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

[Yeomen]

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

Again, We can not assume he can keep pledging shares when the current Tesla BOD bylaws suggest he can not pledge above 25% of the total value of his shares Not trying to beat a dead horse here, just trying to really understand this issue

 

[sparcs]

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.

Q2 demand? they have barely even started deliveries for Standard range in North America. Most of the production will truly only start having impact in Q2 for North America. Nor is it available for purchase yet in Europe and China. Lowering prices expands Tesla's customer base significantly.

If you were arguing Q3 or later, it might at least be a discussion. But then standard range will be made available for sale overseas...

 

[FTMagicSquare]

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.

I agree that 35k ICE != 35k EV. The issue is not if, but when. We are guessing where demand in 2019 would be in the middle of S curve, it could be off by 20% or 80%.

 

[ZachF]

If the exchange rate goes back under 128.57 CAD per 100.00 USD then $35K USD is less than $45K CAD.

XE: USD / CAD Currency Chart. US Dollar to Canadian Dollar Rates

unfortunately, I think the CAD is destined to go lower....

Canada's economy has become way too dependent on Oil and a giant property bubble, while it's real economy has been pretty hollowed out.

 

[FTMagicSquare]

Q2 demand? they have barely even started deliveries for Standard range in North America. Most of the production will truly only start having impact in Q2 for North America. Nor is it available for purchase yet in Europe and China. Lowering prices expands Tesla's customer base significantly.

If you were arguing Q3 or later, it might at least be a discussion. But then standard range will open up in those countries...

I am a strong believer of EV with a 2014 model s and LR model 3, but I want to make that I can see both sides of the arguments.
What you mentioned are quite strong evidence to argue that there is no demand issue for 2019. The bear's point is that lowering price by $10k would not bump the demand by 3-5x. It would go away if we can see some high order numbers of $35k model 3 with validated reasonable gross margin.
Right now, bear is pointing to signs of lower delivery number of s3x in NA as supporting evidence.

 

[shlokavica22]

I agree that 35k ICE != 35k EV. The issue is not if, but when. We are guessing where demand in 2019 would be in the middle of S curve, it could be off by 20% or 80%.

That one depends on the production capabilities and not on the demand (as you implied previously). SR is already available (opening much larger market as you pointed out already). The question rather is about the margins.

 

[dw4ngg]

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?

Yep - that one!

 

[30seconds]

I shouldn't have flatly said the judge will find him in contempt. Rulings are unpredictable and judges usually try to find a middle ground.


The question is whether the tweet "reasonably could be material", per the settlement and Tesla's own policy.


Tesla very clearly guided for 360-400k deliveries in 2019. The pre-approved conference call talking points also said 360-400k. Neither the 10-K nor the prepared statements said anything about 360-600k.

During Q4 call Q&A, Musk said "Maybe in the order of 350,000 to 500,000 Model 3s, something like that this year" in partial reply to a question. Conference call Q&A is not pre-vetted (obviously) and is covered by extensive safe harbor statements that give execs leeway to talk imprecisely about possible outcomes which don't constitute official guidance. Musk has said nutty things in calls before (e.g. 100-200k Model 3s in 2H17), investors know to ignore these off-the-cuff hypotheticals when they conflict with official guidance.

We'll see what the judge says.

Q&A is absolutely pre-vetted, everyone knows what questions are going to be asked and you prepare for it.

Anyways answers are public and absolutely used by analysts to update their models.

 

[shlokavica22]

Right now, bear is pointing to signs of lower delivery number of s3x in NA as supporting evidence.

That's showing only half of the picture though, isn't it (how convenient)? You need global numbers.

In general- if you want to see both sides of the argument- go back and follow the history of claims over the years. Then compare the times bears were correct and the times bulls were correct. Then draw your conclusion.

 

[SebastianR]

I agree that 35k ICE != 35k EV. The issue is not if, but when. We are guessing where demand in 2019 would be in the middle of S curve, it could be off by 20% or 80%.

I made it first principle of mine that I assume the good intentions in others. That's why I will give you an honest reply. I look at this from three perspectives:

1) History / Tesla perspective. What you worry about is what we have heard about the Model S from early 2013 - this exact concern. "what will happen with demand when the first xx number of cars are delivered". In reality, nobody buys a Tesla just like this. They see it at heir neighbor's then they buy one. Ask around. You will see. So the more Teslas are out on the road the more are being sold.

2) Competition perspective: Read this article here: Tesla Model 3 vs. US Incumbents — Gun In A Knife Fight Or Fair Fight? | CleanTechnica it quantifies the damage that the Model 3 will inflict on the competition.

3) You can see in real-time how Tesla manages demand. So far there are a lot demand levers not being pulled amongst those are:
- Model 3 not available in all markets where Model S / X are available (incl. RHD, but also some European countries)
- Model S3X are not available in all countries of this world (ref. Middle East, India, South Africa, Latin America, etc.)
- No Leasing for the Model 3
- Many options that would lend themselves to "a low monthly fee" vs. a "one-time big payment" are still on the "one-time big payment"
- No fleet deals (company cars)
- No advertisements
- No referral programme any longer
- No "free supercharging" incentives
etc. etc.

So yes, there are always concerns with Tesla. Always, always. But demand for the Model 3 is not one of them

Edit: Norway at 177 for the day - the Glovis wave seems to be still going strong...

 

[FTMagicSquare]

That one depends on the production capabilities and not on the demand (as you implied previously). SR is already available (opening much larger market as you pointed out already). The question rather is about the margins.

