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

[dhanson865]

For those that are interested it looks like the case brought by Mr. Greenspan against Elon and Qazi has been dismissed, parts with prejudice: https://storage.courtlistener.com/recap/gov.uscourts.cand.359812/gov.uscourts.cand.359812.171.0.pdf (Which is about time.)

Expect Greenspan and his "charity" to start posting a lot of crap about the judge.

I wonder if Qazi and Elon can, or will try to, recover their expenses for defending against this crap.

what was the case about?

 

[wipster]

What goes down must come up must go down then come up then go sideways...

so far at least...

Come on August!

 

[TheTalkingMule]

If the alternative to stocks buybacks is building more cash than necessary for security, then the buybacks make sense.

But what about alternatives like a Semi fleet, Robotaxi fleet, robot army, many Megacharger stations, power plants…?

Also don’t they need insurance reserves now that they’re becoming the insurer?

In two months and a day we'll be adding another $2B in free cash flow to this pile. Then $3B+ more three months after that. Then $4B just after Christmas, then another $21B or so in 2023.

Certainly there will be a couple more Gigafactories announced within about a year, but there's no hurry in build out since there won't be enough raw materials to take the next exponential leap til 2024/25.

Any fleet build out will only add to cash flow.

Only thing I can think to do with all this cash is buy mining operations. But even those could be partially paid in TSLA equity.

I kinda like this idea of a modest share buy. If even to just pull back the float Elon has added over the last year. What better return is there out there for this cash? Bitcoin?

 

[elasalle]

So how many ships can sail from Shanghai this quarter?
even with 1200 units/day (& this number is supposed to increase ..)- we could be filling a single RORO in like 4 days ... if other issues like port congestion etc are not a hindrance?

Ship#3 is docked, seems it will set sail tomorrow .. interesting to see progress just like in the early days of Shanghai production

Maybe Mr @accountant is tracking/would know?

 

[Artful Dodger]

UK Supercharger congestion has started, but the i3 owner is paying £0.61 / $0.76 per kWh (or lower if subscribing monthly)

1 out of 8 (soon 16) stalls in use. Anyone want to plug this into s spreadsheet model? Could Supercharger income become important?

View attachment 806093

The problem is he's ICE'ing a stall (the one to his left). As a minimum, EVs with right-side charge ports should be required to use the right most available stall. This will become an increasing problem with higher usage rates. But something Tesla can manage, I'm sure.

Cheers!

 

[Singuy]

If spy closes green today then potential double bottom at support.

 

[Sofie]

Tesla deposits $X.nn Bilion with a broker. Creates a standing buy order for $xxx per share. Shortzes unable to drop the SP any lower as they pound against the rocks. They can only keep selling cheap TSLA to Tesla, Haha!

Eventually hedgies give up, as positive qtrly results in a rising tide. Tesla uses those cheap shares for stock-based compensation, which increases ↑ GAAP EPS. Even Elon's CEO comp. plan shares could be purchased on the cheap this way. Paging @mongo

Its a good strategy, one that I'm certain Uncle Leo didn't tweet at random, or w/o chatting with Martin V.

Cheers!

Can he or someone chat with Elon about this then. It sounds great!

 

[Krugerrand]

Yes, they want to make money.
Ant they want to see a clear path to making money in the future.
With Tesla, they see two models and an uncertain future for future products.

They don’t see . Clearly. If you (general and *them*) can’t see the money maker that Tesla is, then feel free to claim yourself as an idiot OR admit you’re only here for the money a lie gets you.

 

[Electroman]

For those that are interested it looks like the case brought by Mr. Greenspan against Elon and Qazi has been dismissed, parts with prejudice: https://storage.courtlistener.com/recap/gov.uscourts.cand.359812/gov.uscourts.cand.359812.171.0.pdf (Which is about time.)

Expect Greenspan and his "charity" to start posting a lot of crap about the judge.

I wonder if Qazi and Elon can, or will try to, recover their expenses for defending against this crap.

Sorry for being naive on this. What does 'with prejudice' mean? Is it good or bad for Elon & Omar?

 

[Nocturnal]

Tesla deposits $X.nn Bilion with a broker. Creates a standing buy order for $xxx per share. Shortzes unable to drop the SP any lower as they pound against the rocks. They can only keep selling cheap TSLA to Tesla, Haha!

Eventually hedgies give up, as positive qtrly results in a rising tide. Tesla uses those cheap shares for stock-based compensation, which increases ↑ GAAP EPS. Even Elon's CEO comp. plan shares could be purchased on the cheap this way. Paging @mongo

Its a good strategy, one that I'm certain Uncle Leo didn't tweet at random, or w/o chatting with Martin V.

