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

[TNEVol]

From my understanding of the most recent letter to the SEC, the SEC has asked the court to not consider pre-settlement (ie, negotiation) evidence, and if the court does, then SEC wants to submit further evidence.


A) Can the SEC even make such a demand of the court?

B) If so, how does this evidence get submitted without an evidential hearing (something both parties have now chosen to forgo)? Via another reply brief? How many more rounds of reply briefs are we going to get? And if new evidence is introduced, then isn't there a possibility that one or both sides may want an evidential hearing after all?

C) If A and NOT B, then will the court simply dismiss Musk's negotiation evidence?

...this is confusing for us non-legal experts. I wish the judge would just throw out this farce of a case and make everybody's lives easier!

Relatively simple as I have discussed before. SEC is stating black letter law that this language of an agreement stands for itself and the only time you look at what a party intends is of you can't discern the meaning from the language itself. EM is saying IF the court can't figure out what the agreement means from the language, here is some indication of what the parties were negotiating . The SECis saying that is irrelevant because the agreement is clear AND if the is any question regarding intentions, they would like to add more information. This is the end of the last word deal. All the cards are.on the table.

 

[Off Shore]

Early adopters and Tesla loyalists can be very forgiving

I've been among the early adopters and Tesla loyalists for nearly four years. I can assure you they're anything but forgiving.

 

[neroden]

Relatively simple as I have discussed before. SEC is stating black letter law that this language of an agreement stands for itself and the only time you look at what a party intends is of you can't discern the meaning from the language itself. EM is saying IF the court can't figure out what the agreement means from the language, here is some indication of what the parties were negotiating . The SECis saying that is irrelevant because the agreement is clear AND if the is any question regarding intentions, they would like to add more information. This is the end of the last word deal. All the cards are.on the table.

Unfrotunately for Crumpton and the SEC, the agreement is clear enough in one respect -- it flat out doesn't mean what the SEC claims it means. They claim it requires pre-approval of blatantly non-material tweets about well-known characteristics of electric cars, which it clearly does not. The legal principle that words in a contract are supposed to mean something and are not surplusage (I forget what it's called) applies to the word "material".

This puts Musk's lawyers in a perfect position. The SEC has taken an untenable position. The judge rules in favor of Musk, or Musk can appeal, and win. I am quite sure Musk would take it to the Supreme Court if necessary. And win. I believe the SEC now has essentially zero chance of winning, barring corruption from the top to the bottom levels of the court system, which is always a possibility.

Maybe the SEC lawyers should have bothered to learn something about electric cars -- or read the conference call transcripts -- or just waited until Monday for Tesla's lawyers to respond -- before filing suit.

 

[Big Blue 1011]

I'm really curious what the percentage of SR orders are. Seems SR+ would attract more customers. A no brainer to upgrade.

I'm really curious what the percentage of SR orders are. Seems SR+ would attract more customers. A no brainer to upgrade.

Agree as to no-braine, unless the purchase of the SR already stretches the buyer;s budget to the limit. At that point, SR vs SR+ isn’t a cost/benefit calculation. It’s a choice between SR or a less expensive alternative.

 

[ls7corvete]

Agree as to no-braine, unless the purchase of the SR already stretches the buyer;s budget to the limit. At that point, SR vs SR+ isn’t a cost/benefit calculation. It’s a choice between SR or a less expensive alternative.

I wonder what configuration is being pushed back. Is it only white? Only premium interior? How many people are actually pushed back. I suspect the majority that are foolish enough to order Sr are getting orders filled.

 

[Doggydogworld]

What is the benefit to shorting at all ?

-Tesla was able to borrow at very low cash rates in years passed because convertible bond holders could hedge via shorting
-Shorting improves options market pricing and liquidity, as market makers can use it to hedge
-Shorting makes merger arbitrage possible, letting shareholders avoid deal risk by exiting early at a fair price
-Longs can sometimes earn income lending their shares. Useful for people who need income from non-dividend stocks

-Shorting helps correct mis-pricing for bankrupt stocks and other misunderstood situations​

-Unhedged shorts are a counterweight to (sometimes wildly) promotional company execs. Not that we know anyone like that
That's just a small sampling. Efforts to outlaw shorting have never really worked. "If you outlaw shorting, only outlaws will short" lol.

