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

[NicoV]

If they look at this as a way of avoiding part of the EU fine on a continuing basis and continue to build and sell their CO2 production machines, then no, they should be allowed to go broke.

If that’s the case, they will go broke anyway, as over time they will find less and less customers willing to pay whatever Europe comes up with to limit CO2 emissions.

 

[saniflash]

which bears the question, is the family owning FCA causing the buying pressure over the last couple of days? maybe there's more to this deal than just cash

 

[EVMeister]

which bears the question

Easy there. Don't summon them.

 

[AlMc]

Easy there. Don't summon them.

 

[scaesare]

When I was a teenager, I knew a guy who had a lightning strike affect their house. His computer was on a surge protector, but his stereo wasn't, and he had an audio cable connecting the two so that he could play music on his stereo. The strike managed to fry his computer via a surge on the audio connector, yet the stereo itself remained fine. Well, mostly. On rare occasions, if the sound got too loud, the stereo would shut off But otherwise, no symptoms, despite the fact that a computer-frying surge flowed through it.

Surges from the grid itself are the real permanent threat to electronics in an EMP attack.

It's nice that the fuses in the Model 3 are almost all solid-state. Virtually instant response to surges, and reset without requiring service. AFAIK, the only ones that aren't are the pack's pyro fuse, and the wire bonds that connect the individual cells to the controller.

Oh yeah, it blew the output stage on my AVR.... connected to all that unshielded speaker wire.

 

[Hock1]

I did some extra research. I was wondering how rights issues which are less than 1-for-1 deal with the problem of "We issued the right to buy 1 share for every 50 shares you already owned, but you only owned 20 shares". Apparently a common way is to offer a "step up privilege", which allows a shareholder to round UP... so the 20-share holder would get to buy one whole share at the discount price.

www.iflr.com/pdfs/web-seminars/rights-offerings/full-presentation.pdf
I also found that nontransferrable rights (can't sever them from the stock and sell them) have been more common than transferrable rights for a while. It's probably also possible to make transferrable rights where the step-up right isn't transferrable (i.e. you only get step-up-rights if you buy yourself... not clear on this but it looks likely it's possible). Transferrable rights help compensate stockholders who can't afford to put in more money. Transferrable rights often must be registered with the SEC and often must be listed on the stock exchange. Subscription rights which are non-transferrable need not be.

If you want to avoid Wall Street, you'd avoid making insured (underwritten) rights offerings; underwritten offerings are for "we really definitely need this much money", as opposed to "we could definitely use some more money but we'd be OK without it".

Since rights are proportional, Mr. Musk would have to put in a whole bunch of extra money if he exercised his rights! He'd have to check his personal margin balances.

I have mentioned in the past, the idea of issuing rights to TSLA shareholders or alternatively, spinning off a part of TSLA, for example China TSLA or the Tesla charging network. The context in which I raised these potential actions is the following:
I believe that there is a very good possibility that there are many, perhaps millions, of shares of TSLA in the system that are undelivered shorts, sold by brokers and hedge funds with " market maker or sponsored access" status. If true, IMO, this would explain the continued incongruent, unrealistic undervaluation of the stock. The issuance of non-transferable rights would force these undelivered shares (FTDs) to be delivered. The sellers of these FTDs would be responsible for providing these rights to the shares they have shorted. That would be impossible, since the rights are a new security that is attached to each of the 173M (+/-) shares outstanding. Therefore, these shorts (to the extent they exist) would need to "settle up" by delivering these shares (or buying them back). (BTW, I know there are periodic reports of FTDS issued by the SEC, but I don't believe them since these numbers are reported, through FINRA, by the very entities that have naked sold the shares).

 

[Pras]

Note that in Q1 P&D report Tesla only said income would be “negatively impacted” instead of plain simple “negative”, which still leaves room for a positive result.

Looking back, it just got more interesting.

“Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted.”

Can we not repeat the same mistake we made just the last week of becoming too optimistic? That was a misjudgment guided by just few data points (model 3 deliveries in Norway, NL, etc).

So, my expectation for earning is negative GAAP net income. The only question is how big the loss is, hopefully small. Cash flow could be drop of $500m from the end of Q4. I would still love to be surprised!!

 

[Pras]

If that’s the case, they will go broke anyway, as over time they will find less and less customers willing to pay whatever Europe comes up with to limit CO2 emissions.

Given Trump is relaxing emission expectations in the US (and he is likely going to be reelected as per 70% of the wall-street execs), FCA can continue to stay on the current path of staying just positive in EU and create sufficient sales so that the production remains at the scale, and keep cost per unit down. They then will generate all the profit from the US or other 'friendly' countries.

