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

[EVNow]

Would shorting ARKK create downward pressure on the ETF price, causing ARKK to sell off baskets of holdings, possibly including Tesla, leading to a domino effect of downward selling pressure in the share price of holdings ARKK has to sell?

ARKK price is based on the value of its holdings. Shorting Tesla won't make it sell stocks ...

Just as shorting SPY won't cause funds based on S&P to sell stock.

ps : I don't know how counterparties hedge when they sell calls & puts on funds. For eg. can anyone short sell ARKK ?

 

[EVNow]

Looks like STLA confirmed the EU pool story today. However "is ending" doesn't make the time horizon as clear as I'd like.

Stellantis' Revenue Jumped 14% as It Navigated the Chip Crisis

[...] Chief Financial Officer Richard Palmer said that Stellantis is ending its deal to buy European emissions credits from Tesla (NASDAQ: TSLA), as it now expects to sell enough zero-emission vehicles to meet regulatory standards on its own. The move will save the company about 300 million euros ($360 million) per year, roughly two-thirds of which would have gone to Tesla, Palmer said.​

​

[...] Stellantis said that it will present more details around its electric-vehicle plans at an "Electrification Day" on July 8, and it will report its full first-half financial results on Aug. 3.​

So - they were indeed not bluffing. Also it looks like Tesla gets about 2/3 * 90M = $60M per quarter from FCA. So, how does Tesla get so much more in Reg Credits ?!

One more thing: Chief Financial Officer Richard Palmer said that Stellantis is ending its deal to buy European emissions credits from Tesla (NASDAQ: TSLA), as it now expects to sell enough zero-emission vehicles to meet regulatory standards on its own. The move will save the company about 300 million euros ($360 million) per year, roughly two-thirds of which would have gone to Tesla, Palmer said.

 

[mblakele]

ARKK price is based on the value of its holdings. Shorting Tesla won't make it sell stocks ...

Just as shorting SPY won't cause funds based on S&P to sell stock.

ps : I don't know how counterparties hedge when they sell calls & puts on funds. For eg. can anyone short sell ARKK ?

Yes, it's possible to short ARKK. For example Stanphyl Capital claims to be short ARKK .

In theory a big short position on ARKK could affect TSLA. Here's how:

• ARKK holds assets, including TSLA.
• Shorting ARKK can lower the price of ARKK.
• Lower prices for ARKK can prompt customers to withdraw funds.
• Fund withdrawals mean the fund has to hand over cash.
• Handing over cash can force asset sales.
• ARKK sells TSLA, lowering its price.

I'm not saying that's happening BTW — but yes, shorting the ARKK tail could conceivably wag TSLA.

 

[mblakele]

So - they were indeed not bluffing.

I'm still not sure that this isn't a bluff by STLA. I'm not betting either way — but I wouldn't be surprised if STLA backs down. Either way it may not matter much. Remember Zach's comment in the 2020-Q4 earnings call: "in the long-term, regulatory credit sales will not be a material part of the business, and we don't plan the business around that. It's possible that for a handful of additional quarters, it remains strong. It's also possible that it's not."

Also it looks like Tesla gets about 2/3 * 90M = $60M per quarter from FCA. So, how does Tesla get so much more in Reg Credits ?!

That's just the EU pool with STLA. Honda is also in that EU pool, aren't they? There are also emissions credit trading markets in China and in the US.

This fits in with Zach's comments in the 2020-Q4 call that revenue from regulatory credits is "extremely difficult for us to forecast". He also mentioned that "Most of our regulatory credit revenue from Q4 was not lined up prior to the beginning of the quarter." To me that sounds like most of the revenue did not come from the EU STLA-Honda-TSLA pool, because that would be fairly predictable. Coming from multiple sources and multiple markets makes the unpredictability easier to understand.

Tesla (TSLA) Q4 2020 Earnings Call Transcript | The Motley Fool

TSLA earnings call for the period ending December 31, 2020.

www.fool.com

 

[scaesare]

Or someone just rotated the map on the touchscreen.

Which you can do in either car.

Tapping the icon that swaps orientations to get back to the one you want resets this in either car.

Again having now looked at the nav section of both manuals, the available views are exactly the same as far as directional orientation.

Not if North was still up.

