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

[Todd Burch]

BBC: BMW shares tumble after profit alert

BMW shares are down more than 4% in Frankfurt.

Pfft. 4%? You call that a tumble? Most of my life savings is in TSLA. I'll see your 4% and show you another 11% on top of that, only for MY auto stock it'll be for imaginary reasons.

 

[AndyH]

We appear to be at a roll the dice moment. Please correct me if wrong, but the following *could* happen...

Fewer stores closing mean less severance to pay.
A run on cut price FSD option pulls in a tidy sum.
30K cars delivered in the last 15 days of the quarter.
Voila, a profit the market has not priced in.
Voila, back on track for S&P inclusion.
Simultaneously, judge rules in favour of Tesla and admonishes the SEC.
Institutional investors are no longer restrained by the SEC cloud and buy up big.
Brexit fears evaporate or are put on hold.

Too optimistic?

Why not be optimistic? Tesla has given us lots of good surprises in the past. The same can hardly be said about the politicians in charge of Brexit though.

 

[Antares Nebula]

I had my bank explore the possibility of giving me a loan based on my tsla shares. It is pretty similar to a margin loan you get at the brokerage except with mandatory principle paydowns.

Elon started borrowing a long time ago from his stock. So that sp target is fairly low. About $100 is what comes to my mind without checking. Add a run of a mill 20% buffer on it and you are looking at $80 before he gets margin called.

Sure there are newer loans recently, but the impact should not be as big.

So

I looked at this too. My bank was willing. The rate was only a few percentages below (6 vs 8). I didn't think it was worth the inconvenience. I may revisit later if TSLA trades higher and if I increase my margin position. I mean, if you're like Musk with billions or millions, those few percentage points matter, otherwise may be more hassle, esp if you're margin fluctuates a lot.

 

[Unpilot]

Pfft. 4%? You call that a tumble? Most of my life savings is in TSLA. I'll see your 4% and show you another 11% on top of that, only for MY auto stock it'll be for imaginary reasons.

I wonder how many times I can "go all in" with Tesla? I mean Today I will make another large (for me) purchase.
This after I told myself NO MORE YOUR OVEREXPOSED!

But this sale is just to good to pass...plus I truly believe in the mission.

 

[Todd Burch]

I wonder how many times I can "go all in" with Tesla? I mean Today I will make another large (for me) purchase.

If I only had a square to spare...or more accurately, if my wife would let me spare a square...

 

[Fact Checking]

If you’re trying to raise cash midnight Wednesday means Friday

Tesla requiring more cash is basically only realistic in the case they were surprised with much higher Q1 demand than expected, and built a lot more Model 3's that temporarily depleted cash reserves.

Here's a quick back of the napkin estimate:

• While Tesla can normally delay a portion of the material and parts costs of a new car built, it's only about $20k per Model 3 - they have to pay another ~$25k for materials, labor and general corporate overhead.
• Tesla had $3.6b of cash on hand at the end of Q4, and paid back $0.9b in bonds, which left $2.7b.
• Cash below $500m is generally not recommended - so effective working capital was maybe $2.2b.
• This, all other things equal, allows for the production of about 88,000 Model 3's.
• But all other things are not equal: Tesla delivered 25k units in January and February in North America alone, which generated income of +~1.5b - and in March deliveries picked up in Europe as well.
• Tesla also has various deep credit lines they can draw upon, secured by cars already produced.

(@ReflexFunds or @schonelucht might want to correct the numbers.)

So either you are arguing that Tesla production is already higher than 100,000 units with two weeks left from the quarter, or they are not cash constrained at all.

"Weak Q1 demand" and "cash shortage" are not compatible.

 

[Aieukl378]

I figure Elon's tweeting habit has cost investors around $100 or so per share and of course we don't know how the latest Twitter mess will play out but with around 172.72 million shares currently outstanding, it has probably cost investors around $1.72 billion and as Elon owns about 20% of TSLA which I guess is about 3.5 million shares, his personal loss due to Tweeting is around $350 million. This seems like a very expensive price to pay for messing around on Twitter...what do you think?

