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

[Thekiwi]

Pretty good performance today given the broad market selloff in tech stocks

 

[Antares Nebula]

Could be because Bloomberg is behind a PayWall (after third free article you must subscribe)

Interesting trick. Just clear your cookies or restart your browser.

 

[Thekiwi]

Courtesy of @Solar Aussie (thanks!):
Interesting in the context of social media campaigns, a la Cambridge Analytica and Russian interference in US and British elections. Also, I think Tesla is mentioned in the Netflix documentary, The Great Hack, which also discusses some of the above issues.

Watched this the other night - Tesla was actually mentioned, incorrectly, as one of the big data corporations abusing users data privacy for financial gain.

 

[Antares Nebula]

Watched this the other night - Tesla was actually mentioned, incorrectly, as one of the big data corporations abusing users data privacy for financial gain.

So Netflix is our enemy too? Jeez. What is it? Tesla vs the World?!

 

[Green Pete]

Watched this the other night - Tesla was actually mentioned, incorrectly, as one of the big data corporations abusing users data privacy for financial gain.

IIRC she mention Tesla being one of the companies valued as it was because of its data, which to some extent is true. I don't believe she explicitly stated there was something sinister about Teslas use of data but to the broader population I could see that conclusion being drawn by not understanding it all.

 

[JRP3]

Interesting trick. Just clear your cookies or restart your browser.

Or use a private window, and a proxy. Or paste the URL into Outline Outline - Read & annotate without distractions

 

[Singuy]

Watched this the other night - Tesla was actually mentioned, incorrectly, as one of the big data corporations abusing users data privacy for financial gain.

Yeah I was going to mention this here. I guess if Elon were to go balls deep for cash, there's no stopping Tesla to sell targeted adds to your cell phone given where you drive and what you visit often.

It will also probably destroy the company. I see some bean counter doing this after Elon leaves Tesla if that ever happen.

 

[Alactronic]

New member to forum and recent owner of the stock... had been planning on lurking forever, but felt the need to chime in on the dividend discussion, because I believe both sides are right but there is a little bit of talking past each other.

I think the hang up is on the term "dividend" - lets just call it "future cash flow returned to shareholders". It is irrefutably correct that a stock's intrinsic value is the discounted value of all future cash flows returned to shareholders - whether via dividend or liquidation. Acquisition by another company is just the transfer of rights of those future returned cash flows + the capitalized values of synergies that acquiring company can achieve via strategic combination and duplicate cost reduction.

Investing is the act of buying a stock below what you believe the intrinsic value to be - any other form of purchase is speculation.

What some arguing against the dividend value are saying is basically that Tesla will in perpetuity always have internal investment opportunities that yield better return than returning the cash to shareholders - similar to the multi-decade situation with Berkshire Hathaway under Buffett. However, this too is recursive - you re-invest the cash flow internally because it generates more expected discounted future cash flow value than returning the cash today as dividends would give shareholders.

Both sides are right - Tesla will likely continue to find opportunities to reinvest above and beyond the value of returning capital to shareholders for the forseeable future. However, thinking of the future (think 100+ years) owner of our shares, whether they be our heirs on Mars or the people we sold our TSLA stock to, they will want those dividends after Tesla has less attractive internal investment opportunities.

 

[Alactronic]

Addressing buybacks too - buybacks add value to existing when the company repurchases shares below intrinsic value, and they destroy value for existing shareholders when the stock is purchased above intrinsic value.

 

[Thekiwi]

If Elon is reading this thread there is a golden opportunity here, to declare a brand new class of shares called INFINITY Shares, which are exactly the same as existing shares, but have zero entitlement to dividends. They could call them 'sod all preference shares'.
Apparently a lot of people would buy these as they are effectively no different to those silly old fashioned shares that are entitled to dividends.
BTW I own a very profitable company. I am happy to issue non-dividend paying shares to anybody willing to buy them. I'll keep the only two dividend-paying shares, but thats not important in any way...

This is nonsense.

A share value is based on its share of future expected CASFLOWS and Net Assets, not dividends.

