saying:

(1) Model S prices decreased by 4.5% (6.5%-2%) for reasons other than inventory sales,
(2) most of that was due to S60 sales, and
(3) if the P100s had been available that would not have been an issue.​

So I wonder if availability of P100Ds alone could raise margins by 2-3% in Q4 (or more) compared to Q3. The significant impact of P100Ds on overall margins would help explain Elon's comment in the ER call that he was spending so much time personally on 100kWh production -- I initially thought thought was a curious way for him to be spending his time.

The AP 2 hardware will increase both demand and margins substantially.

 

[racer26]

I don't want to make to much of this, however it is not negligible like some people seem to think. When I read your answer I am not sure if you understood that the cars which have been discounted have been discounted far more than 2 %. Let's assume that 10 % of the total sold model S cars have been discounted, then the average discount of these subgroup has been 20 %.

Of course. I understand that completely, but the reality is that the cars with the biggest discounts were also the cars with the highest margins (pre-facelift P90DLs). They had the most room to be discounted to make them move. P90DLs were also disproportionately contributing to higher ASPs, so it makes sense that discounting them would have a bigger impact on the overall ASP.

Regardless, it *is* negligible. It doesn't matter if ASP goes down by 2% when absolute units moved is up by 70%+. You don't get one without the other. To convince more people to buy, you have to lower the price. The magic is in lowering the price by just enough to keep your factory running at its optimal capacity to maximize profit and minimize costs.

 

[electracity]

Elon probably has some regrets over the way he did this acquisition. Wall St banks clearly aren't happy.

I hope he has regrets about the extent he allowed solarcity to be leveraged. Now he has to double Tesla's employee count. A slower growing solarcity with fewer employees and a better balance sheet would be easier to absorb.

 

[Ovulation]

I hope he has regrets about the extent he allowed solarcity to be leveraged. Now he has to double Tesla's employee count. A slower growing solarcity with fewer employees and a better balance sheet would be easier to absorb.

Well when SolarCity will be, in the near term, a cash generator like Elon suggested than was all the panic about the merger BS

 

[esk8mw]

I don't want to make to much of this, however it is not negligible like some people seem to think. When I read your answer I am not sure if you understood that the cars which have been discounted have been discounted far more than 2 %. Let's assume that 10 % of the total sold model S cars have been discounted, then the average discount of these subgroup has been 20 %.

Yeah, you are reading this totally wrong. It is a known and accepted fact that Tesla discounted the price of old inventory and showroom cars with mileage on them - I bought one of them - and most were old stock P90Ds. Cars that typically sold in the 140k range were now at a 25k discount. A very tiny minority of newly-built-and-headed-for-inventory-but-got-bought-before-could-hit-showroom-floor models got sold at a discount as well, and obviously didn't have a material impact to price or margins.

A decline in price is not the same as a decline in margin. Most of the old inventory still fetched a healthy margin (even for old stock cars that are essentially "used") because they started as the highest margin cars available - P90DLs. Obviously, this did not have a material impact on margins because, again, margins went way up despite these lower than normal priced cars. If you disagree, then you are conceding that Tesla's natural margin-in the absence of such discounts-is far higher. I actually hope you are correct on that point but I doubt it. I think margins will trend to 30% on the back of improved efficiencies, not the absence of discounts on cars that must be discounted to move because they are no longer new.

 

[MitchJi]

As others have said, we wouldn't be having this discussion if SCTY acq wasn't happening. TSLA would be > $240

I'm hoping tonight will do a lot to erase that.

I absolutely agree that SCTY is having a boat anchor effect on TSLA, but I believe that reaction on the part of the market is wholly unfounded, disconnected from any real risk profile that might be associated with it. That means its the sort of misvaluation that's ripe for taking advantage of - as many of us have been doing with the arbitrage play. Its amazing to me that the arbitrage gap is still so large. Sometime in the next 20 days, it will become apparent that this is a done deal, and the gap will close (though I'm not sure which stock moves to close the gap.

I actually think that TSLA buying SCTY now is one of the more brilliant business moves of my lifetime, in part because of how widely misunderstood it is. I suspect it will not be appreciated for its brilliance for quite some time. That's pretty typical of things Elon does though. It isn't until way too much later for anyone to catch up that they realize how ahead of the curve his decision making was.

I agree that the SCTY is currently a boat anchor for the Tesla SP and I believe that that represents a possible opportunity in the short term. It's possible that Elon can turn the perception around so that it becomes a positive and that would have a huge positive impact on the SP.

My option buys for the ER-Roof, TE announcement were SCTY 19 and 20 calls. As of the close yesterday they were both up by over 25% and the roof event hasn't even happened yet!

 

[Ovulation]

What do you guys think, was the leaked E-Mail really to impress the street or was it do clean out the salesrooms before the new Autopilot hardware arrived?

 

[Rarity]

Well when SolarCity will be, in the near term, a cash generator like Elon suggested than was all the panic about the merger BS

Even if a cash generator, the death of the retail PPA business model industry-wide is where the heartburn lies. If not handled carefully, it could blow up Tesla. And even if it doesn't blow up Tesla, it easily could make Tesla's financials incomprehensible.

 

[racer26]

I agree that the SCTY is currently a boat anchor for the Tesla SP and I believe that that represents a possible opportunity in the short term. It's possible that Elon can turn the perception around so that it becomes a positive and that would have a huge positive impact on the SP.

My option buys for the ER-Roof, TE announcement were SCTY 19 and 20 calls. As of the close yesterday they were both up by over 25% and the roof event hasn't even happened yet!

I wish I had been more heavily weighted SCTY.

Yesterday I sold some TSLA options I was holding and swapped them out for SCTY December calls I got at a nice price. I think tonight's show will have a more profound impact on SCTY's SP than TSLAs.