 

[larmor]

Media is going hard after Tesla again today with Cramer’s harsh criticism of Musk and siding with the SEC.

Media-as represented by CNBC is entertainment, much like topgear...

 

[Causalien]

I looked at this too. My bank was willing. The rate was only a few percentages below (6 vs 8). I didn't think it was worth the inconvenience. I may revisit later if TSLA trades higher and if I increase my margin position. I mean, if you're like Musk with billions or millions, those few percentage points matter, otherwise may be more hassle, esp if you're margin fluctuates a lot.

In my case, the brokerage's margin loan (3.25) is lower than bank's stock loan.(3.75)

 

[pnungesser]

He has numerous past ties to right/libertarian-leaning think tanks often with notable Koch Brothers ties, including Cato Institute, Fraser Institute, Templeton Foundation, Mercatus Center, and Institute for Humane Studies.

Gosh, that might be the reason.

True libertarians would certainly support Musk and Tesla.

 

[sundaymorning]

Media is going hard after Tesla again today with Cramer’s harsh criticism of Musk and siding with the SEC.

Are we talking about the same Cramer that has no regard for the law, the same one that has gone on television to articulate how proud he was to manipulate the media by spreading FUD and stating that “the SEC doesn’t understand” stuff like this so wouldn’t go after him?

 

[ItsNotAboutTheMoney]

Tesla requiring more cash is basically only realistic in the case they were surprised with much higher Q1 demand than expected, and built a lot more Model 3's that temporarily depleted cash reserves.

Here's a quick back of the napkin estimate:

• While Tesla can normally delay a portion of the material and parts costs of a new car built, it's only about $20k per Model 3 - they have to pay another ~$25k for materials, labor and general corporate overhead.
• Tesla had $3.6b of cash on hand at the end of Q4, and paid back $0.9b in bonds, which left $2.7b.
• Cash below $500m is generally not recommended - so effective working capital was maybe $2.2b.
• This, all other things equal, allows for the production of about 88,000 Model 3's.
• But all other things are not equal: Tesla delivered 25k units in January and February in North America alone, which generated income of +~1.5b - and in March deliveries picked up in Europe as well.
• Tesla also has various deep credit lines they can draw upon, secured by cars already produced.

(@ReflexFunds or @schonelucht might want to correct the numbers.)

So either you are arguing that Tesla production is already higher than 100,000 units with two weeks left from the quarter, or they are not cash constrained at all.

"Weak Q1 demand" and "cash shortage" are not compatible.

They have suppliers to pay. They have to keep moving inventory to pay them, or they'll be using up their credit line.

So a key reason for extending the "sale" isn't necessarily to get more orders, but to be able to convert orders into full March payments. For example, I have an order, but I'm in no rush to have the car delivered, so I won't have a March delivery. So my order is currently worth $2.5k to them, but won't help them pay suppliers yet. (In fact, I'm still not really confident that Tesla can lower production costs on the SR enough to allow them to invest in not systemically sucking , and every day consider canceling my order. Structural suck example: my order page shows an appointment date. I haven't even filled in all the necessary information. And, the appointment says Austin, Texas. I'm in Maine and would have the car delivered.)

 

[Dan Detweiler]

Media is going hard after Tesla again today with Cramer’s harsh criticism of Musk and siding with the SEC.

Just more hot air from the guy that wrote the book on how to short stock and manipulate the media to your advantage. Utter BS.

Dan

 

[Yeomen]

I had my bank explore the possibility of giving me a loan based on my tsla shares. It is pretty similar to a margin loan you get at the brokerage except with mandatory principle paydowns.

Elon started borrowing a long time ago from his stock. So that sp target is fairly low. About $100 is what comes to my mind without checking. Add a run of a mill 20% buffer on it and you are looking at $80 before he gets margin called.

Sure there are newer loans recently, but the impact should not be as big.

So

I am very confused by all of this and have seen a wide range of projections

From The Tesla Registration statement it says

directors and executive officers may pledge their Company stock…as collateral for loans and investments, provided that the maximum aggregate loan or investment amount collateralized by such pledged stock does not exceed twenty-five percent (25%) of the total value of the pledged stock.

