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

[Mike Smith]

Pertinent Elon tweets from today:


Elon: "Tesla team is working hard on increasing Powerwall production"

Elon: "Significant improvements coming to S/X air suspension soon via software update! Will simultaneously improve performance handling & ride comfort & enable user customization of height & damping, geocoded for relevance."

Teslarati: 'Tesla Model S shows drastic consistency improvements after update, ties Taycan Turbo S in Car & Driver test'
Elon: "More software improvements coming"

Elon: "Tesla is developing a NN training computer called Dojo to process truly vast amounts of video data. It’s a beast! Please consider joining our AI or computer/chip teams if this sounds interesting."

Elon: "The FSD improvement will come as a quantum leap, because it’s a fundamental architectural rewrite, not an incremental tweak. I drive the bleeding edge alpha build in my car personally. Almost at zero interventions between home & work. Limited public release in 6 to 10 weeks."

Tweeter: 'Will it be able to do roundabouts?'
Elon: "Not perfectly at first, but yes. Will take maybe a year or so to get really good at roundabouts worldwide. The world has a zillion weird corner cases."

Tweeter: 'Will it be able to get around potholes to avoid possible damage..?'
Elon: "Yes! We’re labeling bumps & potholes, so the car can slow down or steer around them when safe to do so."

Tweeter: 'Elon, say something about the two factor authentication man ... is it happening? Last year it depended on some IT system overhaul ...'
Elon: "Sorry, this is embarrassingly late. Two factor authentication via sms or authenticator app is going through final validation right now."

Tweeter: 'At one point there was silly talk of making the horn honk like a goat -- is it an Easter Egg or wide release software update?
Elon: "Also definitely coming haha. Will only be on relatively recent cars, as we didn’t have an outside speaker until about a year ago. Can change inside sound easily."

Tweeter: 'Dojo is used to increase training speed & enable self-supervised learning. This is at server side, so no upgrades required on individual cars (IIRC)'
Elon: "Exactly"

Tweeter: 'they use the cars to sort through clips. so for example they say “send me videos that match this neural net detector of a “parking meter” and then the car does inference on the footage to find anything matching and upload if needed
Elon: "Yup"

 

[Mo City]

Weekend ATH cheers!

And with that, Elon tweeted about something I believe people are not paying enough attention to:


Here is my ATH hyper bull case:

• Tesla is going to become the new Google+AWS for the era of software 2.0

What is means:

• AWS generated 35B revenue last year and contributed more than half of AMZN’s profit, it’s a very lucrative business model.
• I think Cloud computing for Software 2.0 (aka AI in hype word terminology) would be even bigger pretty soon.
• Tesla would have opportunity to provide services on top of their physical world understanding, also able to provide computing 2.0 as service.

Here is why Tesla:

• Cloud computing for AI is still an area everyone is fighting for, but no clear winner yet.
• Tesla with FSD chip and now Dojo will be one of the best platform for inference and training for image/video understanding, aka physical world understanding.(THE best if you ask me)
• Tesla would have millions of eyes on the streets all the time. With Tesla’s data source lead, they will become the leader in real world understanding. Google’s attempts for physical world understanding for example street view etc would look like toys in comparison.
  
• Tesla with the vast amount of real world data, combined with battle tested hardware would be able to attract best talents to join (their mission statement helps too). This alone would be a very important factor for success.

I suspect when Tesla decided to design their own FSD chip, they already have this in mind. Marginal cost for producing chips is very low compared to R&D costs, once they have the capacity to build data centers with their own chip, the margin would be astonishing.

I assign this to a hyper bull case, not because I doubt Tesla’s capability of doing it, only because it seems to not align well with the current mission.

It might happen when Tesla expand their mission again though, let’s see.

A guy on Twitter claiming to have inside knowledge posted something similar to this a few months ago. It's a nice thought.

 

[Artful Dodger]

SpaceX floating equity at 44 billion for latest round.

S&P 500 index funds need to buy around 26M shares over the course of 6 days. At current prices, that's $42.9B

Do you think 'prices' will remain 'current' when the bull whales start trashing those tail flukes?

But I don't think Elon's interested in selling SpaceX, not when Starlink is about to be commercialized. That side of the biz alone could be $100B next year.

Cheers!

 

[woodisgood]

"Impactful event", like say, S&P 500 inclusion?

Cheers!

Wouldn’t that be fun. In this scenario, if funds would be doing their buying during the time of least shenanigans, week of Aug 24-28, the announcement would have to come next week.

