Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[AZRI11]

They did correctly forecasted their demand will decline, so they scaled back their parts orders and used that as excuse to shutdown factories.

Same goes to all OEMs.

If there is a shortage of new ICE cars on the dealer lot, I would agree they under estimated demand, but so far I didn’t see that, even while they are shutting down factories left and right.

My local Ford dealer has an inventory of 392 new vehicles
New 2021 Ford Cars, Trucks, & SUVs For Sale in Berlin, CT | Tasca Ford Cranston

 

[Johnny Ma]

You don't have to have an engineering degree to be an engineer. And don't forget his Physics degree. And while he may not have gone to school for engineering, Yale University and the University of Surrey in England have both bestowed upon him Honorary Doctorate Degrees in Engineering Technology and Aerospace Engineering, respectively.

Indeed. Our best software engineers at my company have degrees in law...degrees these days mean less and less about a person's skill in a particular domain.

It was probably always true that smart people in physics/chemistry/economics (not an exhaustive list) would also make stellar engineers, but nowadays I think we're seeing a lot more people successfully move into new job fields without picking up new degrees to "qualify" themselves.

Elon is a hell of an engineer.

 

[UncaNed]

I always respond by inviting someone that has never driven a Tesla to drive my car.

I know that it is threadbare, but it works.

 

[Zero CO2]

Indeed. Our best software engineers at my company have degrees in law...degrees these days mean less and less about a person's skill in a particular domain.

It was probably always true that smart people in physics/chemistry/economics (not an exhaustive list) would also make stellar engineers, but nowadays I think we're seeing a lot more people successfully move into new job fields without picking up new degrees to "qualify" themselves.

Elon is a hell of an engineer.

engineering is basically physics and economics .... and he has degrees in both... this is why he understands the $ and all the systems engineering ... he masters the first principles from physics and the uncertainty from economics ... great combo... i forgot the SW part that he picked up while in his silicon valley start ups ... that is where he understands levels abstraction

 

[nativewolf]

"Quarterly adjusted EBIT (earnings before interest and taxes) of $4.8 billion included a noncash gain of $902 million on Ford’s investment in Rivian"

One time things only apply to Tesla....don't ya know that

Ford had the sense to invest in Rivian not Nikola and that fraudster Milton. I don't actually understand how anyone doing any due diligence at all, any whatsoever, could fail to see that Milton had always been a con man and grifter. GM was surely pitched on Rivian so was FCA.

Good for Ford

Guess Ford purchased Autoline or hired it to defend its brand:

https://twitter.com/x/status/1387881318063775745

Not to keep defending Ford but this is actually true, Ford Credit- the finance arm of Ford is a good business and they do a big chunk of the Ford loans. 800k pickups alone- not cheap.

 

[22522]

engineering is basically physics and economics .... and he has degrees in both... this is why he understands the $ and all the systems engineering ... he masters the first principles from physics and the uncertainty from economics ... great combo... i forgot the SW part that he picked up while in his silicon valley start ups ... that is where he understands levels abstraction

The Canadian bank job shaped him more than words can say.

 

[The Accountant]

Question about credits and Bitcoin profit. Suppose Tesla didnt have those items would Musk compensation plan have still been at $299M this quarter?

Even without the Reg Credits and Bitcoin benefits, I believe Musk's compensation plan would still have been $299m this Qtr.
The largest driver was that the $55B Revenue target became Probable. I don't think that Probable assessment would have changed.

 

[nativewolf]

i say disagree because it was clear many months ago that car demand did not deteriorate ...in fact by 2Q20 latest 3Q20 it was clear demand was there for autos ... they did not have buffer stock or place the appropriate POs with the semiconductor vendors .... this is more likely scenario ... poor supply chain management

The process is complicated and is described very well in many articles you can find via simple google. Basically, they canceled contracts in the beginning of Covid. The contracted space was then sold by the Fabs to other users leaving no supply for the automative folks. They have to get the throughput back under contract. A risk if you outsource things. They felt it was better to cancel contracts as a risk reduction method of saving cash, and it could have very well worked out that way, vs letting contracts run at the risk of burning cash.