I disagree. The price action is more or less in line with oil price and fundamental, instead of noises and

That one depends on the production capabilities and not on the demand (as you implied previously). SR is already available (opening much larger market as you pointed out already). The question rather is about the margins.

I disagree. My hypothesis is that the stock price in short/median term is more or less driven by fundamentals: How much is demand and how much is the margin. The demand is bigger issue in focus than margin.
If you look at 200-week moving average, it is at ~274. That is the reverse to the mean; if you look at the shorter time frame, it responds to news related to demand more violently than others(SEC, model y, v3 charging, $35k model3, etc)

 

[Drax7]

Why think small, hopefully the judge reverses the settlement fine and imposes
A penalty on the SEC. We shall find out soon if she can judge.

 

[ReflexFunds]

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

There are a number of reasons why Elon's personal loans and Tesla share pledges are not a realistic issue. Firstly, last update we had on Elon's outstanding loan balance was $624m in March 2017, but we do not know how much of his loan was invested into illiquid investments or given to charity, vs how much he holds in liquid investments and cash. Most of Elon's charitable donations have been via Tesla shares already donated to the Musk foundation, so i doubt much if any of his personal loans was given to charity. Some of his loans will have been spent on interest, fines and living expense, but I expect the vast majority has been invested in hard assets.

But lets go with $800m loan and no liquid assets. This implies SP can fall to $232 before Elon has to pledge more shares. But if SP falls this far, he can just pledge more shares, up to 37.8 million. This would take the minimum share price to $85. Below here there would be issues, however, this is the exact reason why Tesla limits loans to a conservative 25% of the total pledged stock value. So in emergencies such as these, Tesla will just change its policy and allow Elon to pledge at a higher LTV (at a higher interest rate). This gives significantly more headroom again before Elon is forced to sell any shares.

All of this is ignoring Elon's 50.5% stake in the $30.5bn Spacex (Elon's stake valued at $15.4bn on paper, but is higher in reality due to control premium). It also ignores all of Elon's other assets in various startups and real estate.

 

[Sean Wagner]

Anyone checked this estimated European deliveries and revenue?

Microsoft Power BI

This is nice [and obviously only loosely indicative of total orders!]. Jives with @Anstandswauwau's inside information. Model 3 is right-sized for Europe. Incidentally, finally populating Germany's streets with more Teslas might open up sales of the S & X somewhat.

Interactive map: Correlation between uptake of electric cars and GDP in the EU | European Automobile Manufacturers’ Association (ACEA)

 

[CyberDutchie]

MS keeps pushing the demand problem narrative:

“The fundamental narrative around Tesla appears more clouded than we have seen in several years. Signs of weakening demand have raised long-standing questions about the company’s ability to fund itself as an independent company. At what point might strategic alternatives enter the discussion?”

 

[VValleyEV]

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

I argue that you do yourself a disservice, and we all do when applying a purely political litmus test to news sources.

I believe WSJ to be a credible news source with a strong conservative bias. I often disagree with their editorial position but it is important to understand that position, and I often learn a lot. Same goes for lots of credible news sources across the political spectrum, the point is to pick a variety of news sources with different political orientations (NYT, LATimes, WP, WSJ). Just avoid the clearly wacko sensationalist ones of all political stripes as a waste of time, although I suppose your argument maybe be that WSJ is in that category.

I consider the Economist to be a great source with a centrist/moderate/right, and it also has more of a global perspective, with a lot of European news. Any other votes across the political spectrum, or do most of you believe that “only left-liberal” or “only conservative” news sources can be credible and worth a regular read?

 

[CorneliusXX]

Again, We can not assume he can keep pledging shares when the current Tesla BOD bylaws suggest he can not pledge above 25% of the total value of his shares Not trying to beat a dead horse here, just trying to really understand this issue

According to your numbers he is already at 13m/37m = 35% pledged. The 25% number again doesn't seem to be that important. He also has substantial assets outside Tesla and a prodigious ability to raise capital. 800m just doesn't seem like a concern.

 

[Yeomen]

According to your numbers he is already at 13m/37m = 35% pledged. The 25% number again doesn't seem to be that important. He also has substantial assets outside Tesla and a prodigious ability to raise capital. 800m just doesn't seem like a concern.

No, its 25% of the aggregate borrow amount in dollars vs the aggregate total value in dollars

 

[Dan Detweiler]

I argue that you do yourself a disservice, and we all do when applying a purely political litmus test to news sources.

I believe WSJ to be a credible news source with a strong conservative bias. I often disagree with their editorial position but it is important to understand that position, and I often learn a lot. Same goes for lots of credible news sources across the political spectrum, the point is to pick a variety of news sources with different political orientations (NYT, LATimes, WP, WSJ). Just avoid the clearly wacko sensationalist ones of all political stripes as a waste of time, although I suppose your argument maybe be that WSJ is in that category.

I consider the Economist to be a great source with a centrist/moderate/right, and it also has more of a global perspective, with a lot of European news. Any other votes across the political spectrum, or do most of you believe that “only left-liberal” or “only conservative” news sources can be credible and worth a regular read?

I understand what you're saying but my disdain for the WSJ does not stem from political views one way or the other. I have equal disdain for publications on the other side of the political landscape. More of a personal thing I guess.

Dan

 

[Todd Burch]

MS keeps pushing the demand problem narrative:

“The fundamental narrative around Tesla appears more clouded than we have seen in several years. Signs of weakening demand have raised long-standing questions about the company’s ability to fund itself as an independent company. At what point might strategic alternatives enter the discussion?”

<S>Seems to me he's pushing the 'Tesla needs a captial raise' narrative. I wonder if he has any alterior motives. </S>