 

[Amon]

I'm trying to explain the split mechanics to myself, which means explaining it to myself as if I were a child. (Not sure if that's Denzel's 2 year old or Groucho's 4 year old).

At any rate, Tesla Investor Relations says:
Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020.

Tesla is literally giving every shareholder 4 additional shares for every 1 share they own. The par value of TSLA shares is, I believe $0.001 each. So, if you own 100 shares you get 400 more, worth $0.40 total, as a dividend from the company. But the company's worth hasn't materially changed.

If you own shares on Aug 21 (I assume at close of trading), you will get the additional shares a week later (after close Aug 28). Thus, the effective date for trading is the following market open, Aug 31 (after the weekend).

Of course, Tesla is not saying what these shares should be trading at. Mr. Market will continue to value these shares collectively. Since there is no capital raise associated with these new shares there is no dilution. Since the par value is so small, the cost to Tesla in issuing them is insignificant. The $0.001 par value is low and TSLA shares are not likely to be like pre-1982 pennies where the value of the copper in a penny is worth more than $0.01.

So, what happens is that at market open on Aug 31, Mr. Market will collectively divide Tesla's previous friday's market cap by the new number of shares and that's what shares will initially trade at - although in practice that won't exist for even a micro-second as this is a fully liquid market. But, ignoring standard market liquidity changes, what in practice happens is that Mr. Market will value 500 new shares on Monday the same as it valued 100 old shares last friday because those both represent the same ownership percentage of Tesla, the company.

Tesla is still not controlling the price of a share, whether pre- or post-split. In the US, Federal taxes are based on what you sell for minus the cost basis and timing of those transactions, so the split does not affect even short or long term considerations. I think now that Florida repealed its "intangible personal property" tax in 2007 there are no longer any US states that tax individuals based on what they own rather than what they transact (real estate is the obvious exception across the board), and even then the value of what you own doesn't change by having it in more pieces, because after all you still own the same percentage of Tesla as a company that you owned before.

The rest is all market mechanics based on the percentage of ownership in Tesla, the company. So, a single standard US option contract for 100 shares also gets split into five option contracts, with strike prices cut to 1/5, and thus Mr. Market will value those accordingly in terms of trading. I say "Mr Market will value those" because it's important to recognize that no-where in this action is any one person, company, or entity setting the price of TSLA shares nor the price of option contracts on TSLA shares.

Dear Smorgasbord, this sounds logical to me, but how do you know that the par value of each new Tesla share is 0.001$ ?
These things should have been mentioned in the official Tesla filling so that even Broker worldwide would have known how to deal with the split right now. But that's unfortunately not the case right now, especially in Germany. If there would be a official statement in regards to the 0.001$ par value then this would help a lot of people here in Germany. The 26% taxation on 0.001$ is no problem, but the same 26% on 1650$ or 4/5 (80%) of 1650$ will be an huge issue.

Is there any official source for the par value?

 

[Ipe]

Dear Smorgasbord, this sounds logical to me, but how do you know that the par value of each new Tesla share is 0.001$ ?
These things should have been mentioned in the official Tesla filling so that even Broker worldwide would have known how to deal with the split right now. But that's unfortunately not the case right now, especially in Germany. If there would be a official statement in regards to the 0.001$ par value then this would help a lot of people here in Germany. The 26% taxation on 0.001$ is no problem, but the same 26% on 1650$ or 4/5 (80%) of 1650$ will be an huge issue.

Is there any official source for the par value?

The existing shares are declared by nominal value on the current balance I suppose (and on the IPO). And the new shares are of the same type so should have the same nominal value.

 

[Tslynk67]

Subject: LEAPs: Are you taking insurance and/or making income through diagonal spreads?

SP & Date combination you are inclined to act on those LEAPs?

• It likely is the case that there's a share price, at a given date where you are willing to part with your LEAPs.
• This could be converting your LEAPs into shares.
• That can be done by writing a call at a little higher strike price for the same expiry, or perhaps by exercising the LEAPs, or outright selling the LEAPs.

Making a play on such thresholds?

• Are you guys using such price and time points to make some money, or you can see that as buying some insurance, by selling calls at such strike and dates? A relatively much more near dated LEAPs with much higher strikes than the principal LEAPs are good candidates to sell.
• Might not be a lot of money, but can be relatively significant when the stock goes down.
• And given LEAPs are relatively longer term, there almost always will be times when the stock goes down non-insignificantly. In such cases, it's the near dated calls with higher strikes that drop much more than the actual LEAPs you are holding.