 

[SOULPEDL]

Looks like ARK bought the dip to the tune of 78,065 shares of TSLA today.

and yesterday as I recall. (And yes I forgot to tell everyone, again.)

 

[mongo]

Actually, the 2018 CEO comp plan is based on Market Cap starting at $100B then in increments of $50B per tranche to a max of $650B, AND with each tranche requiring at least 1 of 16 listed Operational Milestones (8 based on annualized Revenue, 8 based on EBITDA):

View attachment 658166

So there are 12 tranches total based on Mkt Cap, plus Elon needs any 12 of the above 16 operational milestones. Elon's plan is already 'passed the post' for Mkt Cap on his first 11 tranches (all thru $600B as of 2021-Q1), with the table above showing which tranches have vested due to achieving the milestones.

Newzphlash: the twelveth m/c level will likely be reached next week. Paging @The Accountant

It's all explained quite clearly in the 10-Q. Highly recommended reading. Just use your browser's Search function to find the relevant section:

"2018 CEO Performance Award"​

P.S. Note that Mkt Cap is based on the 30-day and 6-mth average Closing SP, and the number of outstanding shares (currrently ~963M shares per the 10-Q).

P.P.S. I estimate that Tesla will pass $125B in annualized revenue as soon as they are producing 1.6M vehicles per year (400K in a quarter). With Berlin and Texas spooling up production in 2022, I expect this to happen by H2 2022. If EBITDA takes care of itself, then Elon's entire CEO performance plan could vest and be certified just over 1 year from now. Then he's got to serve at least 5 more years either as CEO or Executive Chairman and Chief Product Architect before he's allowed to sell the first share (except for purpose of paying taxes on the tranches as they are certified by Tesla's Board)

Nice sumnary. Couple corrections on the pps, the five year holding period (other than those sold for taxes) starts when the options are exercised, not when they are vested. Elon also does not need to remain in any specific position to exercise, that is only a requirement to vest.

Post-Exercise Holding Period. Mr. Musk must hold shares that he acquires upon exercise of the CEO Performance Award for five years post-exercise (except for shares used to pay exercise price and tax withholdings, or in certain other limited circumstances described further below).

Term of CEO Performance Award / Post-Termination of Employment Exercise Period. The term of the CEO Performance Award is 10 years from the date of the grant, unless Mr. Musk’s employment with Tesla is terminated prior to such date. Accordingly, Mr. Musk has until January 20, 2028 to exercise any portion of the CEO Performance Award that has vested on or prior to such date, provided that he remains employed at Tesla. Additionally, Mr. Musk has up to one year following the termination of his employment with Tesla to exercise any portion of the CEO Performance Award that vested prior to such termination, subject to any earlier expiration of the CEO Performance Award on January 20, 2028. Further, the CEO Performance Award also may terminate earlier in connection with a change in control event of Tesla, as described further below.

Employment Requirement for Continued Vesting. Mr. Musk must continue to lead Tesla’s management at the time each milestone is met in order for the corresponding tranche to vest under the CEO Performance Award. Specifically, he must be serving as either Tesla’s Chief Executive Officer or, alternatively, as both its Executive Chairman and Chief Product Officer, in which case any other Chief Executive Officer would be reporting directly to him.


Termination of Employment. There will be no acceleration of vesting of the CEO Performance Award if the employment of Mr. Musk is terminated, or if he dies or becomes disabled. In other words, termination of Mr. Musk’s employment with Tesla will preclude his ability to earn any then-unvested portion of the CEO Performance Award following the date of his termination. Vesting of the CEO Performance Award will be suspended in the event of any leave of absence by Mr. Musk.

Non-pretty version: Proxy Statement

 

[TheTalkingMule]

Not to keep defending Ford but this is actually true, Ford Credit- the finance arm of Ford is a good business and they do a big chunk of the Ford loans. 800k pickups alone- not cheap.

