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

[Fact Checking]

And he especially can't do that after Feb CC call, where he said something along 'we're not even thinking about demand'.

Sorry, but what are you even talking about here? That's nonsense.

You are really helping out the shortz by mischaracterizing what Elon said about demand - which statement was very specific to Europe. Here's the exact quotes from the Q4 transcript that led up the 'we are not even thinking about [European] demand' statement:

David Tamberrino:

"So like orders above, I think I've seen like 20,000 order levels for Europe and single-digit thousands for China is better than that, Elon?"

Elon Musk:

"Yes, absolutely. The - I mean, we're not even really trying, I should point out. I guess it's - we - our factory is like, right now, only making cars for China and Europe. That's all it's doing for - with respect to Model 3. And our whole focus is, okay, how do we get those cars made, get them on a ship as fast as possible, get the ship as fast as possible to Zeebrugge in Belgium then get them over to Drammen in Norway and get those cars to customers as fast as possible. We get them to China as fast as possible."

[...]

Daniel Ives:

So my question is around Europe. Obviously, with deliveries coming onboard in the first quarter, maybe what surprised you in terms of - your demand looks strong, but in terms of what you're seeing at the region, is it stronger than you expected in certain countries? What do you think is driving that? And maybe you can just talk about the opportunities and challenges in Europe especially from a delivery logistics perspective.

Elon Musk:

Well, like I said, we're thinking about demand almost zero right now. It's really getting the product there in time and not having a ton of cars on the water and in a quarter and then for China getting cars there before there's a potential rise in tariffs.​

Which btw. is all TRUE and is fully validated by all new European data we see: European demand is off the charts.

Note that Canadian Q1 Tesla demand is increasing very healthily as well: this year's 4,700 Tesla sales in Canada is about 10x increase from January-February 2018.

He needs to stop BS about how Tesla almost died last time around.

Tesla going bankrupt was certainly hyperbole, but Tesla seeking emergency funding in the middle of 2018 would almost certainly have cost Elon control of the company.

More importantly, context matters: Elon was also highlighting the incredible injustice that while oil industry is getting tens of billions of dollars in direct subsidies and trillions of dollars in indirect subsidies, Detroit was bailed out at a very high cost, Tesla is being opposed at every step, isn't even allowed to sell its products in half of the states, and had to thread the 2018 needle with a lot of ingenuity while they are building the most satisfying mass market car ever built.

Tesla has come incredibly far, against all odds.

Inconsistencies like this abound in the past

There's no inconsistency, just habitual honesty which comes with Elon. You might want him to tell smooth lies, I don't.

But half of the examples you cited are actually nonsense, that demand quote never happened in the way you are imagining it.

But this comment getting so many dislikes and ‘funnies’ really saddens me.

I believe the comment got dislikes in part because it misled about what Elon actually said about demand. I disagree with that as well and I don't think why it saddens you if people dislike being misled.

Context matters, and if a point is made while not even citing Elon's statements properly then maybe the whole thesis the shortz are propagating, that Elon is a "loose cannon", is maybe not even true but in reality it is a Big Lie that is having an effect on some Tesla investors as well?

Remember, there is a very real effort to push out Elon:

Let's Be Honest — There's A Campaign To Push Elon Out ... In Order To Harm Tesla | CleanTechnica​

And one way they are doing that is that they are lying about everything that Elon says, all day and all night, non-stop, 24/7.

 

[SpudLime]

I don't know if link to this story has been posted yet:

Survey confirms car purchases on hold as consumer interest turns electric | The Driven

I had to stop reading after the article said the GenX group stopped at 1975.

Goes to 1977 damnit!!

 

[Thekiwi]

Short & distort? The ugly war between CEOs and activist critics | Reuters

Sounds like the SEC is increasing investigations of short sellers for market manipulation, which is very positive for TSLA.

I’ll believe it when I see it.

However it is a good reuters report in that it shines light on illegal short activity (using bogus reports on seeking alpha etc) that has so far gone unpunished,

Before the Internet these shorts would be laughed off by finance press, but unfortunately with the advent of social media these bozos instead gather a large following/positive feedback loop and the bogus reports just intensify with ever growing absurdity.

there is no bigger example than Tesla of course.

