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

[Fact Checking]

Possible outcomes (as I see them as a non lawyer):

• Judge Nathan ignores the request to file a sur-reply. Would be unusual and a (possibly but not necessarily) bad sign for Elon. Parties would have to go by the existing schedule and file by the 26th regarding an evidentiary hearing. (End of next Tuesday.) Would be spun as Elon loss.
• She denies Elon's request for a sur-reply in a short ruling. She can do so and it's inconclusive: she might be leaning towards any of the parties, or it might mean she thinks this has gone on long enough and wants to perform the primary step contempt proceedings are geared up for: a fast hearing where she can ask both parties questions, including Elon who would be there in person. Will be spun as a "loss" by the FUDsters.
• She and her clerk is researching a longer denial. Would probably be negative for Elon, and spun negatively.
• She and her clerk is researching a longer ruling to grant the sur-reply, with a procedural twist. Would be neutral, and cannot credibly spun into a negative for Elon.
• She does something else. Contempt of court cases are procedural "free form" with a lot of discretion given to the judge.

Given that short denial doesn't need much time I'm leaning towards the "longer research" or "something else" outcomes. The usual response for a judge would be to grant the request, maybe with a reminder and warning to the parties that reply papers must stay in scope.

But this is not a usual case, and as I said it in prior comments: this is close to the point of max risk for both parties.

Just to add more context, this is Judge Alison Julie Nathan with her twin sons and Barack Obama:

Alison Nathan - Wikipedia

"From 2001 until 2002, Nathan served as a law clerk for Associate Justice John Paul Stevens on the U.S. Supreme Court."

"From 2009 until 2010, Nathan served as a special assistant to President Barack Obama and also as Associate White House Counsel."

I.e. Elon's case is heard by a top judge, we just don't know yet which direction she is leaning.

 

[M3Rider]

People ask what the bear analysts are missing. This article kinda highlights that. People think that this thing (1 seat 3 wheeler) is a Tesla competitor. By that logic I guess my gas generator is competition to BMW.

Tesla Competitor Electra Meccanica Soars After Analyst Says It's a Buy

View attachment 388553

Not just that, but all electric bicycle sales are also one less model 3 sold. Need to find a way to deal with those bicyclists.

 

[Etna]

Model S & X demand don't seem very strong in Norway

I would expect the Model 3 to Osborne S&X in Europe because both of these cars are a little bit on the "extravagant" side per European standards.

The Model 3 and Model Y, on the other hand, are a perfect fit there.​

 

[MP3Mike]

Model S & X demand don't seem very strong in Norway

The S/X delivery numbers are worrisome. Any theories?

Yeah, people aren't paying attention. It was expected that S&X demand would go down when the price was raised by eliminating the 75D variants. (Not to mention that demand is down naturally at the start of every year.) That pushed people from the most popular Model S 75D to the Model 3 line.

So all is going according to plan.

 

[HG Wells]

Not just that, but all electric bicycle sales are also one less model 3 sold. Need to find a way to deal with those bicyclists.

Get states to pass laws restricting bicycles to side walks ONLY ! /S

 

[Antares Nebula]

Possible outcomes (as I see them as a non lawyer):

• Judge Nathan ignores the request to file a sur-reply. Would be unusual and a (possibly but not necessarily) bad sign for Elon. Parties would have to go by the existing schedule and file by the 26th regarding an evidentiary hearing. (End of next Tuesday.) Would be spun as Elon loss.
• She denies Elon's request for a sur-reply in a short ruling. She can do so and it's inconclusive: she might be leaning towards any of the parties, or it might mean she thinks this has gone on long enough and wants to perform the primary step contempt proceedings are geared up for: a fast hearing where she can ask both parties questions, including Elon who would be there in person. Will be spun as a "loss" by the FUDsters.
• She and her clerk is researching a longer denial. Would probably be negative for Elon, and spun negatively.
• She and her clerk is researching a longer ruling to grant the sur-reply, with a procedural twist. Would be neutral, and cannot credibly spun into a negative for Elon.
• She does something else. Contempt of court cases are procedural "free form" with a lot of discretion given to the judge.

Given that short denial doesn't need much time I'm leaning towards the "longer research" or "something else" outcomes. The usual response for a judge would be to grant the request, maybe with a reminder and warning to the parties that reply papers must stay in scope.

But this is not a usual case, and as I said it in prior comments: this is close to the point of max risk for both parties.

Would not a NO reply (to Musk sur-reply request) require a longer explanation than a YES reply. The YES reply to the SEC request was given very quickly and curtly.