I've had them on my books since 2009. If they're so healthy, where's my loan payback?

 

[SOULPEDL]

A bit OT as far as "investing" goes, but maybe not.

Seems I picked up a bit of fan club on Nextdoor re solar. I figure we'd better get started making solar happen ASAP after Elon's little talk earlier this week.

So far all the response has been favorable by just being honest and trying to answer questions so people decide what's best for them. For our system, net monthly payments are just $50 more than before the install (but I micromanage electrons and don't ever feed the grid). Best decision in hindsight. Factor in rising energy costs, and I think this is a good way to get this rolling. Many on the fence because they don't understand it and think it will cost even more. I do think there's a savings opportunity but there's clearly a bad past there to overcome.

In the process, I noticed my exact system is about 20% cheaper today (from 2 yrs ago). At this value, I would be net saving money by offsetting about 50% of demand (ROI drops off at higher %'s, Az SRP, because it's cheaper to buy it at night than to add more system). A full system is hard to justify for a family trying to make ends meet. So I'm trying to make the case to try and break even, save long term, keep the lights on! Skip the save the planet speech. I haven't mentioned this once online.

At one point today, I was ready to give this one guy $100, then wondered why Tesla doesn't just do this. But imagine the media hayday with demand of course. But ya gotta figure, if I'm throwing down my own money, it could be the nudge that makes people think there is some value add now - maybe something's new? It's a mental barrier. Don't sell the solar, just show them how.

 

[Bouboule]

During the call, Zach made a comment regarding the transition from cash purchases of FSD to subscription.

Zach: One of the things we'll need to keep an eye on is a potential transition from cash purchases of FSD subscription over to -- or cash purchases of FSD who may move over to FSD subscription. And so there could be a period of time in which cash reduces in the near term and then as the portfolio of subscription customers builds up, then that becomes a pretty strong business for us over time

In my opinion, it is not very bullish for V9 in the short term.
His comment makes sense if the take rate remain similar during the transition. But if V9 was so much better, I would assume the take rate would probably compensate for the losses in cash purchases. We shall see.

 

[Brando]

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PS- Atomic subs US & UK and the space station for NASA

 

[Chenkers]

Two quick questions on this bull spread scenario:

1) A straight LEAP is easier to sell at profit on a bit of SP appreciation, but a bull spread of say 1000/1300 still maxes out if SP crosses ~1400, no? If I jump into these, I cash out with 99% of max profit if we hit max joy in 6 months rather than 26, correct?

2) I assume a buy/sell spread like this on a non-dividend stock doesn't require you tie up shares or cash to cover the position?

Thanks all for the insights on these spreads today. Taking my options game to another much more logical and moderated place!

Edit: Also, anyone know why I can't seem to place this multi-leg options order on the Fidelity platform? I'm gonna go see if it's easier on Active Trader.
[Answered: Apparently for Fidelity IRA accounts, you need Level 2 options approval(which I have), but then you need to go back and request "Spread Trading" and get approval for that separately. Unclear why.]

There's been some other responses above but I'll add my 2 cents.

1) A 1000/1300 bull spread maxes out once the share price gets to $1300. The max price is basically the difference between the strikes, so $1300-$1000=$300 option price or $30,000 if sold at expiry. The option price won't hit near the max return until just before the expiry as the upper sold call still retains a lot of theta value until close to expiry. A good way to analyse these calls and spreads is to plug scenarios in Options Profit Calculator to see how the value and realtive return changes over time: Call spread calculator: Buy and write two calls at different strike prices

2) No need to tie up shares or cash as the bought and sold calls effectively cover each other. Margin requirements are also generally much lower for a spread than a straight LEAP. As you've found you do need the appropriate trading permissions with your broker to open spread positions.