 

[Tim S]

So, a thread that wasn't started until early March with less than a dozen people waiting and within a couple of weeks they started getting their cars is evidence of a suitable large number of complaints that points to high demand for LR Model 3?

Really? We've seen a drop-off of over 19K cars per month!

Look, I've been driving Teslas, owning Tesla stock, and participating on TMC longer than most here today. I'm not a short - I still have shares I purchased in 2011. I never worried about Model S steady state demand previously. But, I am now worried about Model 3 LR (including Perf) demand in the US.

If we look at Q4's deliveries (all US), and then look at Jan/Feb, there's a big falloff. And Feb was less than Jan! If the Jan/Feb sales are not indicative of the steady state demand for Model 3 LR variants because of pull forward demand, then Q4 is also not indicative on the other side. Somewhere between 25K cars/month and 6K cars/month (Dec and Feb) is probably the number. What steady state number would you pick? Pick a number and then it's easy to calculate the pull-forward and payback.

And to be clear, I'm NOT worried about Model 3 SR demand anywhere. But, if almost all the demand is for SR variants, then Tesla is in for a bunch of short term pain as that's not a profitable enough car for them to making right now when they need cash to fund things like Model Y factories.

You're forgetting seasonality. Most people don't buy new cars in winter. Demand for all versions of all Teslas will be higher in spring and summer.

 

[Doggydogworld]

It makes sense based on Tesla's past history that the media ignores, ship overseas, then cross-country with lots of rail, then to California and nearby states where car haulers make the most sense for speed near the end of quarter.

There's no question Tesla does it, and the media doesn't understand it. Whether it "makes sense" is another matter. It's very inefficient, but it makes the end-of-quarter numbers look better. Tesla said they were going to kick the habit last spring, and there was evidence they were starting to do so. But they went back to the crack pipe for another hit in Q1.

Even the Richmond rail yard that has been used heavily for shipment/storage in the past was empty of Teslas right now from what I could tell yesterday.

​

Tesla used rail quite a bit for Midwest and east coast cars. They also shipped containers with S/X knockdown kits by rail to the east cost to be loaded onto Europe-bound box ships. Now they just truck cars nationwide, and ship European cars from SFO Pier 80 through the Panama canal. This costs extra, but is faster and simplifies logistics. It also avoids frustration for Elon, who is fed up with the rail companies.

 

[anthonyj]

Prediction: another analyst downgrade in the AM to lure shorts, a dejavu gap down, huge morning rally +$10, slow fade after 1pm

 

[MarcusMaximus]

So, a thread that wasn't started until early March with less than a dozen people waiting and within a couple of weeks they started getting their cars is evidence of a suitable large number of complaints that points to high demand for LR Model 3?

Really? We've seen a drop-off of over 19K cars per month!

Look, I've been driving Teslas, owning Tesla stock, and participating on TMC longer than most here today. I'm not a short - I still have shares I purchased in 2011. I never worried about Model S steady state demand previously. But, I am now worried about Model 3 LR (including Perf) demand in the US.

If we look at Q4's deliveries (all US), and then look at Jan/Feb, there's a big falloff. And Feb was less than Jan! If the Jan/Feb sales are not indicative of the steady state demand for Model 3 LR variants because of pull forward demand, then Q4 is also not indicative on the other side. Somewhere between 25K cars/month and 6K cars/month (Dec and Feb) is probably the number. What steady state number would you pick? Pick a number and then it's easy to calculate the pull-forward and payback.

And to be clear, I'm NOT worried about Model 3 SR demand anywhere. But, if almost all the demand is for SR variants, then Tesla is in for a bunch of short term pain as that's not a profitable enough car for them to making right now when they need cash to fund things like Model Y factories.

There is no “steady state” that holds true for all months. People buy fewer cars when it’s -50F outside than they do when it’s 90F. They buy more cars right before Christmas, too. Indications right now are pointing to an enormous demand uptick that started in March(see: recent price increases across the board, including the Y now, record registrations across Europe, increasing posts from people complaining about not getting their Model 3s of various specs on this board, now articles decrying Tesla for delaying deliveries of SR/SR+, etc). That matches the pattern in Q1 2018, Q1 2017, Q1 2016, Q1 2015 and so on.

