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

[TradingInvest]

Two days ago Lex Fridman posted this on Twitter: "For 3+ years, I've been leading a large-scale study at MIT on human interaction w/ Tesla Autopilot. First paper & video with novel, surprising results will be out next week."

I believe thousands of real Tesla drivers sent in feedback.

In the tweet, Lex said "Looking for objective journalists". People are recommending Lora Kolodny, Dana Hull, Niedermeyer and Timothy Lee.

If the research shows 95% Tesla owners love Autopilot, these "objective journalists" will write "Many Tesla owners hate Autopilot". Then they will add another paragraph to show Tesla is doomed.

 

[mongo]

OK, so what does that have to do with JB's options? And I don't think you're right about it being negative (assuming it goes through at all), since the conversion is based on the previous week's TSLA average price. If the price is going up monotonically, we/they will get TSLA shares at a discount to the market value at the time. Unless the price of TSLA falls below the threshold it would be worse for MXWL holders if the price was going down.

(I'm of the opinion that the takeover will fail, at least at this price. Shareholders seem to be holding out for a better offer.)

Post was edited since I posted, didn't see JB link.
Yeah, TSLA value is based on average of the 5 days before close of offer, but if linear increase, MXWL only gets 1/2 of the delta during that period whereas they get 100% of delta afterward (and 0% before). Had it closed when TSLA was at 260, they would have recieved more shares, and already gotten a 5% gain.

 

[mongo]

In the tweet, Lex said "Looking for objective journalists". People are recommending Lora Kolodny, Dana Hull, Niedermeyer and Timothy Lee.

I think they read it as 'objectionable journalists'...

 

[Antares Nebula]

If the comments were not abusive in any fashion but were just informing readers about allegations of fraud against the author and Seeking Alpha editors/moderators deleted those comments, then that's direct evidence of Seeking Alpha having a policy of fact checking: they are checking facts and are deleting true claims that are contrary to their agenda.

That might or might not be evidence of an illegal "short and distort" scheme.

Also note that the above link leads to an article behind a paywall - the moderators might have used that as an excuse for deletion. Here's key quotes from the cached news article:

'NEW YORK, Sept. 24, 2004 -- In a significant victory for investors, on September 20, 2004, Manhattan Federal Judge Richard M. Berman ruled that buyers of stock issued by Interspeed, a now-defunct corporation that developed internet DSL technology, could proceed with a class-action lawsuit against UBS Warburg LLC and former UBS Warburg Senior Telecommunications Analyst Anton Wahlman. Co-lead counsel for the Plaintiff Class are Marc I. Gross of Pomerantz Haudek Block Grossman & Gross LLP, and Brian P. Murray of Murray, Frank & Sailer LLP.

The lawsuit alleges, among other matters, that between January 3, 2000 and July 20, 2000, UBS Warburg distributed research reports written by Wahlman that were false and misleading because they maintained a "buy" rating on Interspeed stock while, at the same time, Wahlman was privately sending e-mails to UBS personnel indicating that he believed that Interspeed stock should be shorted. The lawsuit also charges that Wahlman's research reports were false and misleading because Wahlman failed to disclose to the investing public his belief that Interspeed was engaging in "creative accounting."

According to the Complaint, for example, On January 3, 2000, UBS Warburg issued a research report by Wahlman that rated Interspeed a "buy." Just two days later, Wahlman privately e-mailed a member of UBS Warburg's sales force, "(d)on't put people into Interspeed -- very risky." Fifteen minutes later, the recipient of the e-mail responded, asking "so why is (Interspeed) a short?" Wahlman replied, "(j)ust lumpy revenue, some stuffing of channel, creative accounting."'

