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

[Zaxxon]

Twitter

EDIT: I know that midnight Wednesday could mean the minute after 11:59pm Tuesday, but I and I think most people take it to mean Wednesday night, midnight Thursday.

Yeah, Tesla kind of messed up how they presented this. 'Midnight Wednesday' typically means 'the point at which Tuesday night transitions into Wednesday morning.' Lots of people use it incorrectly, but there's a reason that contracts generally specify 12:01 AM or 11:59 PM rather than midnight--to avoid ambiguity. They should have said 'Midnight Wednesday evening' if they meant tonight. Not a big deal, but another pet peeve of mine.

In other news, Norway continues its tear today, now standing at 3881 Teslas registered in Q1--3.4% above the prior best quarter ever, Q4 2017, with 9 more registration days left. And Q1 is seasonally a low Q vs the seasonally-high Q4. Obviously the intro of the Model 3 far overshadows seasonality, but it's one more angle by which this crazy quarter is all the more impressive.

 

[Yeomen]

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?

I dont know, I dont expect him to manipulate anything But I expect the stock to react very badly if he gets called and dont want to be caught up in that. That is all. His personal finances are not business except if they end up having a unplanned effect on the equity price

 

[VValleyEV]

Long ago, I purchased a rather expensive graphics card on the promise there would be some really advanced functionality added later. Learned my lesson. Now whenever I purchase tech, I only look at what it does currently to make the go/no go decision. If later functionality happens, that's great, if it doesn't it's not a problem. I might break this rule if I want to support the technology and/or the company, but I do so knowing that there's no guarantee. Makes for a lot less angst.

I get your point. However, a lot of us here purchased a Tesla vehicle in no small part because of a track record of improvements via OTA updates, including but not exclusive to AP functionally. I added the FSD option at purchase time in that same vein, and also as a monetary vote for that technology, thinking as you say “no guarantee” so if it never arrives so be it.

My expectations have been exceeded: I have seen real improvements in AP from OTA updates, and now I just may be seeing a free AP hardware update (“HW3”) from those FSD dollars expended. It could be that I am a hopeless case and just got lucky this time: I put money on a way cool crowd-funded coffee brewer, way before my Tesla purchase, and I am still brewing coffee with my old Keurig.

 

[MP3Mike]

His personal finances are not business except if they end up having a unplanned effect on the equity price

Doesn't just about everything have an "unplanned effect on the equity price" of TSLA right now?

 

[Causalien]

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

In a bank loan situation, the total loan is determined at the time the loan is made. So say 14 mil shares at $100 dollar but only 25% is a loan of 325 mil. Think of it as a mortgage. At what point will your bank ask you to top up your mortgage when your house is in an upside situation. When the shares reach $80

If it is a brokerage loan, then the total loanable amount is adjusted everyday.

In any case, the detail of these is only known between Elon and the bank. The assumption of 800 mil in total loan needs to be fact checked as we don't know that. How much of the loan is used, how much is paid back. All unknowns. If someone know, then someone somewhere at the bank leaked the details.

So the whole premises of the shorts for $232 is that Elon has current loan total approximating 800 mil.

But the more likely situation is that Elon has pledged a higher amount of stocks but is only using a little bit of it and increasing as he see fit. The rest of his stock act as margin buffer. So even if 800 mil is true, it still need to go significantly below $232 to exhaust the margin buffer.

And we are talking about the worst case scenario where only Tesla shares are in play. You can pledge your whole stock portfolio as a loan with your bank. They evaluate how much % of each stock can be securitized based on risk (TSLA is 50% btw) and give you a sum total.

If you are serious about this. Look up Hector Ruiz, former CEO of AMD who got margin called and devastated AMD stock. When he got margin called, he got margin called on his whole portfolio. Also, because he fell for a honey trap who got all the insider information from him. Including how much the short needs to short to get him margin called.

By the way, this line of short attack comes back every year.

 

[FTMagicSquare]

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.