Cheers!

I'm going to share this on Twitter. Great suggestion.

 

[Prunesquallor]

Sorry for being naive on this. What does 'with prejudice' mean? Is it good or bad for Elon & Omar?

"In the formal legal world, a court case that is dismissed with prejudice means that it is dismissed permanently. A case dismissed with prejudice is over and done with, once and for all, and can't be brought back to court."

Difference between dismissed with or without prejudice

its good.

 

[henchman24]

Bears aren't done yet! 11,400 and 3,900 are lines in the sand.

 

[Gigapress]

Also, the thing that seems to get left out when talking about stock buy backs is that the company buys back it's stock and shrinks the number of total shares and then in the future, if the company needs cash for a major expansion, they can do an offering at a higher valuation. Which then in effect, has permanent anti dilutive effects.

It's a very smart financial decision for the company if the company is very confident in where it will be in future years.

So for example, Tesla buys back 10 billion in stock over the next year while the stock is around the 700-900 billion valuation. Say in 3 years, Tesla is ready to start their Robotax service and needs an extra 10 billion in cash. They do an offering on the open market, but now Tesla's valuation is 1.5-1.8 trillion. They've essentially saved themselves 5 billion.

There really is no downside to Tesla buying back stock BECAUSE they are rapidly growing revenue and earnings. It's extremely rare to find a company growing at the % that Tesla is that actually is generating the type of FCF Tesla is. Extremely rare. Most companies growing even close to what Tesla is are not making profits or their profits are slim and thus they have no buffer for it something goes wrong in a black swan event.

Tesla absolutely should take advantage of the stock being down near 50% right now. They have no more debt. Meaning that 18 billion in cash they have sitting around is about to get materially larger with each passing quarter.

I believe the downside of a stock buyback (or dividend) is the opportunity cost.

Back in October, I was predicting that in the coming years Tesla would basically need to pay shareholders back because their growth of free cash flow would exceed their ability to invest it productively simply because their ROIC is so freaking high now.

After discussion with TMC members who disagreed I reversed on that prediction. Building up an in-house robotaxi fleet and in-house energy assets will be an immense capital sink for years to come.

Considering the tsunami of FCF headed our way, do you understand Elon's statement at the shareholder meeting that they don't expect to pay dividends any time soon?

This seems to contradict:
1) He's repeatedly said that the limiting growth factors are talent and supply chain and that if Tesla could find more ways to spend money reasonably they would
2) Tesla's CapEx efficiency has been improving at a stupendous rate. E.g. Giga Shanghai's up front investment costs paid for themselves in less than a year. So if anything, with rising ROIC we'd expect it to be even harder to reinvest all FCF into growth (a good problem to have).

So with your projection of $48 billion in FCF for 2022-24, what can they do?
- pay down debt

• Tesla's total debt is only around $10 billion last time I looked

- buy back shares

• This is effectively a dividend with different tax implications, so I think we can rule this out

- pay dividends

• Elon just said this isn't coming any time soon

- purchase another company

• Maybe, but large-scale mergers and acquisitions are slow, difficult and prone to failure, so it'd be hard to spend all the FCF

- buy Bitcoin

• Meh, still too much FCF for this. They have quite enough BTC in my opinion and I wish they owned zero. Seems unlikely that they'd pile all their excess profits into BTC before paying a dividend.

- add to their cash account

• They already seem to have enough cash at $24 billion last quarter IIRC, and at a certain point they have more than enough dry powder to weather out any conceivable headwinds

All I can think of is that Elon is intimating that a massive, monumental increase in CapEx is coming soon, beyond that which we already know about that fed into your $48 B estimate. I can only think of one way to profitably spend that much in '22-'24 and beyond: Directing most automotive production away from consumer sales & leasing in favor of building the Tesla Network robotaxi fleet. At a unit production cost of let's say $24,000 each, that would fund production of about 2 million robotaxis while keeping cash and debt roughly constant.

Thoughts?

The "problem" is those factories are going to spit out immense cash flows shortly after construction. $24b is just the 2024 estimate. With ever increasing efficiency, FSD and just operating leverage from scaling up, cash flows could very well be $100+ billion by 2028.

I mean, I recall Ron Baron estimating that Giga Shanghai paid for itself within like 5 months of construction completion. That's an eye-popping IRR of roughly 200% after accounting for the fact that construction and low rate initial production took about 2 years.

To a first approximation, the only way Tesla would be able to reinvest all cash flow would be if production capacity investments are growing at the same rate as their capital from previous investments. Until about 2020, Tesla's ROIC was less than their production investment growth rate, and this is the main reason why they accumulated debt and had detractors claiming it was a structurally unprofitable pyramid scheme. But now, with Tesla's incremental ROIC on new factories in the 100% to 200% range, Tesla's 50-100% growth in manufacturing capacity will be unable to keep up.