...
​

But note that after UBS/Wahlman losing the motion to dismiss the actual class action lawsuit against UBS and Wahlman was settled:

Docket for Bernard v. UBS Warburg, LLC, 1:03-cv-04282 - CourtListener.com

"ORDER denying 12 Motion to Dismiss. For the reasons stated in this Order, Defendants' motion to dismiss (12) is denied."
​

Here's a Stanford summary of the case:

Securities Class Action Clearinghouse: Case Page

The lawsuit alleges, among other matters, that during the class period, UBS Warburg distributed research reports written by former UBS Warburg Senior Telecommunications Analyst that were false and misleading because they maintained a "buy" rating on Interspeed stock while, at the same time, the Analyst was privately sending e-mails to UBS personnel indicating that he believed that Interspeed stock should be shorted. The lawsuit also charges that the Analyst’s research reports were false and misleading because he failed to disclose to the investing public his belief that Interspeed was engaging in "creative accounting."

According to the Complaint, for example, on January 3, 2000, UBS Warburg issued a research report by the Analyst that rated Interspeed a "buy." Just two days later, the Analyst privately e-mailed a member of UBS Warburg's sales force, "(d)on't put people into Interspeed -- very risky." Fifteen minutes later, the recipient of the e-mail responded, asking "so why is (Interspeed) a short?" The Analyst replied, "(j)ust lumpy revenue, some stuffing of channel, creative accounting."

The lawsuit charges that UBS Warburg's and UBS Warburg Senior Telecommunications Analyst’s motive for issuing the fraudulent analyst reports was the desire to garner investment banking fees from Interspeed. The Complaint alleges that UBS Warburg earned $700,000 for underwriting Interspeed's 1999 initial public offering. The lawsuit also charges that if UBS Warburg had published truthful reports by the Analyst, the stock price of Interspeed would have plummeted.
​

The order denying the motion to dismiss isn't on RECAP - could someone please buy it on PACER and put it on RECAP? Maybe that order has some of the facts cited by the court.

The settlement agreement was 5 million dollars:

http://securities.stanford.edu/filings-documents/1034/UWL03_01/2005311_r05s_03CV04282.pdf​

The allegations never got to trial and the defendants didn't admit guilt.

Also note that if the allegations were true (and Wahlman got deposed and the emails that were quoted were possibly from discovery), Wahlman actually identified a genuine short target - the alleged fraud was that he hid this fact from client and kept recommending the company to clients that he knew was risky and which UBS (probably) kept shorting.

I.e. if these allegations are true then UBS was trading against their clients with the collusion of their analyst.

Excellent comments. Two things: whether the Anton fraud article (from Globe Newswire) is behind a paywall depends on your browser, etc. Most of the time I can access it without a paywall.

Second, as far a deleting comments on SA, it is hard to tell what the exact process is. Often, users can get comments deleted simply by making a request (based on my experience on both ends). My feeling is that sometimes moderators are so overwhelmed that they don't bother checking the comment and simply delete given a request. But other times they will proactively delete and even ban the user, which I would have expected in the above case.

And of course, it goes without saying, that SA favors bearish TSLA authors and posters. I have made some pointed comments to this effect in the past, even pointing out some glaring biases. In some instances, my comments have survived and in others, not. My last set of comments got my fully censored (effectively banned) and so I closed my account there. But I see that there are more and more bulls on SA taking up the cause.

 

[VValleyEV]

But I see that there are more and more bulls on SA taking up the cause.

Now that is surprise and some good news.

I have seen bulls on SA get too easily baited and let the conversation descend into a OT shouting matches about global warming etc. I hope there are some new bulls that will find ways to keep the discussion to Tesla financials. I get all the daily email summaries, but when I look at the subject lines it is hard to make myself follow them, and then to also look at the long list of crazy content-free comments.

 

[Singer3000]

OK, so what does that have to do with JB's options? And I don't think you're right about it being negative (assuming it goes through at all), since the conversion is based on the previous week's TSLA average price. If the price is going up monotonically, we/they will get TSLA shares at a discount to the market value at the time. Unless the price of TSLA falls below the threshold it would be worse for MXWL holders if the price was going down.

(I'm of the opinion that the takeover will fail, at least at this price. Shareholders seem to be holding out for a better offer.)