The problem is inventory. They are build-to-localized instead of build-to-order, meaning they will need to build x numbers of cars and expect them to be sold in y days. So spike in order numbers can move cars out faster and improve cash position.
The bigger problem is Q2 profitability, if they can maintain the momentum of delivery number in 2018, everything works. So the question is really Q2 demand. All TSLA been doing in the last a few months is to boost Q2 and trying to maintain the momentum for Q2 and beyond.

 

[Yeomen]

In a bank loan situation, the total loan is determined at the time the loan is made. So say 14 mil shares at $100 dollar but only 25% is a loan of 325 mil. Think of it as a mortgage. At what point will your bank ask you to top up your mortgage when your house is in an upside situation. When the shares reach $80

If it is a brokerage loan, then the total loanable amount is adjusted everyday.

In any case, the detail of these is only known between Elon and the bank. The assumption of 800 mil in total loan needs to be fact checked as we don't know that. How much of the loan is used, how much is paid back. All unknowns. If someone know, then someone somewhere at the bank leaked the details.

So the whole premises of the shorts for $232 is that Elon has current loan total approximating 800 mil.

But the more likely situation is that Elon has pledged a higher amount of stocks but is only using a little bit of it and increasing as he see fit. The rest of his stock act as margin buffer. So even if 800 mil is true, it still need to go significantly below $232 to exhaust the margin buffer.

And we are talking about the worst case scenario where only Tesla shares are in play. You can pledge your whole stock portfolio as a loan with your bank. They evaluate how much % of each stock can be securitized based on risk (TSLA is 50% btw) and give you a sum total.

If you are serious about this. Look up Hector Ruiz, former CEO of AMD who got margin called and devastated AMD stock. When he got margin called, he got margin called on his whole portfolio. Also, because he fell for a honey trap who got all the insider information from him. Including how much the short needs to short to get him margin called.

By the way, this line of short attack comes back every year.

Except for the part in the Tesla company filings that limit the pledgable amount to 25% of the total value of the shares. But I agree that Tesla itself would certainly not force Elon to sell shares knowing the effect that would have on the equity. As such we would need to see the bank documents here

 

[Unpilot]

So the question is really Q2 demand.

If your first post is about demand...you have not done your homework.
But welcome aboard.

 

[Sean Wagner]

And I bet BMW hasn't yet guided for the necessary capex costs of investments into a very quick and violent EV transition, plus potential write-offs that might have to be done?

Their plans are for a transition that jives exactly with how they propose to proceed, which is somewhat diffuse and more leisurely than the competition. [Edit: in fairness, they think being flexible on the manufacturing side with regards to the motive source will let them react appropriately. Caveats there. And they currently plan for 5'000 somewhat compromised EV Minis at the outset, before Chinese volumes and dedicated platforms [?] ramp up. Pish!]

As I've mentioned, Volkswagen only has to outpace its peers of the classic car realm to live another day. Which said peers are beginning to understand, hence their pushback. Any day now, they'll change course... sometime.

Not sure what happens after that - really need to get a rough handle on VW's liabilities. If they're going to be the frontrunner among the established manufacturers, some scrutiny should pay off handsomely towards grasping the bigger picture.

One important observation - their newly scheduled layoffs are on the paper-pusher side, where they want to become vastly more efficient. This is different from the adjustments at Ford or GM on the production side.

 

[Dan Detweiler]

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

Here is what you need to know about Jim Cramer in his own words...and he says Elon has no respect for the SEC? Jim Cramer is only interested in Jim Cramer.

Dan

 

[jerry33]

I get your point. However, a lot of us here purchased a Tesla vehicle in no small part because of a track record of improvements via OTA updates, including but not exclusive to AP functionally. I added the FSD option at purchase time in that same vein, and also as a monetary vote for that technology, thinking as you say “no guarantee” so if it never arrives so be it.

My expectations have been exceeded: I have seen real improvements in AP from OTA updates, and now I just may be seeing a free AP hardware update (“HW3”) from those FSD dollars expended. It could be that I am a hopeless case and just got lucky this time: I put money on a way cool crowd-funded coffee brewer, way before my Tesla purchase, and I am still brewing coffee with my old Keurig.

