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

[Fact Checking]

5.0 or 5.9%?

5.9% indeed.

 

[Mike Smith]

Renault Can’t Expect a Tesla-Style Helping Hand

'This juxtaposition sends a crystal clear message: Carmakers that grew fat and happy producing combustion engine vehicles won’t get any help from the stock market now that they’ve decided to embrace an electric future. Instead the gasoline gang are going to fund these changes themselves and it’s going to be painful.'

 

[dc_h]

And probably you’ll still be wrong.

Although Q1 will only be 83,430, I suspect, when not channeling for bipolar Jonas that 569,420 to 650,000 is my 83% confidence guesstimate.
Fremont 3+Y production ~450,000
Fremont SX production ~ 70,000
Shanghai 3 production 100-120k

I’m a little bearish, relatively speaking, for Q1, but still expect deliveries over 90,000. But once Shanghai and Fremont Y hit stride in Q2, I don’t see how quarterly production and deliveries stay in elder 150,000.

 

[Boomer19]

Capital World Investors just disclosed a 10.6 million shares (5.0%) stake in Tesla:

SC 13G/A​

I believe they are long term investors who were increasing and decreasing their Tesla stake over the years, and they now increased their stake.

the latest i queried from bloomberg is this:

holder | source | position | latest change | file date |
elon | form 4 | 34,085,560 | -17,000 | 12/16/19 |
bai giff | 13g | 13.826.979 | 0 |12/31/19 |
cap group cos | 13f | 10,240,162 | 425,545 | 9/30/19 |
vangaurd | ult-agg | 7,912,514 | 220,550 | 9/30/19 |
blackrock | ult-agg | 6,705,855 | 295,374 | 12/31/19 |
......

recent large + changes:
renaissance tech llc | 13f | 3,938,142 | 3,267,141 | 12/31/19 |
jpm chase | ult-agg | 2,537,599 | 2,179,933 | 12/31/19 |
cap ventures int | 13g | 2,264,941 | 1,115,612 | 12/31/19 |

 

[The Accountant]

I believe these warranty provisions are booked as accrual, I.e. they estimated life time warranty costs at the time of the sale, right?

Have you tried to plot this together with actually warranty expense cash outflows, which are I believe also reported in the Q10?

Given that most warranty expenses are front-loaded if like most high-tech products the warranty claims of Tesla products follow a bathtub curve, this should demonstrate that Tesla's estimates of warranty costs are both reasonable and conservative, and should defang the warranty accrual TSLAQ FUD.

PwC audits both Tesla and Ford and in this year's 10K audit opinion letter for both companies, they included wording on how they audit the warranty accrual. They acutally bring in audit experts with specialized skills in this area to audit the accrual. Here is the wording from the Tesla audit opinion letter (I've bolded sections that I felt were important):

....These procedures included testing the effectiveness of controls relating to management’s estimate of the automotive warranty reserve, including controls over management’s estimate of the nature, frequency and costs of future claims as well as the completeness and accuracy of actual claims incurred to date. These procedures also included, among others, testing management’s process for determining the automotive warranty reserve. This included evaluating the appropriateness of the model applied and the reasonableness of significant assumptions, including the nature and frequency of future claims and the related costs to repair or replace items under warranty. Evaluating the assumptions related to the nature and frequency of future claims and the related costs to repair or replace items under warranty involved evaluating whether the assumptions used were reasonable considering current and past performance, including a lookback analysis comparing prior period forecasted claims to actual claims incurred. These procedures also included developing an independent estimate of a portion of the warranty accrual, comparing the independent estimate to management’s estimate to evaluate the reasonableness of the estimate, and testing the completeness and accuracy of historical vehicle claims. Procedures were performed to test the reliability, completeness, and relevance of management’s data related to the historical claims processed and that such claims were appropriately used by management in the estimation of future claims. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of aspects of management’s model for estimating the nature and frequency of future claims, and testing management’s warranty reserve for a portion of future warranty claims.