@FrankSG IIRC as a reply to the price where each of us would like to part with the shares, you said that if SP reaches $2500 within a few weeks from now, you would be converting the LEAPs to shares. Have you been selling diagonal calls accordingly, or considered those? Perhaps Sep-18: $2500, or Jan-2021 $3500 C, just to give some examples.

@Lycanthrope ?

At the moment I don't sell LEAPS, but have been known to sell some weeklies, but only those which are the right combination of "safe" and with a reasonable premium. However, this is a risky prospect with the current volatility and I did have to re-buy a couple of calls a few weeks back at a big loss, but then (in principle) covered that cost by buying an October 16 ITM - that looked like a poor choice though until Tuesday evening.

Why not sell LEAPS? In my case it's because I loan my core shares to my company every year-end for accounting purposes and if I had contracts against them, then I'm not sure I'd be able to do so.

Otherwise I'd be OK to sell calls at $3500, but would be happier if we had some $4500 strikes, or $900 in new money.

 

[Tslynk67]

Those of you with high price GTC sell orders to stop the shares from being lent out:

1) What price did you choose? LIkes $5,000? More/less?
2) ETrade doesn't do forever GTC. 30 or 90 days are default, but I can set something a year or more out. Thoughts?
3) Is this really worth the bother?

TIA!

Here you go - normally this is classified info, but with the old splitterino I'll be reformulating, and raising...

 

[Todd Burch]

I've decided that even though we didn't (3.) close above $1700 today but we did have an ATH close, that I would post that picture after all. I hope you all are happy.

While I appreciate the effort, I look quite a bit better in a tutu and leotard.

 

[Tslynk67]

Yeah, it does require setting aside the better part of a day, but good excuse to get together with my buddies and drink beer while we brew beer. And a when we do 20-30 gals at a time at least it lasts a little while...

Wow, that' enough for like a whole week!

 

[Tslynk67]

S&P 500 index funds need to buy around 26M shares over the course of 6 days. At current prices, that's $42.9B

Do you think 'prices' will remain 'current' when the bull whales start trashing those tail flukes?

But I don't think Elon's interested in selling SpaceX, not when Starlink is about to be commercialized. That side of the biz alone could be $100B next year.

Cheers!

Not to mention some passive funds will likely grab a few million too.

Just looking back at yesterday's chart, that effort of the MM's to try for $1600 toward the end was for realz, but the recovery bounce was BAF and bodes well for Monday I feel.

 

[samppa]

weekend OT

Omg, another Tesla killer is coming

Home

 

[Artful Dodger]

Not to mention some passive funds will likely grab a few million too.

Just looking back at yesterday's chart, that effort of the MM's to try for $1600 toward the end was for realz, but the recovery bounce was BAF and bodes well for Monday I feel.

Indeed, I expect its those larger non-index funds doing much of the buying this week, although I don't think they're trying to front-run the index funds. I think mostly, they'll outperform the index funds as buy'n'hold investors (which is their selling point to clients)

Cheers!

 

[CorneliusXX]

While I appreciate the effort, I look quite a bit better in a tutu and leotard.

You talk a big game but the proof of the pudding is in the eating.

 

[LN1_Casey]

Some great analysis of TSLA.

 

[Nuclear Fusion]

What a relief on the stock split timing.
Would’ve hated for S&P funds to be simply buying back to the price peak of 4 weeks ago
What are the estimates of the percentage addition for S&P inclusion?

 

[EVMeister]

You talk a big game but the proof of the pudding is in the eating.

This isn't a pudding I want to eat.

 

[Artful Dodger]

"Walk in the air on the west, south, and east of the Shanghai Tesla gigafactory 3" | Wu Wa

 

[Artful Dodger]

"(Aug 13) Continuous high temperature above 95°F, unable to slow down Tesla Gigafactory 3" | Jason Yang

 

[smorgasbord]

Dear Smorgasbord, this sounds logical to me, but how do you know that the par value of each new Tesla share is 0.001$ ?
These things should have been mentioned in the official Tesla filling so that even Broker worldwide would have known how to deal with the split right now. But that's unfortunately not the case right now, especially in Germany. If there would be a official statement in regards to the 0.001$ par value then this would help a lot of people here in Germany. The 26% taxation on 0.001$ is no problem, but the same 26% on 1650$ or 4/5 (80%) of 1650$ will be an huge issue.

Is there any official source for the par value?

tsla-ex31_1396.htm
https://fintel.io/so/us/tsla/cibc-world-markets1