That then make people assert the idea that his borrowing and margin calls would be much higher as stated here

it seems reasonable to guess that his current loans total approximately $800 million, which means—according to the new proxy—they’d need to be collateralized by $3.2 billion in Tesla shares. As the proxy notes Musk has currently pledged 13,774,897 of his 37,853,041 shares to support those loans, it implies that at a share price below $232.30 (assuming a current balance of $800 million),

To me, as an investor, long or short, knowing this number is the most important piece of information possible

 

[Navin]

I am very confused by all of this and have seen a wide range of projections

From The Tesla Registration statement it says

directors and executive officers may pledge their Company stock…as collateral for loans and investments, provided that the maximum aggregate loan or investment amount collateralized by such pledged stock does not exceed twenty-five percent (25%) of the total value of the pledged stock.

That then make people assert the idea that his borrowing and margin calls would be much higher as stated here

it seems reasonable to guess that his current loans total approximately $800 million, which means—according to the new proxy—they’d need to be collateralized by $3.2 billion in Tesla shares. As the proxy notes Musk has currently pledged 13,774,897 of his 37,853,041 shares to support those loans, it implies that at a share price below $232.30 (assuming a current balance of $800 million),

To me, as an investor, long or short, knowing this number is the most important piece of information possible

The fact that Elon is the largest shareholder, he has borrowed against his shares and his comp plan is tied to TSLA valuation doing well (which is tied to the broader mission of getting to Mars) makes me really happy that he does care about share price as much as me.

 

[MP3Mike]

To me, as an investor, long or short, knowing this number is the most important piece of information possible

Why? What does Elon's personal financial situation have to do with Tesla's performance? Do you expect him to illegally manipulate the stock if it gets too close to a margin call price? Couldn't he just pledge more shares if necessary?

 

[AudubonB]

I think that as soon as a certain Mod gets out of bed you are going to find this thread merged with the general one.

 

[jerry33]

Why? What does Elon's personal financial situation have to do with Tesla's performance? Do you expect him to illegally manipulate the stock if it gets too close to a margin call price? Couldn't he just pledge more shares if necessary?

Elon stands to make a whole lot if Tesla performs well. His compensation from Tesla is based on that.

 

[mrdoubleb]

Tesla requiring more cash is basically only realistic in the case they were surprised with much higher Q1 demand than expected, and built a lot more Model 3's that temporarily depleted cash reserves.

Here's a quick back of the napkin estimate:

• While Tesla can normally delay a portion of the material and parts costs of a new car built, it's only about $20k per Model 3 - they have to pay another ~$25k for materials, labor and general corporate overhead.
• Tesla had $3.6b of cash on hand at the end of Q4, and paid back $0.9b in bonds, which left $2.7b.
• Cash below $500m is generally not recommended - so effective working capital was maybe $2.2b.
• This, all other things equal, allows for the production of about 88,000 Model 3's.
• But all other things are not equal: Tesla delivered 25k units in January and February in North America alone, which generated income of +~1.5b - and in March deliveries picked up in Europe as well.
• Tesla also has various deep credit lines they can draw upon, secured by cars already produced.

(@ReflexFunds or @schonelucht might want to correct the numbers.)

So either you are arguing that Tesla production is already higher than 100,000 units with two weeks left from the quarter, or they are not cash constrained at all.

"Weak Q1 demand" and "cash shortage" are not compatible.

I think Ron Barron also said they have 60 days payment terms with suppliers vs. delivering cars within 2 weeks these days (save for Europe and China but even that may fit into the 60 days).

So maybe supplier payments are less of a concern? Certainly not zero but this mitigates that effect. Labor costs on the other hand are sometimes paid every 2 weeks in the US.

 

[MP3Mike]

Elon stands to make a whole lot if Tesla performs well. His compensation from Tesla is based on that.

Yes, but that doesn't have anything to do with his possible margin call. He wants it to do well regardless.

Again, what are you expecting to happen if the stock dropped to a price such that Elon got a margin call? Is he suddenly going to do something to make Tesla perform better and he was just holding out?