If Tesla issued a secondary class of shares that had the same amount of ownership of the company as a regular existing share (but no future dividend rights), then those new shares would be worth almost the same as current shares. less a small amount based on dividend payment level (which are currently non-existing).

Let’s say Tesla issued this new class of shares on a 1:1 basis with existing shares, so they make up 50% of outstanding shares. now we assume Tesla continues growing over ten years and by 2030 is generating $10 Billion in net income, and is paying out $5 Billion in dividends. If we assume a very conservative earnings multiple of 20x PE, the market cap would be $100 Billion.

So under your theory where shares with no rights to dividends should be worth nothing - one could buy up half of a company (effectively a controlling stake) with a $100 Billion market cap and generating $10 Billion in annual net income for next to nothing? Do you also have some bridges for sale by any chance?

======

Also, in regards to your profitable company where you hold 2 shares and are more than happy to issue non-dividend receiving shares, I would be happy to acquire 3+ shares. I now am controlling shareholder, my first action is to remove you from the business and approve sale of business to myself for $1.

 

[Artful Dodger]

"Our most important assumption is [demand for] electric vehicles, given the battery-cost declines and the new chemistries coming out of Tesla. We believe the average electric-vehicle price will drop below the average auto price in the next two years. In five years, a Toyota Camry will still be around $25,000, but a 200-mile-range electric vehicle will probably be $15,000."

Tesla Model 1

 

[StealthP3D]

New member to forum and recent owner of the stock... had been planning on lurking forever, but felt the need to chime in on the dividend discussion, because I believe both sides are right but there is a little bit of talking past each other.

I think the hang up is on the term "dividend" - lets just call it "future cash flow returned to shareholders". It is irrefutably correct that a stock's intrinsic value is the discounted value of all future cash flows returned to shareholders - whether via dividend or liquidation. Acquisition by another company is just the transfer of rights of those future returned cash flows + the capitalized values of synergies that acquiring company can achieve via strategic combination and duplicate cost reduction.

Investing is the act of buying a stock below what you believe the intrinsic value to be - any other form of purchase is speculation.

What some arguing against the dividend value are saying is basically that Tesla will in perpetuity always have internal investment opportunities that yield better return than returning the cash to shareholders - similar to the multi-decade situation with Berkshire Hathaway under Buffett. However, this too is recursive - you re-invest the cash flow internally because it generates more expected discounted future cash flow value than returning the cash today as dividends would give shareholders.

Both sides are right - Tesla will likely continue to find opportunities to reinvest above and beyond the value of returning capital to shareholders for the forseeable future. However, thinking of the future (think 100+ years) owner of our shares, whether they be our heirs on Mars or the people we sold our TSLA stock to, they will want those dividends after Tesla has less attractive internal investment opportunities.

Thanks for weighing in with what is obviously the correct interpretation. If Tesla successfully navigates the challenges in front of them, my personal belief is they will be making so much profit in only 20-25 years that re-investing all of it would be problematic. It is at the point that a company believes they can create more value for its shareholders by returning a portion of the earnings than by re-investing all of it that they start paying dividends. As long as opportunities are lucrative and productive, they will not be paying dividends.

It's well known that a single organization can have trouble dealing with vast sums of investable capital in an efficient manner. But as long as there are obvious areas the money can be put to good use growing their business and carrying out their mission, they will not be paying any dividends. The gains will all be capital gains. Apple holds onto more money than what I would like to see (which is one reason of many I am not invested with them).

 

[Carl Raymond]

Christ...people still claiming dividends are optional. This is just not correct economic theory. if you buy shares in a stock not because it will EVER (before the heat death of the universe) pay a dividend back to the stockholders, but PURELY because you think the value will go up and you can then sell it eventually to someone who will pay more...
thats a ponzi scheme. Literally. it *is* the absolute definition of it. Its like tulipmania,
Whats the rationale for the person who buys the stock from you when you want to 'cash in'? that they can offload it to another...and another... this is musical chairs, and not stock investment.