 

[Doggydogworld]

I wonder what configuration is being pushed back. Is it only white? Only premium interior? How many people are actually pushed back. I suspect the majority that are foolish enough to order Sr are getting orders filled.

I don't think they've delivered any SR yet. It's not clear if they've even produced any. From day one people who ordered SR+ got VINs assigned pretty quickly. SR orders were handled differently, no VINs or even normal confirmation. Musk said they were queueing SR orders so they could prioritize reservation holders. Their normal ordering system apparently doesn't do that. It sounds like they re-routed SR orders for manual processing or something.

I agree with those who say there are probably a lot more orders for SR+ than SR.

 

[Artful Dodger]

Battery fire Elektrische auto vliegt in brand bij dealer, brandweer dompelt auto in waterbak
Of a brand new BMW i8.
It is the first time that the fire department uses the technique of putting the entire car in a container of water to prevent the fire from starting again.

Pfftt, that's NOTHING! Tesla dumps their's right often da ships! /s

Cheers!

 

[Pras]

There is no “steady state” that holds true for all months. People buy fewer cars when it’s -50F outside than they do when it’s 90F. They buy more cars right before Christmas, too. Indications right now are pointing to an enormous demand uptick that started in March(see: recent price increases across the board, including the Y now, record registrations across Europe, increasing posts from people complaining about not getting their Model 3s of various specs on this board, now articles decrying Tesla for delaying deliveries of SR/SR+, etc). That matches the pattern in Q1 2018, Q1 2017, Q1 2016, Q1 2015 and so on.

A few possible reasons (and their combinations) for delaying ST version

1) there is a steady state demand of SR+ and above models that matches the production capacity for now. So will produce SR once the SR+ and above demand slows.
2) SR demand is small for now to justify batch production (so better wait for it to collect)
3) RH drive car tooling is about to begin cutting production capacity
4) SR parts are not fully available.

Agree with why give a delivery window and switch but any of the above can be new information.

 

[TNEVol]

Unfrotunately for Crumpton and the SEC, the agreement is clear enough in one respect -- it flat out doesn't mean what the SEC claims it means. They claim it requires pre-approval of blatantly non-material tweets about well-known characteristics of electric cars, which it clearly does not. The legal principle that words in a contract are supposed to mean something and are not surplusage (I forget what it's called) applies to the word "material".

This puts Musk's lawyers in a perfect position. The SEC has taken an untenable position. The judge rules in favor of Musk, or Musk can appeal, and win. I am quite sure Musk would take it to the Supreme Court if necessary. And win. I believe the SEC now has essentially zero chance of winning, barring corruption from the top to the bottom levels of the court system, which is always a possibility.

Maybe the SEC lawyers should have bothered to learn something about electric cars -- or read the conference call transcripts -- or just waited until Monday for Tesla's lawyers to respond -- before filing suit.

This scares me a little because you and a few others I can name have greatly influenced my investments. In fact my best move was the Solar City arbitrage discussed here and my worst moves were my personal feelings like buy at 350 for the 420 sale.

However your comments on legal process are totally unrealistic despite being fully justified. There will be no class action suit against the SEC or its lawyers. There is no cause of action or potential for compensation for counsel that I have seen.
I have seen no argument that Congress has passed a law authorizing such a suit which is required. While I am certainly not the best informed I can think of no obvious cause of action and apparently EMs lawyers have not come up with it either or they would have claimed relief.
My concern is that I am seeing people on here predicting improbable results from the litigation that IMO are not going to happen. This creates an expectation that is unlikely to happen (like bankruptcy for the shorts). It seems better for those of us who support Tesla to temper our expectations of the legal proceedings. No one is going to recover damages from the SEC or its lawyers for simple and elementary reasons. Outside of a few exceptions like civil rights you cannot revive damages from the government or its agents particularly lawyers representing the agency. This is not a Supreme Court issue and will be answered by the trial court and probably there will be no appeal. Hopefully EM will be vindicated on his tweet.

 

[Artful Dodger]

It's all that, and it's also much, much better:

• NVidia was probably selling the gp106 chip for around $100, but marginal cost of producing one more Tesla AI chip ASIC is in the few dollars range.
• Nvidia's latest generation chips would have been significantly more expensive, reducing the margins of the Model 3 or increasing its price above $35k.
• Tesla can add two or four chips to a single board with very little additional cost other than power use - should they require more computing power in the future. For example the Tesla Semi, a much larger vehicle, could possibly run 20 cameras on 4 AI chips at full FPS.
  