 

[Intl Professor]

View attachment 388543

I resemble that.

My first venture into home ownership was located in the upper end of a lowest income neighborhood. When some of the young black males were nosing about the property I invited them in for a soda and a visit. When they came again over at least a decade at the door I would ask, "Did you come for a visit or a soda?" They always gave the right answer so were admitted and got a soda. (Now with so much awareness of child abuse I probably would not invite them in to visit.)

When still pre-teen one bravely yet politely asked one day, is your name "Dick" or "Richard?" I explained the only time my mother called me Richard when she was mad at me, in a loud voice and stretched out into Riiiiiiichard as I demonstrated. "But you can call me Richard."

It was a good strategy and learning experience for me to have such an early warning system for what was going on. My reputation was initially hurt later when I became president of the homeowners' association. That was decided by the Board in my absence at the precisely the same time on my last drunk I put out an imaginary fire with a real water hose in my townhome. The fire trucks and police contributed to the ruckus in the neighborhood. I'm sure neighbors must have understood I was just being a Dick. And more importantly, since I served with distinction afterward for three years, the poor are accustomed to having miscreant leaders, so I was an anomaly. A Dick who eventually became a better mannered Richard.

Edit: Before the mods get onto this. There must be a corollary to Buddha's injunction, think and act on good thoughts and good things will happen: act like a good neighbor and improve the neighborhood. Another reason to buy Teslas and TSLA, part of Musk's mission in life, though I'm skeptical colonizing Mars will improve the fourth from Sol.

 

[EVNow]

Model S & X demand don't seem very strong in Norway,

It does look like S&X demand has reduced a lot because of 3.

If we think back about how a lot of people spent a lot more than they normally would to get S&X - this shouldn't be surprising. Tesla needs to refresh S&X.

 

[humbaba]

"SUV" and "CUV" have become meaningless terms. When a Kona gets put in the same category as a Chevy Suburban...

In this context I believe Ford is referring to what is colloquially known as a "golf cart".

More seriously, they say "electric" but there's no way a previously unknown EV is going on sale next year (unless, maybe, it was a joint venture with Tesla). I think it is more likely -- assuming this is reaa vehicle to be released next year -- to be an "electric" hybrid.

 

[Doggydogworld]

Tesla requiring more cash is basically only realistic in the case they were surprised with much higher Q1 demand than expected, and built a lot more Model 3's that temporarily depleted cash reserves.

Here's a quick back of the napkin estimate:

• While Tesla can normally delay a portion of the material and parts costs of a new car built, it's only about $20k per Model 3 - they have to pay another ~$25k for materials, labor and general corporate overhead.
• Tesla had $3.6b of cash on hand at the end of Q4, and paid back $0.9b in bonds, which left $2.7b.
• Cash below $500m is generally not recommended - so effective working capital was maybe $2.2b.
• This, all other things equal, allows for the production of about 88,000 Model 3's.
• But all other things are not equal: Tesla delivered 25k units in January and February in North America alone, which generated income of +~1.5b - and in March deliveries picked up in Europe as well.
• Tesla also has various deep credit lines they can draw upon, secured by cars already produced.

(@ReflexFunds or @schonelucht might want to correct the numbers.)

So either you are arguing that Tesla production is already higher than 100,000 units with two weeks left from the quarter, or they are not cash constrained at all.

"Weak Q1 demand" and "cash shortage" are not compatible.

I couldn't follow your napkin estimate. What's your bottom line number for 3/31 cash and equivalents? Mine is $2.5 billion.

Side Note: Tesla cash always dips significantly during the quarter. This quarter was especially pronounced due to the start of overseas Model 3 shipments and the 920m convertible bond maturity. I estimate they bottomed out a little below $1 billion on 3/1.

 

[Antares Nebula]

273.30 or so was the ceiling reached a couple of days ago. Need to break out of it, otherwise has the potential to be a double top (bearish).

 

[humbaba]

It does look like S&X demand has reduced a lot because of 3.

If we think back about how a lot of people spent a lot more than they normally would to get S&X - this shouldn't be surprising. Tesla needs to refresh S&X.

I think it is risky to assume cause. Looking at a year ago the numbers were also weak. My speculation is that the initial pent up demand for a real EV had been satisfied and so the uneven numbers reflected ongoing demand for those vehicles. The same is most likely happening with the 3, but if so it is clear that there is even more pent up demand than there was for S&X.

 

[neroden]

The tweet is here:
Michael on Twitter

Thank you Sean Pereira who posted the altered-headline article to Michael.