I don't know about JB but I did wonder with so few of the shares tendered, whether Tesla's major institutional shareholders would each look to pick-up 4.99% of Maxwell's shares to a) increase their Tesla holding at a discount, b) help get over the line an acquisition that management appear to be believe is strategically important. It's only $11m for that 4.99%.

 

[RiverCard]

True, as far as it goes but B737 has had more than MCAS to the history:
Boeing 737 plane crashes
B737 series Rate: .28 FLE: 53.46
A320 series Rate: .11 FLE: 9.61

Rate: flight with fatality per million flights
FLE - Full Loss Equivalent: This is the sum of the proportions of passengers killed for each fatal event. For example, 50 out of 100 passengers killed on a flight is an FLE of 0.50, 1 of 100 would be a FLE of 0.01. The fatal event rate for a set of fatal events is found by dividing the total FLE by the number of flights in millions.

Those numbers are not bad. Both are safe, both have gigantic number in use and a long history. Boeing has had a long history of difficult model introductions, the B737 has had more than it's share of problems with model extensions.

Comparing Tesla with almost any ICE would be illuminating. Certainly Tesla is likely to have the best fatality and injury statistics in the business. Loss severity in terms of repair costs probably would end out more or less similar to others within the general class. It's not as easy to obtain really apples to apples data with cars as it is with airplanes.

Frankly Boing and the FAA both should be drawn and quartered IMHO. It already is a whitewash when compared to what it would have been and it been Airbus. OTOH, all the suppliers to one are the same ones as the other and the Rosemont vanes that are such as mess for the B737 were once standard on the Airbus A330, with catastrophic events both sides. Those are more prone to icing and damage than are those of one of the other suppliers. Surprise! the better one costs more, just as Boeing didn't want AOA displays for pilots because those cost more, nor simulator training because that costs more.

Imagine what they'd do to Tesla if Tesla chose suppiers and parts that way!

If it ain't Boeing, I am not going!

 

[Antares Nebula]

Why Elon does the things he does (/s, humor):

 

[Antares Nebula]

They are just baiting Elon to tweet something material or something offensive to tank the stock. Happens too often that he gets baited. He should have someone ban all these shorts.

Without a doubt, paid trolls, either Russian, hedge funds, oil interests, etc. But like someone else pointed out, why doesn't Musk (or his paid intern) block these guys? They are continuously creating new accounts, so one has to stay on top of it. But I think it is a manageable problem.

 

[neroden]

It's even better than that. The dry electrode process replaces just 1 of 7 steps required to build the cell. There's no reason at all Tesla wouldn't licence that to Panasonic, and then integrate it into the existing production process at GF1 (and build into 1st construciton at GF3/Shanghai).

It's a Win-Win that leverages existing bty cell lines, all while cutting costs, speeding production, reducing factory space required, and eliminating use of toxic solvents. Oh, did I mention uses less energy to manufacture, but results in a 30% greater energy density product?

Cheers!

The Maxwell merger might not go through. There seem to be a lot of shareholders holding out and unwilling to tender their shares. Which is a mistake -- Maxwell was definitely having liquidity issues immediately before the tender offer, and would have them again, and the stock would drop further than it was before the tender offer. Tesla is permitted and required to extend the tender deadline four times, and has already done so twice. I'm not sure what they'll do if they don't have enough shares tendered by the fifth and final deadline.

They need about 23 million shares to be tendered; they've only got about 6 million tendered. I do expect a bunch of people got confused by the "Cambria Acquisition Corp" stuff in the first round, and there must have been paperwork delays because not even all the *management* shares had been tendered after by first deadline, and the management had signed an agreement to tender their shares. So the first extension didn't bother me. The second extension, however, raises questions as to whether there are significant, large holdout shareholders who just won't tender.

 

[neroden]

Well the censors at Seeking Alfalfa didn't take long to delete those comments. Got 11 likes and even more views before it was deleted. I'm still surprised that they let him write articles there (okay, maybe I'm not, it's Seeking Alfalfa, after all).

