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

[Fact Checking]

GF4 tree felling probably delayed by a week:

Tesla-Grundstück in Brandenburg: Gutachten zum Kaufpreis lässt auf sich warten - Berlin - Tagesspiegel

"Das Gutachten zum Grundstückswert des künftigen Tesla-Geländes in Grünheide bei Berlin kommt wohl erst kommende Woche. Das erklärte am Donnerstag Umweltminister Axel Vogel (Bündnis 90/Grüne) im Haushaltsausschuss des Landtags. Ursprünglich wollten die Parlamentarier über das unabhängige Gutachten beraten. Erst nach Unterzeichnung des Kaufvertrags am 16. Januar konnte ein vereidigter Gutachter beauftragt werden, berichtete Vogel. „Wir hätten uns gewünscht, dass das Gutachten früher vorliegt.“"
​

Translation:

The appraisal of the property value of the future Tesla site in Grünheide near Berlin will probably only come next week. That said on Thursday Environment Minister Axel Vogel (Alliance 90 / Greens) in the budget committee of the state parliament. The parliamentarians originally wanted to advise on the independent report. Only after the purchase contract was signed on January 16, a sworn expert could be commissioned, Vogel reported. "We would have liked the report to be available earlier."​

While this is a formality - I'd expect Tesla to pay EUR 50m too if that's the fair price - but Tesla owns the area only once they have paid the price, and there's a deadline when trees can be cut down, and if that is missed then GF4 would face a 6 months delay.

 

[traxila]

Perhaps more of a dip due to elon credibility than the actual cash raise. He spent a good 5 minutes talking about not raising cash and even got irritated at the analysis for suggesting the idea.

I would have serious problems with a CEO that went on record about an upcoming cash raise during an earnings call . That would make no sense at all. Why would you announce something like this before you actually announce it. Would simply drive the price down immediately so that you get a worse deal while everyone waits for you to announce.

Play poker much?

 

[Fact Checking]

Perhaps more of a dip due to elon credibility than the actual cash raise. He spent a good 5 minutes talking about not raising cash and even got irritated at the analysis for suggesting the idea.

That's nonsense - on the day of the conference call Tesla was trading for $570. After that it hit a new ATH of $960 and closed around $750 yesterday.

Those are significant new developments that Elon didn't know on the day he made those statements.

There is a point where dilution is low enough so it's sensible to raise equity, even if they only use the cash for a rainy day fund.

 

[ggies07]

GF4 tree felling probably delayed by a week:

Tesla-Grundstück in Brandenburg: Gutachten zum Kaufpreis lässt auf sich warten - Berlin - Tagesspiegel

"Das Gutachten zum Grundstückswert des künftigen Tesla-Geländes in Grünheide bei Berlin kommt wohl erst kommende Woche. Das erklärte am Donnerstag Umweltminister Axel Vogel (Bündnis 90/Grüne) im Haushaltsausschuss des Landtags. Ursprünglich wollten die Parlamentarier über das unabhängige Gutachten beraten. Erst nach Unterzeichnung des Kaufvertrags am 16. Januar konnte ein vereidigter Gutachter beauftragt werden, berichtete Vogel. „Wir hätten uns gewünscht, dass das Gutachten früher vorliegt.“"
​

Translation:

The appraisal of the property value of the future Tesla site in Grünheide near Berlin will probably only come next week. That said on Thursday Environment Minister Axel Vogel (Alliance 90 / Greens) in the budget committee of the state parliament. The parliamentarians originally wanted to advise on the independent report. Only after the purchase contract was signed on January 16, a sworn expert could be commissioned, Vogel reported. "We would have liked the report to be available earlier."​

While this is a formality - I'd expect Tesla to pay EUR 50m too if that's the fair price - but Tesla owns the area only once they have paid the price, and there's a deadline when trees can be cut down, and if that is missed then GF4 would face a 6 months delay.

The Germans are already showing the Chinese are far superior in execution....

 

[Singuy]

Compared to the timing of the last raise this is pure brilliance. Don’t know why anyone would complain.

It could well be that Musk was truthful about not being able to use the cash faster than Tesla has been. But for a company the size of Tesla now with the operations it has a potential economic downturn would require a much larger cash buffer than they have. This is a great step towards making sure that Tesla is insulated from the buffeting of the macro economic winds. Alternatively, it could well be that they have some plans in store for which they do require even more cash.

Either way, my gutted calls aside (funny yesterday I bought puts because my gut was telling something was up and we needed to go down before we could go up. Of course, my heart made me reverse the position. Sigh. Yet another reason not to trade stocks you are emotionally vested in), I am 100% on board with this move.