• Tesla can also increase the frequency of the chip - it's reportedly around 400 MHz now, which is pretty conservative.
  
• Tesla could, in principle, license tens of millions of AI chips to other carmakers who don't have the processing power but would like to run their own NNs. This is probably why Intel bought MobilEye for 15 billion dollars last year.
• Tesla could in principle license AutoPilot with their own AI chip - i.e. license both the software and the hardware. Other carmakers would find it very difficult to replace that hardware with their own R&D results and Tesla could charge very, very healthy margins.

I.e. having their own chip turns Tesla into a chip-maker, giving the infinite flexibility to their platform, and enabling high margin business opportunities that chip makers generally enjoy.

Danke, Herr Käpt'n von Trapp!

I don't know about y'all, but (many years from now) when F/C finally takes that last hike over the Alps into Switzerland, I will sorely miss these impromptu, virtuoso sitdown sessions (and singing with the family).

Prost! Zum Wohl! Your health!

 

[schonelucht]

what the hell is up with the bloomberg tracker now its saying over 80k model 3

The tracker had been problematisch for a log while. It gives too much weight to VIN registration. Those gapped at several known points in production on top of corresponding cars not being produced sequentially. Hence, the tracker chronically overestimates. Just as with insiderEVs numbers, the authors adjust the model when numbers come out, but they apply the correction retroactively, so you can’t judge the historical performance of the tracker on a predictive basis.

One such gap just happened withe the SR+ start of production, so the number is particularly bad now.

 

[mrdoubleb]

I was going to say...why would they suddenly stop at October of 2018? Hmmm....

For the same reason VW is proposing to reduce the German EV subsidy for cars longer than 4.65 meters*: science.

*Model 3 is 4.69 meters long. What an unfortunate coincidence!

 

[schonelucht]

No better, no worse than paying to reserve an aisle seat, or “would you like fries with that”. The upsell is standard business practice.

So long as they do actually have hamburgers without fries if such is on the menu.

So you want to get some popcorn at the movies. It’s a long line but there are helpful signs ‘popcorn : only 15 minutes waiting time from here’. That doesn’t sound too bad with your movie only starting in 20. Finally you get to the front ‘one large serving of popcorn please’ ‘coming right up for you, would you like to get a coke with that’ ‘no’ ‘then I am sorry sir, but I will have to ask you to step out of line. Due to the long lines we only serve customers that order at least two menu options’ But try again in 20 minutes when there will be much less customers.

I am not saying the analogy is perfect, but I am saying than these business tactics do have a cost.

 

[Fact Checking]

As I expected there will be no evidentiary hearing. There is now way I would have requested one.

The SEC did not dispute Elon's evidence AFAICS - which made an evidentiary hearing unnecessary for Elon's team. They got all the evidence they wanted, with no apparent SEC opposition. Elon's team filed their letter a couple of hours after the SEC sent theirs - a day before the deadline.

If the judge ends up relying on Elon's evidence (his affidavit and the Noe expert testimony) then the SEC not opposing/countering this evidence will IMHO prove to be a significant strategic mistake.

The SEC did oppose the "settlement intent" email trail to a certain extent.

Now it's up to the judge how much evidence she wants.

No one has pointed out to me where the EM lawyers have asked for damages or sanctions.

It would be highly premature at this stage of defense. As I said before, Elon's offense will IMHO be started once there's a ruling - either inside the contempt of court process, or in a new motion for declaratory judgement.

Or if any eventual ruling favorable to Elon/Tesla is broad enough to prohibit the SEC's nuisance motions and censorship attempts then it won't be needed.

There's still going to be a hearing I think: the contempt hearing with Elon present, right?

 

[Artful Dodger]

what the hell is up with the bloomberg tracker now its saying over 80k model 3

Right, note that the BB est'd for Model 3 production (80,161) implies 6,680/wk (allowing for 6 days known downtime during 2019Q1).

That's 45% higher than production achieved during 2018Q4. A high bar, but I think Tesla will be close.

P.S. Thanks to you (and anyone else) for continuing to document the ever-changing Bloomberg Model 3 Production Estimate.

Cheers!