 

[humbaba]

273.30 or so was the ceiling reached a couple of days ago. Need to break out of it, otherwise has the potential to be a double top (bearish).

Note that from 2PM $TSLA was controlled by macros, but that ended ~3PM with NASDAQ dropping off and $TSLA remaining strong. I see today is being bullish, though not extraordinarily so.

 

[Carl Raymond]

The S/X delivery numbers are worrisome. Any theories?

• In the US one can argue the tax cliff helped to pull the demand to last Q. Possibly same with some EU countries that I heard.
• The price reduction and China opening should have help offset some of the impact. But doesn’t seem enough.
• Other issue could be people holding for potential refresh. I think last year Electrk or someone sent a fake (or denied by Elon) news on potential refresh this time around.
• But the big question is about model 3 canibalization

The 3 is selling so well that I think any worries about the larger models is more than offset by the “Tesla Families” effect. People buy the 3 and just love it. A percentage of those people at some point find they need a bigger (possibly additional) car, but the thought of buying anything other than Tesla is anathema. The 3 thus feeds demand for S and X.

Thanks kindly for your *concern*.

 

[SOULPEDL]

Also note another remarkable thing: Q1 is a seasonally weak quarter in Norway too - which makes these records even more impressive.

Guessing pent up demand just like USA, but nice how they shifted slightly to the Model 3 as S/X steadies. Maybe stole a few but loving how Tesla's controlling and timing demand for extremely lean mfg.

Last night, I was driving past a HUGE Ford Dealership thinking to myself - all that inventory just sitting there, and no owners (except maybe 2 in the Sales Office).

And on China, there are a lot of people (waiting for this car). No lack of demand with double US market.

Still all in deeper than ever. This blip too will pass... starting today?
Summon and AP3 in the Green Room.

 

[oneday]

I couldn't follow your napkin estimate. What's your bottom line number for 3/31 cash and equivalents? Mine is $2.5 billion.

Side Note: Tesla cash always dips significantly during the quarter. This quarter was especially pronounced due to the start of overseas Model 3 shipments and the 920m convertible bond maturity. I estimate they bottomed out a little below $1 billion on 3/1.

I think you’re off by about $1 billion dollars. Also, Tesla never announces cash mid-quarter, so your speculation is warrantless and mostly irrelevant. What do you base this on?

 

[neroden]

Indeed, my a@$e.

As Karen tweeted (liked by Elon ), none of the tweets that SEC has submitted as Exhibit 12 are remotely material

Docket for United States Securities and Exchange Commission v. Musk, 1:18-cv-08865 - CourtListener.com

There are a startlingly large number of people repsonding to that saying "I'll sign on to a lawsuit against the SEC for stock manipulation!" or similar.

As I've explained, you have to sue the individuals for acting outside their official duties -- or sue them "in their official capacity" if Congress has authorized that -- and it's hard legally -- so you'd need a very high-powered lawyer. But this is a lot of people willing to sign their names on to such a suit... hopefully the individuals engaged in misusing the SEC for stock manipulation and/or personal vendettas will realize that they should just back off.

 

[anthonyj]

The S/X delivery numbers are worrisome. Any theories?

• In the US one can argue the tax cliff helped to pull the demand to last Q. Possibly same with some EU countries that I heard.
• The price reduction and China opening should have help offset some of the impact. But doesn’t seem enough.
• Other issue could be people holding for potential refresh. I think last year Electrk or someone sent a fake (or denied by Elon) news on potential refresh this time around.
• But the big question is about model 3 canibalization

They need an interior refresh badly. Maybe new tail lights for Model S too

 

[Fact Checking]

Would not a NO reply (to Musk sur-reply request) require a longer explanation than a YES reply. The YES reply to the SEC request was given very quickly and curtly.

The SEC attached a proposed order to their motion and the judge simply signed it.

Having the semi-right to a reply motion if the defense expands scope is also part of regular motion practice - while somewhat unusual in contempt of court cases which are usually about speed and proceed to an oral hearing quickly.

Sur-replies are much less common, which I suspect is why Elon's lawyers have not attached a proposed order: they know the judge has discretion and they didn't want to presume.

Also note that the justification Elon's lawyers gave for the sur-reply is an out of scope reply brief by the SEC.

Even if she wants to grant the sur-reply motion then it's wise to double check that claim, but this requires her to read and carefully process all 100+ pages of filings citing thousands of pages of precedents...

If she's doing her homework then that takes time.

So no, the delay is not indicative for or against Elon, it's only indicative that she's either a very busy judge, or a very careful judge - or both.