Now let’s get this fleet electrified!

Let's be honest, we can't say Elon telling the analysis who suggested raising cash to piss off brilliant and then calling this cash raise brilliant. People here need to pick one and stick to it.

 

[AlexS]

if it gets fully subscribed overnight, watch out shorts

 

[Drax7]

Best time to raise when not in need.
It’s a want versus a need.
Good insurance.
If we close higher on the day, we should double investment

 

[TheTalkingMule]

Nice to see the Board winning an argument every once in a while! Absolutely foolish to bypass this opportunity to raise funds and make an acquisition or two. Elon was being too stubborn about this.

In that light, stock drop is entirely appropriate. Logically though, I bet we close green today.

 

[ZsoZso]

In actual news... today is a momentous day at GF4

@GF4Tesla..️️.build #GigaBerlin. on Twitter

View attachment 510727

Harvesters are standing by, waiting for the signal:

@GF4Tesla..️️.build #GigaBerlin. on Twitter

You mean these guys are standing by (ready for relocation) ?

(these are harvester ants)

 

[mongo]

Let's be honest, we can't say Elon telling the analysis who suggested raising cash to piss off brilliant and then calling this cash raise brilliant. People here need to pick one and stick to it.

I think you're combining the acquisition and debt response with the acceleration response:
Tesla, Inc. (TSLA) Q4 2019 Earnings Call Transcript | The Motley Fool
Acceleration:

Martin Viecha -- Senior Director of Investor Relations

Okay. The next question from institutional investors is, given the recent run in the share price, why not raise capital now and substantially accelerate the growth in production, i.e., build the Gigafactories, investment in Supercharger and customer service?

Elon Musk -- Co-Founder and Chief Executive Officer

Well, we're actually spending money as quickly as we can spend it sensibly. So if there's any sensible way to spend money, we're spending it. There is no artificial hold back on expenditures. Anything that I see that is what looks like it's got good value for money, the answer is yes immediately. But we're spending money I think efficiently and we're not artificially limiting our progress. And then despite all that we are still generating positive cash. So in light of that, it doesn't make sense to raise money because we expect to generate cash despite this growth level. Zach?

Zachary J. Kirkhorn -- Chief Financial Officer

Yeah, I completely agree with that. I think some of our learnings during the Model 3 launch period where we grew too quickly and with too much complexity and it held back our ability to continue to scale and part of the journey that we've been on in 2019 is to underline a series of unintentional bad processes that kind of accumulated in the company over-time.

And so that's kind of what contributes to the reduction in OpEx over the year as we get smarter about that. And now we've laid a good foundation and I think and I agree with you on that we're not holding back on the growth. I mean we have two products, two vehicle products launching right now and that will consume much of the bandwidth of the company to stabilize those over the course of the year. And then looking into next year, we have even more products launching, more factories. So we want to be smart about how we spend money and grow in a way that's sustainable. So we don't fall victim to the mistakes I think we made a year and a half or so ago.

Elon Musk -- Co-Founder and Chief Executive Officer

Yeah, absolutely.

Later, in the live q&a
Acquisition and debt payoff: (redundant in general)

Dan Levy -- Credit Suisse -- Analyst

Hi, good evening. Thank you for taking the question. Just want to follow-up on the question on capital raise. So given the cheaper cost of capital and this is a real competitive advantage for others, why wouldn't it make sense to raise capital to either pay down debt or to pursue acquisitions, especially bolt-ons that could help you accelerate capabilities in autonomous or battery technology?

Elon Musk -- Co-Founder and Chief Executive Officer

I mean, if you know of any acquisitions, we'd love to hear about them. Yes, sure. Sounds great. Who should we acquire?

Dan Levy -- Credit Suisse -- Analyst

Well, I -- given the importance of autonomous, I imagine that this is an area that you would want to accelerate, if you view it as a crucial competitive advantage.

Elon Musk -- Co-Founder and Chief Executive Officer

We're not aware of any one that we'd want to acquire.

Dan Levy -- Credit Suisse -- Analyst

And debt pay down?

Elon Musk -- Co-Founder and Chief Executive Officer

Diluting the company to pay down debt doesn't sound like a wise move.

Dan Levy -- Credit Suisse -- Analyst

Okay.

Zachary J. Kirkhorn -- Chief Financial Officer

I think the broader -- there's been a couple of versions of this question over the course of the call. I think what we're saying more broadly is that, as we look forward on the cash generation from the business relative to what our plans are, we are not constrained.