 

[Freder Reeve]

prices are higher on 3 (cept 35k of crs), y looks same

 

[Thekiwi]

prices are higher on 3, y looks same

I dont understand why people thought the Y prices were going to change.

SR+ still $37,500

 

[SpudLime]

This is the second time I have posted this.

Every time the new negative posters and some of the old gang start reappearing, they know TSLA is about to break out.

They come here slinging poop to get everyone riled up to start the push back against some big good news.

My guess for this one is: a much better than expected Q1 results.

A lot of you have held on for over 10 years. I have never seen such a global group of such talented people from so many different walks of life.

This place scares the trolls and the FUDsters.

 

[Fact Checking]

right now it is close to impossible for TSLA to raise money with reasonable cost from the open market.

That's false, Tesla had two successful cash raising rounds just in the last 6 months:

• Q3'2018: 880 million dollars of cash raised!
  
• Q4'2018: 831 million dollars of cash raised!

These were among the top 5 highest value investments rounds of Tesla, ever, and note that both cash raising rounds were non-dilutive to existing shareholders and there's no cost to it whatsoever - Tesla got this cash for products delivered and keep it forever, no strings attached!

The next cash raising round will finish in about 9 days: Q1'2019, and if the European and Chinese delivery push is a success I expect another $500m-$1b of new cash raised.

I.e. in just three quarters Tesla will have raised enough cash to finance all of the planned 2019 capex already - and there's three more quarters in 2019!

But it gets better: I cited the free cash flow numbers, but the real cash generated is 'cash from operating activities', which was even more impressive:

• Q3'2018: 1,391 million dollars of cash earned from operations
  
• Q4'2018: 1,234 million dollars of cash earned from operations

Cash generated from operations will be very impressive in Q1 as well, even if Tesla posts a pro forma GAAP loss in Q1.

I.e. in just two quarters Tesla generated enough cash to cover existing capex commitments, which were $510m and $466m in Q3 and Q4, and interest payments which are around $170m per quarter, plus long term debt repayment of $920m.

Tesla will be swimming in cash in 2019 and going to continue its debt deleveraging efforts, with no external help required, fortunately.

The most recent garbage from moody is TSLA still rated as B3(junk), because 'missteps', how subjective can it be?

I expect a reluctant Moody's upgrade later this year, around the time when Tesla is included in the S&P 500, but it won't matter to Tesla's cash raising ability: Tesla is not selling equity and doesn't have to.

The inevitable Moody's upgrade will help valuation and the stock price though, as it will make it more obvious to a larger group of investors that the TSLAQ fraudsters are telling self-serving lies about Tesla.

 

[neroden]

ROTFL - paging @ReflexFunds, this is comedy material:

"Assuming the company sells ~17k Model SIX, 42k Model 3s, is able to extend payables to 105 days from 87 days in Q-4, raises $50 million in Model Y/Semi/Roadster 2 deposits, spends $3 billion on capex over the course of 2019 ($500 million of which is funded by drawing on the China credit facility) we estimate Tesla will end Q-1 with consolidated cash on its balance sheet of a little over $1.6 billion."​

I saw an additional piece of comedy material here. 42K model 3s? What is he smoking? Roughly 36K went onto ships. They've probably sold more than 8K in Canada! They've sold cars in the US, too!

This appears to be deliberate short-and-distort.​

 

[neroden]

For what it's worth (not much, I know) but I think people are making a much bigger deal out of this skirmish than it deserves. I agree with most posters that this is largely a problem of the SEC's making. Its response to the "around 500k" tweet reminds me of those newsclips of early morning white collar criminal arrests by full body armored SWAT teams. A bit over the top, to say the least.

Moreover, with a little forward thinking, the issue could have been avoided. The Consent Judgment required Tesla to adopt a mandatory internal procedure for the review of Elon's tweets but did not require Tesla to provide the SEC with a written copy of the procedures. So, Tesla adopts a policy in which Elon gets to decide, in the first instance, whether a tweet needs to be pre-approved. I'm sure that is not what the SEC (nor the judge, perhaps) envisioned. Instead of going into Court with guns blazing however, once discovered, the SEC should have tried some behind the scenes diplomacy to get Tesla voluntarily to modify its internal policy regarding pre-approval of Elon's tweets. Failing that, they could have then filed a motion seeking a ruling that the policy as implemented by Tesla did not comply with the terms of the Consent Judgment and should be modified by the Court to clarify that prospectively, all tweets that provide sales, deliveries or price changes require pre-approval. And Tesla's lawyers could make their own arguments in response. And then let judges do what judges do. Yes, no or something in between. Regardless, the markets would have remained calm in the interim and innumerable keystrokes would have been spared.