 

[lafrisbee]

Reminds of a good friend who lives in Belgrade Montana, just west of Bozeman. They had just moved into a new home there so he drew me a map and mailed it to me. We were coming from Washington (the state) on I 90 and when Belgrade showed up before Baseman and on the wrong side of the highway, I knew something was up. Then we turned the map upside down and everything made sense. When we found their house and pointed out laughingly what he had done, he didn't even realize it... no wonder they didn't have many visitors! I think he was dismapic it

uh? that would be dysmapic

 

[Thekiwi]

Yes, it's possible to short ARKK. For example Stanphyl Capital claims to be short ARKK .

In theory a big short position on ARKK could affect TSLA. Here's how:

• ARKK holds assets, including TSLA.
• Shorting ARKK can lower the price of ARKK.
• Lower prices for ARKK can prompt customers to withdraw funds.
• Fund withdrawals mean the fund has to hand over cash.
• Handing over cash can force asset sales.
• ARKK sells TSLA, lowering its price.

I'm not saying that's happening BTW — but yes, shorting the ARKK tail could conceivably wag TSLA.

How often would a fund trade below its NTA though? any prolonged mismatch between share price and NTA per share would lead to arbitrage situation which would very likely move the price back to NTA value. Therefore I dont think shorting a fund would have much, if any, impact on funds share price.

 

[lafrisbee]

Great flight and landing but just a few feet to the side and it would be off the edge of the concrete.

So what you are trying to say is that they didn't increase the carbon dioxide levels by wasting concrete.

 

[EVNow]

That's just the EU pool with STLA. Honda is also in that EU pool, aren't they? There are also emissions credit trading markets in China and in the US.

This fits in with Zach's comments in the 2020-Q4 call that revenue from regulatory credits is "extremely difficult for us to forecast". He also mentioned that "Most of our regulatory credit revenue from Q4 was not lined up prior to the beginning of the quarter." To me that sounds like most of the revenue did not come from the EU STLA-Honda-TSLA pool, because that would be fairly predictable. Coming from multiple sources and multiple markets makes the unpredictability easier to understand.

So, if they are getting most of the money by selling credits, they would have a great deal of control over when to sell. This has been hunch - that I was suggesting in the finance thread - that Tesla can decide how much of the revenue to bring in each quarter.

 

[Spacep0d]

Picked up 7 more shares before it went down a little more. Dollar cost averaging for the win, woot! Now to hold for many years more!

 

[wipster]

uh? that would be dysmapic

Exsqueeze me that I can't spell words that don't exist...

 

[mblakele]

So, if they are getting most of the money by selling credits, they would have a great deal of control over when to sell. This has been hunch - that I was suggesting in the finance thread - that Tesla can decide how much of the revenue to bring in each quarter.

Doesn't that conflict with Zach's comment in the 2020-Q4 call that revenue from regulatory credits is "extremely difficult for us to forecast"?

 

[ZeApelido]

One of these is not like the others

Bloomberg - Are you a robot?

 

[ByeByeJohnny]

That's just the EU pool with STLA. Honda is also in that EU pool, aren't they? There are also emissions credit trading markets in China and in the US.

Honda only joined Teslas pool at the end of 2020. November I think. Also I don't have a link but someone did the math on what Honda would need and it was something like 10% of Stellaris. But even if they somehow managed to need $100 million in 2020 that still leaves almost $1,000 million from 2020 and possibly close to $500 million for just Q1 2021 that must then be credits from China or the US.

Whichever it is, if not both, that is much higher than what has been previously believed from those areas.

 

[st_lopes]

Doesn't that conflict with Zach's comment in the 2020-Q4 call that revenue from regulatory credits is "extremely difficult for us to forecast"?

I think what @EVNow is trying to say is that if Tesla’s reg credit revenue is primarily coming from credit market selling (ie from markets where they earn a credit and have to sell it on a credit exchange) as opposed to from the pre-priced / pre-sold EU pooling arrangements, that they would have a lot more control over how much reg credit to recognize each quarter, as they would dictate when they sell the earned credit and thus recognize the revenue.

If Tesla’s reg credit revenue does in fact primarily come from outside of the EU, it’s a valid point that they would be able to stockpile deferred revenue as needed, and only sell the credits when/if they need to manage their operating or gross margins.

That said history seems to indicate that they sell nearly 100% of their available credits every quarter, which to me is prudent because I’d much rather they take the cash in door today rather than hoard a credit. Especially since credit prices may see a drop in a subsequent quarter or year where more competitors are earning credits and creating a supply imbalance in those credit markets.

 

[MP3Mike]

So, if they are getting most of the money by selling credits, they would have a great deal of control over when to sell. This has been hunch - that I was suggesting in the finance thread - that Tesla can decide how much of the revenue to bring in each quarter.