 

[scaesare]

T’is a thought crime.

As was that apostrophe abuse.

 

[nursebee]

Can we not repeat the same mistake we did just the last week of becoming too optimistic? That was a misjudgment guided by just few data points (model 3 deliveries in Norway, NL, etc).

So, my expectation for earning is negative GAAP net income. The only question is how big the loss is, hopefully small. Cash flow could be drop of $500m from the end of Q4. I would still love to be surprised!!

This kind of group think request (and how things seem to be many times) is what poisons the forum and ones own personal growth. One should have ones own opinions on matters and be wary if a member of a group collective. Perhaps fading the action of the group is a legit trading endeavor?

Someone is on the other side of every trade. What are their motivations to buy or sell?

 

[Webeevdrivers]

Given Trump is relaxing emission expectations in the US (and he is likely going to be reelected as per 70% of the wall-street execs), FCA can continue to stay on the current path of staying just positive in EU and create sufficient sales so that the production remains at the scale, and keep cost per unit down. They then will generate all the profit from the US or other 'friendly' countries.

Worst case scenario FCA just declares bankruptcy again and goes back to the American and Canadian taxpayers for another bailout. They won’t be allowed to bail.

As for trump being re-elected, I don’t think that is something Putin has decided yet. . But yah, we live in the US a few months of the year and all our neighbours pretty much think he is a messiah so, yep, probably a shoe in. “The people are never wrong”.

 

[Pras]

This kind of group think request (and how things seem to be many times) is what poisons the forum and ones own personal growth. One should have ones own opinions on matters and be wary if a member of a group collective. Perhaps fading the action of the group is a legit trading endeavor?

Someone is on the other side of every trade. What are their motivations to buy or sell?

OK. if it makes you feel better, let me rephrase my comment to the below. You will be too naive if my comment convinced you to change your views. But here is the edit.

"I will not repeat the same mistake I made just the last week of becoming too optimistic? That was a misjudgment guided by just few data points (model 3 deliveries in Norway, NL, etc).

So, my expectation for earning is negative GAAP net income. The only question is how big the loss is, hopefully small. Cash flow could be drop of $500m from the end of Q4. I would still love to be surprised!!"

 

[CorneliusXX]

Can we not repeat the same mistake we made just the last week of becoming too optimistic? That was a misjudgment guided by just few data points (model 3 deliveries in Norway, NL, etc).

So, my expectation for earning is negative GAAP net income. The only question is how big the loss is, hopefully small. Cash flow could be drop of $500m from the end of Q4. I would still love to be surprised!!

Agreed. We know there are a lot of one off expenses in Q1 related to laying off staff, uncertain margins after the price reductions and an increase in inventory.

While there are a couple of potentially offsetting factors with autopilot sales and whatever turns up from this agreement with the FCA there has been no indication that the financials will look pretty this quarter.

We should be bracing for a significant loss. Some of the more reliable forecasters on this site have estimated as much.

 

[WarpedOne]

Some of the more reliable forecasters on this site have estimated as much.

*None* of those estimations included FCA payments.
AFAIK none of those estimations included recognizing any FSD payments as income.

Be gready when all others are fearful ... my 264 buy order executed, yay!

 

[Creekstalker]

Demand can be increased by lowering price or improving value....true for any product with high substitutes in market, I.e. mass market cars.

You are confusing change in demand and change in quantity demanded. Changes in price make the law of demand kick in and people buy more at lower prices and vice versa. A change in demand occurs when some factor other than the price changes (consumer taste, consumer income, price of related goods, consumer expectations, population). You do mention improving value- that causes a change in consumer taste and hence does move the demand curve. Just changing the price does not.

The big demand factors for Tesla are:

Change in Consumer Taste- this is what advertising seeks to achieve, and Tesla doesn't advertise. Every car is an advertisement though, and the Great FUD War is being fought top down (in the investment class- FUD about Musk, Tesla's impending bankruptcy, etc.) and bottom up (directed at consumers- Tesla's viability as a company, fires, wompy wheels, deadly autopilot, etc.). Keeping stores open can help with consumer tastes. If we can just fight to a draw here, reinforcements are inbound in the form of 100,000 cars every quarter. Every one is an ad.

Change in Consumer Income- not much we can do about this, but a recession would suck since Tesla's are still on the expensive side. Unfortunately, economic cycles are inevitable and we are due for a recession just based on history. I really want to see Tesla on solid footing before we get a downturn.