Elon Musk -- Co-Founder and Chief Executive Officer

Yeah. We're going to pay down the debt just as time goes by and we paid down $0.5 billion worth of debt last quarter. So, we'll just keep steadily paying it down. And yeah, so, yeah. But, yes, I don't think we have any more say on that part, really.

 

[gerebgraus]

That's nonsense - on the day of the conference call Tesla was trading for $570. After that it hit a new ATH of $960 and closed around $750 yesterday.

Those are significant new developments that Elon didn't know on the day he made those statements.

There is a point where dilution is low enough so it's sensible to raise equity, even if they only use the cash for a rainy day fund.

I expected Tesla to raise money. It seems that there is a battery price breakthrough and that has an "unpleasant" side effect that they need to invest to produce batteries and increase production as they will be able to produce competitive products for a much wider segment of the car and energy market. So they need to invest a lot to build the battery and car factories.
I hoped that they will be able to raise money by issuing low cost bonds. That did not work out.

 

[JusRelax]

What I'm upset about is that these swings are all premarket

Totally agree. My broker's trading doesn't start until 9:30 EST.... and it looks like the dip may have all but disappeared by then...

 

[Krugerrand]

What I wish for? Please show me where I said that!

Hey, you can be upset about it, nobody can say anything different. And if I thought I could control the movement of the share price, even I might get involved. But I can't and you can't so that's a non-starter.

A drop to $400 would only upset me if it was caused by a fundamental (negative) change to the company's business. Anything else is just noise. You can get upset about the manipulation but, if you are powerless to change it, it is just part of the game that you have to accept if you want to participate in the innovations and profit that is being created right before our eyes. You can bitch and moan all you want and it's not going to change that at all. In the end, the share price is going to reflect their accomplishments. If you don't think Tesla will be successful, or wildly successful, you should get out now. In that case, there is zero point in hanging around (as a shareholder).

Personally, I'm going to enjoy the ride. I think it will return far better than average with lower risk. But there is some risk, I just don't see it as being too significant compared to the probable returns. I've been wrong before but this is one of the better bets I think.

I obviously agree with the sediment simply from the perspective that if something upsets you the choices are;

Ignore it
Accept it
Do something about it
None of the above and be miserable

I dislike carrying around negativity. It poisons on all levels.

Primarily it’s the skewed philosophy people have about money that has market manipulation going on, angst by shareholders feeling ripped off, monetarily rich and poor being viewed and labeled socially differently, the *horror* of talking about one’s wage/investment...an endless list of examples of money something, something evil, money something, something happiness, yadda, yadda, yadda.

People are slow learners or they just like the payoff they get for being upset, unhappy or negative.

 

[Don TLR]

According to Benzinga, Elon will purchase 10 Million worth of shares and Larry will buy 1 Million.

 

[Krugerrand]

Don't play the game if you don't accept the rules!

Or play by your own rules.
Or change the rules.

 

[ev-enthusiast]

According to Benzinga, Elon will purchase 10 Million worth of shares and Larry will buy 1 Million.

Is Larry buying 1 Million shares or $1 Million?

 

[X Fan]

A lot of news for the market to absorb this morning.....

FWIW: I'm thinking insiders on the street were well aware of this forthcoming capital raise.

 

[Fact Checking]

Here's the prospectus, which got filed with the SEC:

424B5

"Common stock we are offering

2,650,000 (or 3,047,500 shares if the underwriters exercise their option to purchase additional shares in full)."

"We expect to receive net proceeds from this offering of approximately $2.01 billion (or approximately $2.31 billion if the underwriters exercise their option to purchase additional shares in full) after deducting the underwriting discounts and our estimated offering expenses. The estimated net proceeds are based on the assumed public offering price of $767.29 per share, which was the last reported sale price of our common stock on February 12, 2020."​

Does anyone know how the final offering price is determined?

 

[Artful Dodger]

Now I want to buy more shares. But I'm all in!

Can anyone give me pointers on best strategies when collecting empty bottles?

Gas Stations.

 

[gerebgraus]

I expected Tesla to raise money. It seems that there is a battery price breakthrough and that has an "unpleasant" side effect that they need to invest to produce batteries and increase production as they will be able to produce competitive products for a much wider segment of the car and energy market. So they need to invest a lot to build the battery and car factories.
I hoped that they will be able to raise money by issuing low cost bonds. That did not work out.

So one way to interpret this: Dilution is not great, but this is only 1.5% dilution. In exchange Tesla will be able to outcompete not just premium car makers, but also the high end mass market e.g. Camry, RAV4 etc.