Social Chat - Short Term TSLA Movements

[FluxCap]

Thanks for clarification, Curt. I think Sleepy and most of us agree with you on the appropriate interpretation of this event as "unlocking value in the company" just as Sleepy said on our Roundtable discussion, but I also agree with Sleepy that dilutive events cause temporary price drops in public equities fairly frequently in the market while people try to figure out the benefits. This one could be different, or not.

Or, are you saying you think there will be no analyst and trader negative reaction to the dilution at all?

 

[MikeC]

In the interview on Wednesday with Betty Liu of Bloomberg after the conference call, Musk said, “We could pay for the giga-factory from retained earnings, if we allowed the time frame to extend beyond three years. If we want the factory to be done in three years, we would probably need to raise some capital.”

After reading this again, I wonder if he meant that it will require new capital for it to be 100% complete in 3 years. But if it only needs to be beginning to ramp up in 2017 to match early Model E production, maybe it doesn't really need to be "completed" until 2018-19. Otherwise, why would he even make a distinction between finishing in 3 years or not, if extending it beyond 3 years was not in the realm of possibility?

 

[Zextraterrestrial]

After reading this again, I wonder if he meant that it will require new capital for it to be 100% complete in 3 years. But if it only needs to be beginning to ramp up in 2017 to match early Model E production, maybe it doesn't really need to be "completed" until 2018-19. Otherwise, why would he even make a distinction between finishing in 3 years or not, if extending it beyond 3 years was not in the realm of possibility?

that is what I read

 

[Curt Renz]

Thanks for clarification, Curt. I think Sleepy and most of us agree with you on the appropriate interpretation of this event as "unlocking value in the company" just as Sleepy said on our Roundtable discussion, but I also agree with Sleepy that dilutive events cause temporary price drops in public equities fairly frequently in the market while people try to figure out the benefits. This one could be different, or not.

Or, are you saying you think there will be no analyst and trader negative reaction to the dilution at all?

You’re welcome. I’ll note that if a company makes a subsequent offering to make up for foolishly burned money, then it often takes a hit. If it’s done for capital improvements that are likely to enhance the value of the company, then no hit should be expected. In fact, the market can react positively. Tesla’s subsequent offering in May was largely done to eliminate criticism for having a government loan, so it was paid off by the receipts. That offering was fully subscribed at that day’s closing price, and the stock continued to soar upward.

Since we do not presently know what will be learned from the upcoming giga-factory conference, we cannot easily foresee the reaction of analysts or the market. Nevertheless, I am unworried.

 

[mershaw2001]

What are the chances the capital raise is already done or will be done by the time of the announcement? Those 10 million shares could be sold on the open market..in fact, they could be what has kept the price at 210.

 

[772]

0% chance... they can't just issue new shares and sell them on the open market, they need to register the offering first w/ the SEC. Then, shares are usually issued in blocks by underwriters (investment banks) to investors.

 

[mershaw2001]

0% chance... they can't just issue new shares and sell them on the open market, they need to register the offering first w/ the SEC. Then, shares are usually issued in blocks by underwriters (investment banks) to investors.

Thanks for the clarification!

 

[sleepyhead]

After reading this again, I wonder if he meant that it will require new capital for it to be 100% complete in 3 years. But if it only needs to be beginning to ramp up in 2017 to match early Model E production, maybe it doesn't really need to be "completed" until 2018-19. Otherwise, why would he even make a distinction between finishing in 3 years or not, if extending it beyond 3 years was not in the realm of possibility?

That is a good point. That would be awesome if true, but still sounds unlikely, especially after Elon said that it is a "good idea" to raise capital.

@Curt - I agree with what you are saying. And it is very possible that Tesla announces a secondary with gigafactory and the stock goes up. And in the long run it will be very beneficial for sure to raise capital for the gigafactory.

But I just wanted to add some caution that it is very possible that the stock pulls back immediately on announcement and maybe even acts weak for a week or so. It is impossible to predict market reaction, and I am bringing this up because a lot of people play weekly options and wouldn't want to see people loading up on OTM calls and then lose money because they chose an expiration date that is too soon.

That said, I really do not know how the market will react. My initial thought was that we will see a drop in share price of up to 5% or even more if Tesla announces a ~10% dilution. But after reading TMC a lot of people make a good case that the stock might shoot straight up or at least not pull back at all.

I really don't know what to think now, but I am sticking to my initial gut reaction. I will not be playing the event with short term weeklies, but I am riding all of my other calls unhedged into this event. So I am positioned bullishly by not hedging, but not getting aggressive this time with OTM weeklies.

 

[anticitizen13.7]

After reading this again, I wonder if he meant that it will require new capital for it to be 100% complete in 3 years. But if it only needs to be beginning to ramp up in 2017 to match early Model E production, maybe it doesn't really need to be "completed" until 2018-19. Otherwise, why would he even make a distinction between finishing in 3 years or not, if extending it beyond 3 years was not in the realm of possibility?

That makes the most sense to me as well. Tesla probably won't be churning out Model E at 300k/year when they first launch. It comes down to what makes the most business sense: getting the Giga factory up ASAP, or scaling as capacity is needed.