Thus, if Tesla is not going to pay a dividend nor build up a multi-hundred billion cash balance in this decade, then they must have something else planned. A rapid robotaxi fleet buildout, where Tesla rather than consumers pay the upfront costs, is the most reasonable capital sink I can imagine. If we're aiming for let's say:

• A fleet of 10^8 AEVs
• By 2035
• With unit cost of $50k on average (this includes Semis and Vans/Minibusses dragging up the average)

Then that will take about half a trillion dollars of investment.

Another huge potential capital sink--I just realized--is investing in their own solar + battery projects as a virtual power plant operator instead of selling the batteries to someone else. This could also suck up on the order of 10^12 dollars. Same kind of logic: Tesla basically buying their own products with their own money and then sell the services over time. Tesla knows their own product and will have super cheap capital, and so could make arbitrage profit off this information asymmetry.

 

[Artful Dodger]

I'm going to share this on Twitter. Great suggestion.

I saw it here first on roller derby... it's an old idea.

Cheers to the Longs!

 

[insaneoctane]

... So yes, I canceled my Cybertruck order and I'm planning on selling my M3 and getting another luxury EV. I can't stand thinking that my $ is supporting these kinds of ideologies. Couple that with the Twitter deal, I'm officially done with Elon. I feel bad for those that work there and have to deal with this lunatic. So Rivian or Polestar here I come. And I'm happy to do so.

Certainly this is your prerogative. Elon's tweets might have lost you and more. I wonder if it will bring anyone into the fold though? You're leaving to go buy your next EV elsewhere else, while newcomers are likely leaving ICE to join. Seems like it might actually help the mission. Just sayin'....

 

[Drax7]

I believe the downside of a stock buyback (or dividend) is the opportunity cost.

Back in October, I was predicting that in the coming years Tesla would basically need to pay shareholders back because their growth of free cash flow would exceed their ability to invest it productively simply because their ROIC is so freaking high now.

After discussion with TMC members who disagreed I reversed on that prediction. Building up an in-house robotaxi fleet and in-house energy assets will be an immense capital sink for years to come.

Plus recession risk, they need to conserve capital until macro picture favorable.

 

[ZeApelido]

Bill Gates doing an AMA on Reddit.

I asked the question, you should upvote it

https://www.reddit.com/r/IAmA/comments/ut7yj0/_/i98r0q8

 

[ZachF]

Going into the end of trading like…

Edit: that close..

 

[henchman24]

Bulls 3 (Vix below 30.. nearly 29, SP500 3900, Tesla above 100EMA/MA) Bears 1 (Nasdaq 11,388)

 

[WattsHappening]

Also, the thing that seems to get left out when talking about stock buy backs is that the company buys back it's stock and shrinks the number of total shares and then in the future, if the company needs cash for a major expansion, they can do an offering at a higher valuation. Which then in effect, has permanent anti dilutive effects.

It's a very smart financial decision for the company if the company is very confident in where it will be in future years.

So for example, Tesla buys back 10 billion in stock over the next year while the stock is around the 700-900 billion valuation. Say in 3 years, Tesla is ready to start their Robotax service and needs an extra 10 billion in cash. They do an offering on the open market, but now Tesla's valuation is 1.5-1.8 trillion. They've essentially saved themselves 5 billion.

There really is no downside to Tesla buying back stock BECAUSE they are rapidly growing revenue and earnings. It's extremely rare to find a company growing at the % that Tesla is that actually is generating the type of FCF Tesla is. Extremely rare. Most companies growing even close to what Tesla is are not making profits or their profits are slim and thus they have no buffer for it something goes wrong in a black swan event.

Tesla absolutely should take advantage of the stock being down near 50% right now. They have no more debt. Meaning that 18 billion in cash they have sitting around is about to get materially larger with each passing quarter.

I made this argument a quarter or so ago and got ridiculed by some. Stock buybacks are for companies with no better investment prospects, there are so many other things they can do with the cash, save for a rainy day, yada, yada.

The main thing for me is Tesla is a money printing machine now. Even while building two massive GFs and paying down debt, they are throwing off tons of FCF. And this is only going to increase. I don't see any potential scenario where Tesla needs to worry about cash flow for the next 5 years+. They have too many potential levers to pull, even if demand starts to level off.

In that light, I think announcing a stock buyback program now would be great. They can pick and choose when and how much to buy back. In any case, I can't think of a way to generate better returns on cash than that. And of course it comes with the added bonus of a nice 'oh sh*t' moment for shorts.