JMO

I mean, yeah, if I'd been at the SEC this is how I would have done it. But when the SEC lawyers are motivated by a personal vendetta or desire to manipulate the stock price, rather than by desire to do their job, maybe they have reason to do something different.

 

[Tslynk67]

MSM constantly harping about no-demand and yet: Ford accelerates electric vehicle investment

"Carmaker Ford is expanding production of all-electric vehicles after deciding that rapid growth in market meant it needed to accelerate its plans."

 

[neroden]

Schonelucht had an interesting approach in the near term forecasts thread. I modified it and built my own cash inflow and outflow estimates for the first two months. 60 days makes AP easy, since Tesla pays net 60 (or sooner). Vastly oversimplifying, I got roughly 5400m of outflows:

3400 - AP
1000 - Bond maturity and cash interest
1000 - Employee salaries, rent, utilities, etc.

Inflows are messier, since deliveries include leases and sales that are a mix of cash and trade-in, plus their DSO runs about 2 weeks on paper but I think it's closer to one week in real life. I treated all sales as cash to simplify and assumed AR was 449m on 3/1 vs. 949m on 12/31. I also ignored energy lease payments and the offsetting NRE debt service. This gave me 2700m of inflows:

1200 - NorthAm cars (gross)
500 - Overseas cars (gross)
200 - Energy sales
500 - AP (net)
230 - Recourse borrowing (ABL)
70 - Used car liquidation (net) and non-warranty service

2700m in - 5400m out leaves just under a billion of cash on 3/1. Cash will build substantially in March as they deliver ~2x as many cars as Jan/Feb combined. They also expanded their ABL, though I'm not sure they'll have enough inventory to tap it fully on 3/31.

This is a bizarrely pessimistic estimate; you assume accounts payable drops by 3400 and accounts receivable drops by 500, which seems way mismatched to me. Yes, the difference should drop as the ramp-up flattens and capex slows, but not by THAT much from Q4 (which was already much flatter ramp than Q3) to Q1.

Other than that, OK. (I.e. add a billion or two dollars).

...wait, I see that you're trying to model the "peak cars on ships" moment, when most of the cash is tied up in inventory on ships. If so, that's an tolerable model I guess although misleading. The ABL expansion definitely had enough inventory to borrow against during the "peak cars on ships" moment.

Anyway, we agree that they'll have giant piles of cash at the end of March.

 

[neroden]

OT

Closing arguments in criminal trials the prosecution gets the first and last word.

Technically, the judge gets the last word and it can matter a *lot* what the judge's instructions to the jury are -- they can be massively biased, and it's documented to have a huge effect.

 

[neroden]

MXWL down >6% after hours. News?
View attachment 388647

First round of the tender offer didn't get high subscription. They're extending it.

They can extend it as much as they like, so I think it'll still go through, but it may take a while. And it might not go through. Merger arb traders tend to be in a hurry and signs of delay mean that they get out.

But the dropping price will bring more merger arb traders in who will tender their shares. I decided 6% wasn't good enough to bet on it, but 14% might be....

 

[Fact Checking]

They've sold cars in the US, too!

We have actual January delivery numbers:

Tesla Delivered More Vehicles in January than Reports Suggest

Tesla delivering around 11,485 vehicles (S, X & 3) within the US in January.​

Alpha Hat has a very, very good methodology of tracking the vehicle IMEI's within the U.S., which data mobile carriers are apparently selling freely. Has anyone inquired about how expensive their subscription is?

Assuming 11.5k in January and 11.5k in February, and the usual seasonal pattern of March=January+February we'd get 46k S+3+X deliveries in the U.S.

We know that Jan+Feb in Canada was 4,700 - conservatively assuming just the same level in March we get 7k deliveries in Canada. (We don't know whether Tesla pushed enough cars to Canada or did early deliveries. Does anyone here know whether March deliveries have picked up at Canadian delivery centers?)

(Plus there's Mexico which might deliver another thousand or two.)