I think TSLA is an awesome investment and I don't want dividends before 2030, but I value the stock highly BECAUSE I believe they will be able to pay staggeringly high dividends in 2030. I'm an investor, not a 'trader' or a gambler.

Wow. 17 disagrees.

I’ve read the counter args and they all appear to confuse the receiving of dividend with the concept of dividend. Dividend is just another word for reward (without having to part with it). If there is no reward for having a share, why pay good money for it? It’s valueless.

The counter people need to imagine a world where dividend is outlawed. Puff, the stock market also vanishes. To disagree with your statement cliffski, they have to be able to show that shares have value without the existence of dividend (reward). Bitcoin achieves it, (some believe) but I can’t imagine hundreds of stocks being able to pull that off.

 

[KarenRei]

 

[EVNow]

If Elon is reading this thread there is a golden opportunity here, to declare a brand new class of shares called INFINITY Shares, which are exactly the same as existing shares, but have zero entitlement to dividends. They could call them 'sod all preference shares'.
Apparently a lot of people would buy these as they are effectively no different to those silly old fashioned shares that are entitled to dividends.
BTW I own a very profitable company. I am happy to issue non-dividend paying shares to anybody willing to buy them. I'll keep the only two dividend-paying shares, but thats not important in any way...

Is "Monalisa" worth nothing - because it doesn't "pay dividends" ? How about gold ?

Some assets are purely worthy of holding because of intrinsic value. Not sure about your company, though.

 

[dakh]

Yeah not sure what to make of this. I do own some ARK etf. Maybe I'm just not a radical enough thinker, but this statement makes me worry me that she is a little far off the wagon.

Are battery costs really expected to go down that far/fast? One would expect if that is the case, that Tesla's margins should increase over the next few quarters at a notable rate.

Maybe they got some insight into what the next gen battery tech is going to look like (battery investor day). It isn't even necessary to have any major breakthroughs in cell composition itself. If they simply make a more efficient cell and pack producing equipment (say, taking advantage of much larger scale at GF plus some other innovations), that alone can yield quite a bit of savings.

Now mind you, as an investor, I absolutely do not want, at least in the short/medium term, for some major breakthrough to come in and make batteries 10x cheaper. This will be a home free ticket to all the other auto manufacturers that didn't invest anything into any electric car tech. Making electric cars will suddenly become very easy and it'll just be a rush to the bottom commodity type deal.

 

[Krugerrand]

Based on your Catvatar, may I suggest an analgesic for your skin condition?

CH33RS!

No, actually you can not.

But do not fear for me, when TSLA starts paying dividends I’ll buy myself a bloody fur coat. I won’t need it on my private island, but it might come in handy when I’m tootling around on my yacht.

 

[Krugerrand]

So Netflix is our enemy too? Jeez. What is it? Tesla vs the World?!

Um...yeah. Where have you been?

 

[JRP3]

Some in depth investigation by Niedermeyer

Both Savolainen and a Canadian owner named Roger-Pierre Gravel are considering legal action against Tesla over weak paint on their Model 3s, an issue that has inspired lengthy forum threads with many reports of prematurely chipped paint and prompted tens of owners around the world to contact Savolainen and Gravel in hopes of coordinating a global response.

Finnish Tesla Model 3 Inspection Reveals Soft, Thin, Under-Spec Paint

 

[sparcs]

Wow. 17 disagrees.

I’ve read the counter args and they all appear to confuse the receiving of dividend with the concept of dividend. Dividend is just another word for reward (without having to part with it). If there is no reward for having a share, why pay good money for it? It’s valueless.

The counter people need to imagine a world where dividend is outlawed. Puff, the stock market also vanishes. To disagree with your statement cliffski, they have to be able to show that shares have value without the existence of dividend (reward). Bitcoin achieves it, (some believe) but I can’t imagine hundreds of stocks being able to pull that off.

It sounds less like confusion and more like the earlier poster indicated that this is about talking past each other.

If we use this more abstract notion of dividend as a reward, nobody is disputing that Tesla will give some type of "reward" in an unknown format at some unknown date. In the near term the "reward" potentially is share price appreciation. There could be many other types of "rewards" at a later date.