I tend to look at buying vertical LEAP call spreads as an alternative to buying shares that I plan to hold for long term. I generally target lower strikes a bit above the current share price range and upper strikes well below where I expect TSLA to be by expiry. This way I usually end up with a spread that will give around a lowish risk 4x return on the investment compared to say a 1.3x on straight shares. If the share price shoots well above the upper strike by expiry then I will roll the strikes up to give a wider spread at zero cost for additional profit.

 

[Singuy]

During the call, Zach made a comment regarding the transition from cash purchases of FSD to subscription.


In my opinion, it is not very bullish for V9 in the short term.
His comment makes sense if the take rate remain similar during the transition. But if V9 was so much better, I would assume the take rate would probably compensate for the losses in cash purchases. We shall see.

I'm not bullish on the transition to subscription base at all. If V9 is very good, we should see a substantial tick rate for cash purchases if subscriptions does not exist. There is this thing about novelty and can wear off especially if it's a system that requires monitoring (as in it's hard to justify it long term unless this system allows you to work while driving, or sleep while driving). However with a full cash purchase, the novelty will wear off however you have paid it in full.

Just think of pretty much everything you have. You care less about it after the novelty wears off, but in this case it's a hard pill to swallow paying 200-300/month to keep it going.

 

[SOULPEDL]

But if V9 was so much better, I would assume the take rate would probably compensate for the losses in cash purchases.

Agree, plus there's still too much fear on purchasing an enigma for most, and the car is expensive already (step up for many).

At one time, they let people try it for free, then pulled it away. That was a marketing experiment for the take-rates on trials, and subscription is a form of trial. So they likely already modelled the sales/lease scenarios and know when to press the button, maybe based on # of cars or <x assists per mi on Beta testers. Recall they forced their Service Centers to become profitable on their own. If they're taking the same approach with FSD, who knows, maybe AI development has its own internal P&L. On second thought, maybe Safety should be the driver, not money just yet.

 

[Artful Dodger]

Just hope when he said couple of weeks it is because team has told him a week.

Also I wonder if the S/X refresh comes down to the chips needed for the video game console in the back. Could it be all the S/X that have been built are simply waiting for the console to be installed?

Here's what Elon said about Model S/X during the 2021-Q1 conference call:

"So with respect to the Model S and X, there were more challenges than expected in developing the Plaid Model S or what we call the Palladium program, which is the new version of Model S and X, which has revised interior and new battery pack and new drive units and new internal electronics and has, for example, a PlayStation 5 level infotainment system.​

​

"There's just a lot of issues encountered, ensuring that the new battery was super safe was quite hard as we're putting more energy in a smaller space. So it took quite a bit of of development to ensure that the battery of the new S/X is safe. And we're trying to get all the -- in the cars slowly for the past few months. But we're just stacking them up in the yard and just making refinements to the cars that we built."​

​

Those were Elon's comments about the challenges. For completeness (and easy access), here are his comments about future rollout plans for S/X:

​

"But we do expect to ramp Model S production and start delivering them probably next month. And then to be in sort of fairly high volume production for the X in Q3 and start delivering Model X in Q3 as well. So I think as we ramp up, I think probably the demand for the new S/X will be quite high. So it's really just going to be a question of ramping supply chain and internal production processes.​

​

"So probably, like, we're going to aim to produce over 2,000 S/X per week. Perhaps if we get lucky, upwards of 2,400 or 2,500. This again is contingent on global supply chain issues, which is just a lot of factors outside of our control here. But I do think this will get solved.​

​

"So it's just a matter of time and then we'll be doing well over 2,000 S/X per week. It's a great car. It actually costs us less to produce, a little bit less to produce, but it is a superior product. So in conclusion is there's a lot to be excited about in 2021 and '22."​

 

[SOULPEDL]

I swear I'm not a salesman... I think that's my secret, along with straight talk.
Made my day!

 

[Oveeus]

While we are on the F result. I’m getting talks about potential collaboration being discussed between them and TSLA. Maybe Ford execs aren’t that stupid after all.

This is coming from an US supply chain source. I’d give a rating of 6 out of 10.