That's 54k deliveries in North America alone. If we add in the 36k on ships and subtract the guided 17k in-transit vehicles we still get 73k global deliveries. But I think they'll be able to reduce in-transit inventory in the next 10 days, plus some of these estimates are conservative, which means we might be looking at around 80k total deliveries - close to the Q4 levels.

Another way to look at this is production, I had a good look at Bloomberg again and I think their Q1 estimates might be pretty good:

Bloomberg - How Many Tesla Model 3 Cars Have Been Made?

"Our best estimate is that Tesla has manufactured 225,988 Model 3s so far—or 70,325 in the current quarter—and is now building approximately 5,896 a week."​

There's 10 more days of production in Q1, which will add a bout 8,400 more Model 3's to the Bloomberg estimate, so their Q1 estimate right now is around 78k Model 3's made, a sustained full-quarter rate of around 6,000/week. This is in line with the Carsonight numbers as well.

If we add Model S/X production of say 19k to it, then we get production of 97k units, +12% QoQ increase over Q4 and a seasonally very good number. If we subtract the guided 17k in-transit vehicles from that number we get deliveries of around 80k.

So I'm starting to be cautiously optimistic about Q1: global Q1 deliveries in the 70k-80k range and production in the 90k-100k range, with potential upsides and very few downsides other than some major logistics hick-up in Europe. We'll be able to narrow this down a bit more right before the delivery report, based on eyewitness reports from Benelux delivery centers.

Not advice.

 

[neroden]

It’s not a matter of legal vs illegal. It’s that virtually everyone who sees the lies and manipulation are sitting on their hands. We’ve all been sitting here talking about it for YEARS and the best we have done is one or two asking others to do something about it because ‘fill in the excuse’ why they can’t themselves do something about it.

Well my excuse is that I've got way too much other stuff on my plate (medical etc.) to be the lead plaintiff, and I'm not a lawyer. If someone cares to hire a high-powered lawyer I'll sign on and help though.

 

[Singer3000]

I dont understand why people thought the Y prices were going to change.

SR+ still $37,500

What are we to make of the only 1.4% increase in SR+, versus 3.5% for LR? A demand problem for SR+? Or better gross margins and production capability for that product than had been assumed?

 

[mrdoubleb]

What are we to make of the only 1.4% increase in SR+, versus 3.5% for LR? A demand problem for SR+? Or better gross margins and production capability for that product than had been assumed?

My take: they have deliberately guided for an average 3% increase and I fully expected them to raise lower trim prices less. This helps sustaining overall demand, plus buyers of more expensive items are usually more price flexible and they really want to make good on their promise to bring EVs to the masses.

 

[EVMeister]

What are we to make of the only 1.4% increase in SR+, versus 3.5% for LR? A demand problem for SR+? Or better gross margins and production capability for that product than had been assumed?

I think partly that they wanted to maintain it as an attractive alternative to the SR, making it something of a "no brainer" for many prospective buyers.

 

[wnorris]

There's no inconsistency, just habitual honesty which comes with Elon. You might want him to tell smooth lies, I don't.

No one wants to see Elon tell lies, but he desperately needs to work on his messaging. His statements come at some of the worst times and do not convey the confidence that, as a CEO of a 50B company needs to convey. There is a difference between being honest and divulging too much information (repeatedly).

This has been stated countless times on this forum, but he needs a Gwen Shotwell equivalent at Tesla. If the SEC debacle and force Tesla to get him more help then I am all for it. I think the addition of L Ellison to the board was a fortunate byproduct of the last round with the SEC.

Slightly OT - I am reading Why We Sleep by Matthew Walker and recommend it highly. After reading this I cringe to think about past Ambien comments during the height of the Model 3 ramp. It highlights the fact that Elon needs a stronger support system in place at Tesla that can help take pressure off him during these increasingly stressful times. Forgoing sleep for extended periods and taking medicine to sleep at all is horrific on an individuals well being.

 

[stef]

What are we to make of the only 1.4% increase in SR+, versus 3.5% for LR? A demand problem for SR+? Or better gross margins and production capability for that product than had been assumed?

I think is very clever as will still make it look a great value compared to the 35k car. A bigger increase might have forced some people to not upgrade from the basic SR, while this pricing will actually make it look the best value for money (considering the step to LR has also grown)