 

[sleepyhead]

Let me just add that Jinko Solar JKS raised capital last summer when it was at $20 and the stock immediately tanked about 20% to $16 over the next day or so. The capital raise was beneficial and necessary, and the stock doubled from $16 to $33 over the next 1-2 months.

Markets like to sell first and ask questions later. I hope that TSLA does not pull back on offering announcement, but I would not be excluding that possibility.

 

[AlMc]

Let me just add that Jinko Solar JKS raised capital last summer when it was at $20 and the stock immediately tanked about 20% to $16 over the next day or so. The capital raise was beneficial and necessary, and the stock doubled from $16 to $33 over the next 1-2 months.

Markets like to sell first and ask questions later. I hope that TSLA does not pull back on offering announcement, but I would not be excluding that possibility.

The more I think about a possible pull back, would that be bad? Most of us on TMC are bullish on the long term effect of an offering to fund the factory. Should produce a good buying opportunity for 'longs' (stocks and LEAPS) and for well played options.




It is not the pull back that would be bad. It is the short term uncertainty of what will happen if another offering happens.

 

[palmer_md]

The more I think about a possible pull back, would that be bad? Most of us on TMC are bullish on the long term effect of an offering to fund the factory. Should produce a good buying opportunity for 'longs' (stocks and LEAPS) and for well played options.
It is not the pull back that would be bad. It is the short term uncertainty of what will happen if another offering happens.

Yes. The pullback to <150 in November was a great opportunity for many of us, since we knew it would bounce back to >180 in short order. 20% in two months is pretty good, and more if you timed it right, and even more now that its above 200. I welcome another opportunity like that.

 

[carnut4ever]

What are the chances the capital raise is already done or will be done by the time of the announcement? Those 10 million shares could be sold on the open market..in fact, they could be what has kept the price at 210.

Very interesting point. I didnt know that Tesla had shares to sell on the open market. Its quite the shock to see the price flat line for two days. I (most) were expecting short covering, massive moves up then down. The selling could have started Wed morning which could explain the dip. (I'm short, have a negative bias, looking for a correction and long entry point)

 

[sleepyhead]

Very interesting point. I didnt know that Tesla had shares to sell on the open market. Its quite the shock to see the price flat line for two days. I (most) were expecting short covering, massive moves up then down. The selling could have started Wed morning which could explain the dip. (I'm short, have a negative bias, looking for a correction and long entry point)

They don't have shares to sell on open market.

Side note : when I say pull back, I mean like a 5% pull back, but nothing major.

 

[Robertj]

Investors Business Daily Article on Tesla and Solar City

Tesla Battery Factory Just Might Power Up SolarCity, Apple TSLA SCTY - Investors.com


Interesting to see readers comments on this article
These readers you would think are a bit ahead of the average person on the street, but reading this it is apparent most people still do not get Tesla

 

[Robertj]

Investors Business Daily quoting Andea James

"There should be a cost benefit for Tesla to produce its own batteries," James wrote. "It is unclear to us just how much, but we estimate it could be as high as 8 cents per watt-hour, which would lower Tesla's cost per kilowatt-hour on its battery pack to about $180."
Tesla's agreement with Panasonic lets it take delivery of at least 1.8 billion lithium-ion cells over four years, James points out, which would allow Tesla to produce a minimum of 64,000 vehicles a year at 7,000 cells per vehicle.




Read More At Investor's Business Daily: Tesla Battery Factory Just Might Power Up SolarCity, Apple TSLA SCTY - Investors.com

Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook

 

[Gwgan]

Canadian Solar stock rose after they announced the release of more shares Canadian Solar Announces Pricing of Concurrent Offerings of 2,778,000 Common Shares and US$130 Million Convertible Senior Notes - Yahoo Finance
just the opposite of what I expected. Even a briefly incendiary factory couldn't keep the price down (2/21/14).

 

[sleepyhead]

Canadian Solar stock rose after they announced the release of more shares Canadian Solar Announces Pricing of Concurrent Offerings of 2,778,000 Common Shares and US$130 Million Convertible Senior Notes - Yahoo Finance
just the opposite of what I expected. Even a briefly incendiary factory couldn't keep the price down (2/21/14).

Not true.

Can't remember exact figure but CSIQ was down more than 6% the day of announcement. Maybe even 10%.

 

[Convert2013]

Canadian Solar stock rose after they announced the release of more shares Canadian Solar Announces Pricing of Concurrent Offerings of 2,778,000 Common Shares and US$130 Million Convertible Senior Notes - Yahoo Finance
just the opposite of what I expected. Even a briefly incendiary factory couldn't keep the price down (2/21/14).

Are you kidding me? The stock went down. I follow news in solar and CSIQ like a hawk. TSLA has been the only blessed one where people are extremely confident of leadership as they clearly tell investors what they are gonna do with the $.

 

[Gwgan]

Are you kidding me? ...

No, I wasn’t trying to kid you. I saw the news on the 14th. The news came out on the 11th and you are right.