Yes, and no. They have a ton of credits, but they can't sell them unless they have a willing buyer. And those buyers may try to buy them on the cheap since Tesla has so many. So they have to wait until an OEM needs them bad enough to pay a reasonable price for them. (At least in terms of the CARB ZEV credits.)

 

[Prunesquallor]

With trepidation, I'll take a shot at the EU emission credit situation. This makes my head hurt.

The following analysis attempts to assess the implications of Stellantis dissolving the EU emissions pool with Tesla. This mainly looks at what Stellantis must do to avoid EU emissions penalties without Tesla.

We begin with the 2020 ICCT Market Monitor
https://theicct.org/sites/default/files/publications/MarketMonitor-EU-jan2021.pdf

Note that PSA-Opel and FCA, the components of Stellantis, are still bookkept separately. Also note that it looks like PSA-Opel was in pretty good shape last year. It actually came in under its emissions target.

However, it is important to understand the “Compliance Credits”. PI – or “Phase-In”, was a one-time-only 2020 gift that allowed manufacturers to write off their worst polluters, up to a credit of 3.0 g CO2/km. Everyone took full advantage, and that is now gone. Also SC – or “Super-credits” allowed manufacturers to double-count ZEVs in their emissions calculations up to 7.5 g CO2/km total for 2020-2022. PSA-Opel used 5.3 out of the 7.5 in 2020, they only have 2.2 left through 2022. (EC – “Eco-Innovations” is a negligible component)

Looking at the FCA-Tesla-Honda pool, it used all Phase-In and Super-credits compliance credits in 2020 and was still showing a 3 g/km gap.

To estimate the situation in 2021, I assumed that vehicle sales of PSA-Opel and the FCA-Tesla-Honda pool remained at 2020 totals along with the emission levels. Those are (also from the ICCT Market Monitor):

PSA-Opel: 1,723,970
FCA-Tesla-Honda: 859,451
(Honda sold less than 4000 cars in the EU in 2020, so its contribution can be ignored: Register to read | Financial Times)

Given those assumptions, and the EU CO2 emissions penalty rate of 95€/vehicle/(g/km), the penalty situation in 2021 looks like this:

If PSA-Opel and FCA-Tesla are considered separately, they could be predicted to incur €606 million and €1135 million penalties, respectively. If combined into one pool, the penalty could be somewhat less than the sum due to the way compliance credits are deducted. Still, €1455 million.

So, if Stellantis wanted to “go it alone”, what would it have to do to ditch Tesla and meet its emissions target? One option would be to replace the sales of the pool’s Teslas with Stellantis ZEVs, PLUS replace some Stellantis ICE cars with ZEVs. According to the Financial Times link, Tesla sold 97,957 vehicles in the EU in 2020. Given that (and ignoring Honda) the numbers work out like this for that scenario:

Stellantis would have to sell 254,000 more ZEVs in 2021 than in 2020. 98,000 would replace the lost Teslas and 156,000 would need to replace Stellantis ICE vehicles.

Many assumptions would probably change (number of 2021 vehicle sales and ICE/ZEV mix) and other scenarios could be made to work (additional vs. replacement ZEVs, etc.). As usual, this doesn't shed much light on what Stellantis was paying Tesla other than establishing an upper bound.

 

[Tes La Ferrari]

TL;DR. Electrek says that Tesla is revamping the referral program, to avoid influencer link spamming / as it cost $23m in the past quarter.

Tesla is completely revamping referral program after spending $23 million on free Supercharging

Tesla is completely revamping its referral program after already spending $23 million on free Supercharging miles this year alone. For...

electrek.co

“Sources familiar with the matter told Electrek that Tesla spent over $23 million in free Supercharging miles last quarter alone.


It is prompting the automaker to do even more changes to the referral program.

According to a source familiar with the matter, Tesla plans to eliminate referral links, which owners often spam on social media, and instead turn to an app-based referral program promoting in-person referrals.

The plans are still not entirely clear, but Tesla plans to update its mobile app to have more features for non-Tesla owners.

It is going to facilitate test drives and current owners can link their account to the new user’s app to give test drives and if those new users end up ordering a Tesla, the current owner will be rewarded.”

 

[saniflash]

Options gurus: I'm trying to figure out why the calls to puts ratio in ARKK is so skewed towards puts.

squawksquare on Twitter has a theory on this

https://twitter.com/x/status/1390053843573092353

 

[Tslynk67]

Question then is why have only 88 been registered so far in Norway?

To be charitable, maybe they're on ships, same as all the Teslas...