I don't disagree. I have many "first on my block" items. But there are a lot of complaints about this and that, most of which fall under the category of "I was promised this and didn't get it". I was suggesting a methodology to maximize satisfaction with any tech purchase.

 

[ReflexFunds]

If they trade up options then the price will go above $45k...

It is possible the incentive will apply to all vehicles (even up to the fully optioned USD$69.5k LR P) as long as the base model has a price less CAD$45k. I haven't seen full details of the policy yet though to know how the price limit it is defined.

 

[Silent Ludicrosy]

Whenever I get bummed out by FUD, it helps to remember who the FUDSTERS are working for.


The Houston chemical fire is still going strong, fed by naphtha (and other chemicals) which is used to boost octane in gasoline.

 

[FTMagicSquare]

If your first post is about demand...you have not done your homework.
But welcome aboard.

Thanks. I believe that is the most realistic argument a bear can make. I do worry about demand for the following reason:
-- The high growth rate of model 3 deliveries in 2018 are due to early adopters got pulled in instead of organic growth.

Is it so that early adopters rushed in then it quiets down, what happened in Europe and China would be replay of this early adopter pull in. The market is pricing in this possibility, and when TSLA announced that it got high demand, we saw the 10 points jump in price action.

I am not fully convince by this argument yet, as I believe EV adoption is reaching that critical threshold now. We know that demand for 35k cars is 3-5x of 45k cars, but that is historic data, would it be the case for EV market?

 

[Intl Professor]

Well, you know what? This is a site full of Tesla owners and future owners. Fans of the company and what it stands for. Yes, we tend to see developments in a positive light.That's what we do. Just like the folks over on other sites that overwhelmingly see the negative. Think of us here as a little bit of sunshine in a world of hate. A balance if you will. No, we are not blind to the struggles the company faces, but we are prone to see it for what it is in our eyes. Overwhelmingly simple bumps in the road to building and developing the safest, best performing, best selling cars in their class in any market in the world where they are available in numbers. That's a fact.

So yeah, we are a bit biased, but it is out of our own experience and how we see the company growing and progressing. If your purpose is to express concern, I don't think anyone here has a problem with that. If your purpose is to try to change our minds and somehow belittle our opinions then in my view, you have no business being here. There are plenty of other places on the internet where those view are welcome.

Have a great day.

Dan

It is said of the Buddha: good thoughts lead to good results, bad thoughts lead to bad results. We can control our thoughts, nothing else, that is up to others including nature. A happy life is all about attitude. I have a question for KarenRei. How come you're only number four? Muddy roads?

 

[Silent Ludicrosy]

Potentially positive article on WSJ. Anyone have a subscription? Auto Makers Steer in Tesla’s Direction on Wireless Updates

 

[shlokavica22]

I am not fully convince by this argument yet, as I believe EV adoption is reaching that critical threshold now. We know that demand for 35k cars is 3-5x of 45k cars, but that is historic data, would it be the case for EV market?

35K EV is not equal to 35K ICE vehicle. Running costs are less. Plus- there are various tax/subsidy benefits in the EU/China in addition to that. If anything- the demand will grow with the time.

 

[shlokavica22]

Potentially positive article on WSJ. Anyone have a subscription? Auto Makers Steer in Tesla’s Direction on Wireless Updates

Outline - Read & annotate without distractions

 

[Dan Detweiler]

Potentially positive article on WSJ. Anyone have a subscription? Auto Makers Steer in Tesla’s Direction on Wireless Updates

No disrespect but I wouldn't have a subscription to the Wall Street Journal if somebody gave it to me. Certainly am not going to give them any of my money...but hey, that's just me.

Dan

 

[CorneliusXX]

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

If he pledges another 13m shares the call price halves. The 232 number is irrelevant. The assets he has available to meet collateral requirements is the number you should care about