 

[LJS22]

Renault Can’t Expect a Tesla-Style Helping Hand

'This juxtaposition sends a crystal clear message: Carmakers that grew fat and happy producing combustion engine vehicles won’t get any help from the stock market now that they’ve decided to embrace an electric future. Instead the gasoline gang are going to fund these changes themselves and it’s going to be painful.'

That message is being heard loud and clear right now. It’s a narrative that’s being spoken about more and more as it seems easier to Be a startup than an existing manufacturer, I don’t believe that to be true as even companies with a seemingly endless amount of funding like Rivian will have some growing pains.

The cool thing about all of this is Tesla is the architect of this new narrative. Through execution and creation of a brand they are putting auto companies back’s against the wall. I expect the push back to continue as the companies Tesla has targeted will not go down lightly.

Fun times ahead! Only sad part is Tesla gave everyone a blueprint on the future of auto manufacturing and until now they’ve been laughing at Tesla.

 

[MTL_HABS1909]

Can anyone explain why we even have pre-market and after hours trading? I never really understood how this is allowed given that not everybody can trade. To me it’s no different than some people having access to non-public information and trading on it before it’s made public. It also seems like it makes it super easy to manipulate a stock.

 

[DrMazeppa]

Interesting price action in pre-market. I guess this is not just max pain. I thought the events yesterday would provide a little stability, plus the rumors on demand in China.

Maybe I should always do the opposite trade of what I expect to happen

 

[theschnell]

Renault Can’t Expect a Tesla-Style Helping Hand

'This juxtaposition sends a crystal clear message: Carmakers that grew fat and happy producing combustion engine vehicles won’t get any help from the stock market now that they’ve decided to embrace an electric future. Instead the gasoline gang are going to fund these changes themselves and it’s going to be painful.'

Thanks for sharing. They had 8 years to be developing and implementing a strategy. The Zoe, while better than nothing, cannot hardly be called an electrification strategy (or if it is, then they are getting what they deserve).

 

[LJS22]

Interesting price action in pre-market. I guess this is not just max pain. I thought the events yesterday would provide a little stability, plus the rumors on demand in China.

Maybe I should always do the opposite trade of what I expect to happen

It’s Friday with a 3 day weekend. Today will be volatile for better or worse. Coronavirus will likely weigh heavy on market today.

 

[KarenRei]

Tesla beginnt zweiwöchige Waldrodung in Grünheide

Excerpt:

Environmental Agency: Tesla begins two-week forest clearing in Grünheide
14.02.20 | 1:45 p.m.
No sooner had the environmental agency given the green light than the first trees fell on the site of the future Tesla site in Grünheide. The ministry made it clear that Tesla could get started "at your own risk" - because an important approval is still pending....

There's some short video clips of the harvesting - they appear to be working 24/7.

 

[Lessmog]

Just throwing this thought out there.

Is it possible that somebody with first dibs on a cap raise like this, knew this was coming a week ago, and thus decided to heavily short the stock @ $960, knowing they'd be able to get the shares back from the capital raise at a lower price? Any chance that somebody close to Goldman Sachs / Morgan Stanley or they themselves pulled this off?

Not sure if this is possible, but it'd almost be the perfect crime:

Good Q4 ER -> Stock goes up -> TSLA Management decides over the weekend to go ahead with cap raise -> By Tuesday GS & MS know it's coming -> They short the stock -> Details get worked out -> Cap raise announced yesterday -> GS & MS get to cover for lower price.

Maybe this is too far out there, but I'm interested in what others think.

Nah, that couldn't possibly be so. No way, never, ever.
Me, I have infinitely absolute faith in the ethics and integrity of the Big Banks.
They are supposed to keep an impenetrable Chinese Wall between analysts and traders, as I remarked yesterday, so there is totally no method by which information could illegally seep through.

And as a last resort we have of course the Shirtseller Enrichment Coalition, populated with persons of the highest moral who continuously circulate between institutions in order to always stay fully appraised of any and all illicit schemes one might think of.