Price of Related Goods- One thing people fail to mention is that Tesla has achieved mass marketability while gas prices have been historically low. $2.60/gallon here in Georgia and people are bitching because this is a two-year high. We need to be rooting for high gas prices. The other related goods are ICE vehicles and the perpetually right-around-the-corner EV competition. I don't really know what's been going on with new car prices, but truck prices have gotten outlandish. This ought to help whenever the Tesla pickup is ready (and why I'm rooting for an attainable pickup rather than a super-expensive futuristic Elon thingy)

Change in Consumer Expectations- This is the demand lever Tesla has been using. "Price raise coming next week", etc. This has been used mostly to good effect, in my opinion. One thing to watch out for, however, is the expectation that buying today will cause consumers to miss out on the next big innovation tomorrow. Also the expectation that waiting until quarter's end can mean lower prices. Tesla really needs to find a lineup and price levels and just let them be for a little while. This makes me see the sense in "model years" used by all other manufacturers. It puts the fear of missing out a full year into the future. I know Tesla does OTA updates, but the new motor in the S/X and the Hardware 3.0 updates certainly might cause some consumers to delay purchase.

The other factor involving expectations is the federal subsidy. Subsidies are technically a supply factor, but in this case they function like demand factors. Teslas are getting $1825 more expensive on July 1st. This expectation about future prices is why I'm not worried about demand until Q3. We'll sell as many as we can get delivered here in the US in Q2. Q3 is going to be the real test, and we might need Europe and China to save our bacon as the lowered subsidy causes (in effect) the law of demand to kick in domestically.

Sorry for the treatise. I just see "demand" and "quantity demanded" used incorrectly/lazily a lot. We want an increase in demand, not an increase in quantity demanded. An increase in quantity demanded means Tesla lowered prices. A change in demand means more people buying the cars at all price levels.

 

[seldon]

What is going on with Tesla Energy? In the past they were supply constrained because of battery production but in Q1 it seems not so much :-( If excess battery capacity from Q1 goes into Powerpacks and Powerwalls how does that impact cashflow and earnings?

 

[KarenRei]

Price of Related Goods- One thing people fail to mention is that Tesla has achieved mass marketability while gas prices have been historically low. $2.60/gallon here in Georgia and people are bitching because this is a two-year high. We need to be rooting for high gas prices.

The price of crude is recovering nicely:

 

[jhm]

We don't even mark that sort of blind hill here. It's blind intersections, blind entrances out of driveways, (or *one lane road* blind curves, and yes, we have some of those) for which you're supposed to sound your horn to allow someone coming from the other side of the corner to know you're there. It's in the regulations in much of the US. Is there someone coming around the corner? Only way to know is to listen for them.

I suspect many countries simply maintain all their roads and all their road signage better than much of the US does. I know California is a lot better than NY.

I would expect that Tesla can do detailed mapping is such hazards. This would be good to have in advance of bad weather that would make such real-time determinations even harder.

 

[dc_h]

So basically Tesla can lower FCA's fine arbitrarily low all the way to zero, if FCA agrees to pay it to Tesla.

So both parties benefit from making a deal, and both parties need to cooperate to make a deal. I think Tesla would have a fair expectation of at least 50% of the fines - more if they were the sole (monopoly) source of zero emissions, which Tesla is.

If Tesla played this smart they'd have auctioned it off to all European carmakers, starting bid at $300m and eliminating the lowest bidder in every round, or something like that. Note that every carmaker would know their own exposure and bid accordingly, without having to disclose it to competitors or Tesla.

Since the pool is exclusive and non-transferrable the bidders would be in a classic Prisoners Dilemma, highest bidder wins it all.

Wouldn't be surprised if the second to last bidder was PSA ...

BTW., wouldn't be surprised if editors of the Financial Times (owned by FCA owners) would be told to ... not emit as much FUD against Tesla, because now it's in the best interest of FCA as well for Tesla to sell as many zero emissions vehicles in 2019 as possible.

Also note where the news broke first: the Financial Times ...

If they limit the deal to FCA and Chrysler, by extension, they are helping the weakest legacy OEM and maximizing pain for the strongest. Leaving a little money on the table to hurt the dirty tricksters is perfect.

 

[KarenRei]

What is going on with Tesla Energy? In the past they were supply constrained because of battery production but in Q1 it seems not so much :-( If excess battery capacity from Q1 goes into Powerpacks and Powerwalls how does that impact cashflow and earnings?

Are you asking about sold systems or unsold systems?

Tesla Energy sales are always a black box until the ER.