Arbitrage trading is going on. Can't do much, just sit it through until merger vote is done. Great times for option sellers tho.
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
- Status
Arbitrage trading is going on. Can't do much, just sit it through until merger vote is done. Great times for option sellers tho.
racer26
Active Member
I wish I knew.
I don't understand how Tesla can unveil four near-future by Tesla standards (mid-2017) products unlike anything the market has ever seen (albeit without pricing info beyond a claim of "cheaper than a traditional roof plus the cost of the generated power"), AND start taking orders for PowerWalls that are so objectively better than anything the competition has to offer on every measurable metric, for January deliveries, and we're down $3 in the first 2 hours of the next trading session. It doesn't make sense.
We got plenty of evidence this week that 4Q16 is when TE starts contributing to the bottom line in a meaningful way with the big PowerPack orders, and 1Q17 they're going to really take off with deliveries of PowerWalls. Even Wall St's usual myopic view of Tesla because of their inability to see past the next 6 months should be significantly impacted positively by this announcement.
FredTMC
Model S VIN #4925
No idea. Just seems to me that tesla is really "in the penalty box" over the SCTY acquisition. The tone from the analysts on the earnings call was so cold. I was shocked.
Then, the analyst reports came out. Should've seen some upgrades and positive notes, but didn't happen.
Looking forward to the financial call tomorrow on SCTY. Unclear if this'll have any effect on WallSt's attitude.
racer26
Active Member
I'm not convinced the arbitrage trade is really what's going on here.
SCTY is ahead of where the merger ratio says it should be relative to TSLA by about $0.12 per share, based on TSLAs drop. ($2.79 * 0.11 = $0.31, vs the $0.18 or so SCTY is down). That certainly suggests some strength in SCTY due to a closing arbitrage gap, but both shares being red doesn't make sense.
Elon said it costs less than normal roof after cost savings from electricity are counted , the roof per se costs more than normal roof. It is pretty obvious that putting solar cell to roof tile adds ist cost.
To me, it seems like it is being forced down to the 193-194 level every time it gets some upward momentum (good ER) followed by uncertainty (election, SCTY vote coming up). 193 is where it went right after the deal was announced and it re-bottomed at 194 later and seems to be headed there once again. The SCTY deal appears to have a more powerful impact on keeping the SP in a range than I expected given the relative sizes of the companies and Elon's assurances that SCTY is CF neutral or positive. I believe Elon when he says these things--many apparently do not--so I just have to be patient while Tesla proves yet again it can do difficult things.
Looking at the past year's trading, TSLA dipping into the 190s has been fairly common. Usually the dips are followed by impressive climbs. The only really deep dip was the January dip when people feared a recession and Model X was still unreliable on the production floor. The broader markets did a deep dip then, too. Even with that dip, an impressive climb followed for TSLA.
At Tuesday's SCTY financials event, Elon is likely to repeat his words from the Q3 ER in which he pretty much forecasts neutral cash flow for SCTY during Q4 '16 and 2017. If he can back up his predictions with sufficient details to explain the plan, then the event could have an effect of a significant re-risking.
It'd be a nice bullish sign if today's mandatory morning dip transitions into the green. I suspect we'll have to fight the shorts at the transition point, though.
racer26
Active Member
I don't understand Wall St's apparent total distrust for everything Elon has to say. It is not in Elon's character to lie or be intentionally misleading, and everything he's claimed of late that people were skeptical about has come to fruition more or less exactly as he said. The only things Elon says that shouldn't be relied upon are timelines, and even those are getting better for the important ones. The meat of what he says is coming is usually 100% true. Those roofs *are* mind-blowing, Powerwall *is* a home run, AP2 *is* amazing, and so on.
FredTMC
Model S VIN #4925
I think this WallSt backlash has to do with Elon announcing the SCTY acq intent shortly after a major funding round. WallSt seems to have been blinded by this unexpected announcement. I was too.
MitchJi
Trying to learn kindness, patience & forgiveness
racer26
Active Member
Major funding round or not, Tesla's mission statement from Day 1, and the SMP1 both implied that a merger with SCTY was in the cards someday. But, as I've said here before - I think its a brilliant play, and one that has no negative impact whatsoever, despite the appearance that SCTY is a money pit. That funding round was to raise funds for Model 3, and so is the SCTY acquisition. They are not things at odds with one another, but both important pieces of the same puzzle. Not just the same puzzle, but the only puzzle that Wall St thinks matters - getting Model 3 to market on time.
FredTMC
Model S VIN #4925
Right - and I can understand the initial reaction and uncertainty taking the price below 200 in the near term. But the current price action, IMO reflects either (i) 100% irrationality or (ii) a belief that Elon is lying re: the deal.
If (i) there are in fact 150mm synergies in the deal, (ii) the roof/PW2 can be priced as Elon described and (iii) SCTY is CF neutral or positive, then there is literally no reason at all for the deal to have a negative impact on the SP (positive if anything). If you disagree with any of these things or think there's significant execution risk, then there's a case for a lower SP. If you agree with these 3 things, you will eventually be proven right. Same thing with autonomy and Model 3. Either you believe Tesla will deliver on those promises or you don't. If they do deliver on those 2 things + keep SCTY promises, the sky is the limit. That's the way I'm looking at it.
racer26
Active Member
You mean the billions in debt for PPA leases that are backed by a greater number of billions in future cashflows?
Yes. The market is punishing this financing arrangement.
racer26
Active Member
Precisely. If you believe Elon's claims on all of these future products (Model3 full-auto, ridesharing platform that will make more money than the car costs for owners, roofs that are net cheaper than traditional roofs, cost synergies with SCTY, SCTY being CF neutral to slightly positive, that Model3 is on-time and under budget, and that 3Q16 is not a one-off fluke, but that we're entering the time when continued profitability is a thing) there is no reason for SP to have a negative reaction at all. The only explanation is that the market doesn't believe him on one or more of these claims.
racer26
Active Member
Sorry, should read: greater number of billions in guaranteed zero-risk future cashflows which can be sold today to get non-dilutive, non-debt increasing capital to use to execute Model 3.
I don't think these folks see it as zero-risk (at least the retail portion).
bdy0627
Active Member
- Status
Similar threads
- Locked