That is how I can sleep soundly at night. That, and the $5 bill under the pillow. Stock movements are magic.
/s

 

[theschnell]

Interesting price action in pre-market. I guess this is not just max pain. I thought the events yesterday would provide a little stability, plus the rumors on demand in China.

Maybe I should always do the opposite trade of what I expect to happen

Why would you assume it's not max pain? That's the primary cause in my opinion. Whether it stays this low in open trading I have my doubts, but I think max pain is definitely why its this low pre-market.

 

[ZachF]

Renault Can’t Expect a Tesla-Style Helping Hand

'This juxtaposition sends a crystal clear message: Carmakers that grew fat and happy producing combustion engine vehicles won’t get any help from the stock market now that they’ve decided to embrace an electric future. Instead the gasoline gang are going to fund these changes themselves and it’s going to be painful.'

It is hilarious now hearing people who previously called you crazy are now using your same talking points they called you crazy for saying...

How long until Tesla is the only major automaker in the green?

 

[ZachF]

Continuous Improvement.......continues:

View attachment 511054

The chart above includes the sales and warranty expenses for all of Tesla's products (Auto, Solar, Storage, etc).
Not only are sales increasing but quality is improving as well, demonstrated by the continuous drop in warranty costs...now at 2.1% of sales.

Shouldn't it be a percentage of fleet size still under warranty?

I imagine warranty costs as a percentage of the fleet size is dropping even faster.

 

[Krugerrand]

This equity raise destroys the 'FOMO retail' narrative. This is $2.3B of institutional money validating the current price.

premarket looks happy.

 

[Fact Checking]

PwC audits both Tesla and Ford and in this year's 10K audit opinion letter for both companies, they included wording on how they audit the warranty accrual. They acutally bring in audit experts with specialized skills in this area to audit the accrual. Here is the wording from the Tesla audit opinion letter (I've bolded sections that I felt were important):

....These procedures included testing the effectiveness of controls relating to management’s estimate of the automotive warranty reserve, including controls over management’s estimate of the nature, frequency and costs of future claims as well as the completeness and accuracy of actual claims incurred to date. These procedures also included, among others, testing management’s process for determining the automotive warranty reserve. This included evaluating the appropriateness of the model applied and the reasonableness of significant assumptions, including the nature and frequency of future claims and the related costs to repair or replace items under warranty. Evaluating the assumptions related to the nature and frequency of future claims and the related costs to repair or replace items under warranty involved evaluating whether the assumptions used were reasonable considering current and past performance, including a lookback analysis comparing prior period forecasted claims to actual claims incurred. These procedures also included developing an independent estimate of a portion of the warranty accrual, comparing the independent estimate to management’s estimate to evaluate the reasonableness of the estimate, and testing the completeness and accuracy of historical vehicle claims. Procedures were performed to test the reliability, completeness, and relevance of management’s data related to the historical claims processed and that such claims were appropriately used by management in the estimation of future claims. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of aspects of management’s model for estimating the nature and frequency of future claims, and testing management’s warranty reserve for a portion of future warranty claims.

Wow, nice find - that should be the death knell to any rational variant of the warranty accrual FUD.

 

[Krugerrand]

Elon himself has said too many vehicles get 5 starts on NHSTA test. They need to be more strict to differentiate the very best.

The results are against all vehicles that did not get a Top Safety Pick Plus.

The vast majority of which are not Teslas.

All you had to do was post the info without adding your usual passive aggressive digs.

Model 3 made the list. The end.

 

[MP3Mike]

It'd be pretty amazing for demand, especially because not a single MiC M3 is on the road yet.

What do you mean not a single MiC Model 3 is on the road? They have delivered a number of cars to employees, and they had delivered some cars before the virus outbreak...

 

[AlexS]

Why would you assume it's not max pain? That's the primary cause in my opinion. Whether it stays this low in open trading I have my doubts, but I think max pain is definitely why its this low pre-market.

They just want to make you sell your shares, so they could buy them cheaper.