*This* is what makes Seeking Alpha legally liable for Anton Wahlmann's illegal market manipulation. If they can take the effort to delete comments pointing out facts about his past history of securities fraud, that means they are *not* an open forum, they *are* exercising editorial control, and they're conspiring with him to commit market manipulation now.

Did you get before and after screenshots? Could be useful for prosecuting Seeking Alpha.

 

[neroden]

Exactly. I only have TSLA in my E*Trade account. I have other stocks but not with E*Trade.

I asked them why this action and they said a government body FINRA issued this order—not them— to help protect investors.

I suspect they're lying. To my knowledge, FINRA doesn't issue per-stock margin requirement orders. Brokerages can set whatever margin requirements they like as long as they're stronger than FINRA's general requirements, of course.

 

[neroden]

OT

Apparently, my state on average has one of the dirtiest energy mixes in U.S.
A gas car has to have at least 34mpg in CO to have less emissions than an EV with 0.34kwh/mile efficiency.
Nice pic here:

Here's the updated version of that graphic.

New Data Show Electric Vehicles Continue to Get Cleaner

Colorado isn't as bad as it looks, the problem is that Wyoming is *absolutely terrible* and drags down the Colorado-Wyoming subgrid region massively. Still, even using the regional average, a gas car has to get 46 mpg to do better than an electric car in that area.

By the way, how about that NYUP region (where I live) ?

(The most efficient gasoline car in existence only gets 58 mpg -- and that's a non-plug-in hybrid. The most efficient non-hybrid gets less than 40 mpg, last I checked -- I can't find them on the "top" lists any more)

 

[Antares Nebula]

*This* is what makes Seeking Alpha legally liable for Anton Wahlmann's illegal market manipulation. If they can take the effort to delete comments pointing out facts about his past history of securities fraud, that means they are *not* an open forum, they *are* exercising editorial control, and they're conspiring with him to commit market manipulation now.

Did you get before and after screenshots? Could be useful for prosecuting Seeking Alpha.

No screenshots. I will next time. But, as I remarked on fact checking's comments:

As far a deleting comments on SA, it is hard to tell what the exact process is. Often, users can get comments deleted simply by making a request (based on my experience on both ends). My feeling is that sometimes moderators are so overwhelmed that they don't bother checking the comment and simply delete given a request. But other times they will proactively delete and even ban the user, which I would have expected in the above case.

In short, SA can maybe claim that users, not SA, are "editing" the comments. For example, somebody could have flagged that comment as "offensive" or "personal attack". But the counterargument is that SA has an obligation to look at comment delete requests and judge for themselves whether the comment should be deleted, and if they then judge the fraud criticism of Anton to be without merit (even though it was like to a press article), then SA may be liable. I'm not a lawyer, so not sure about any of this. But I would guess that there are nuances involved that make a clear determination difficult.

 

[neroden]

lol at the three levels being subjectively labeled good, better, and best. so the worst state in the union is "good". good compared to what? 1970s gas guzzlers?

"good" means in that area EVs are better than most gas cars
"better" means in that area EVs are better than all gas cars except some hybrids
"best" means in that area EVs are better than all gas cars including all hybrids

 

[erthquake]

The Maxwell merger might not go through. There seem to be a lot of shareholders holding out and unwilling to tender their shares. Which is a mistake -- Maxwell was definitely having liquidity issues immediately before the tender offer, and would have them again, and the stock would drop further than it was before the tender offer. Tesla is permitted and required to extend the tender deadline four times, and has already done so twice. I'm not sure what they'll do if they don't have enough shares tendered by the fifth and final deadline.

They need about 23 million shares to be tendered; they've only got about 6 million tendered. I do expect a bunch of people got confused by the "Cambria Acquisition Corp" stuff in the first round, and there must have been paperwork delays because not even all the *management* shares had been tendered after by first deadline, and the management had signed an agreement to tender their shares. So the first extension didn't bother me. The second extension, however, raises questions as to whether there are significant, large holdout shareholders who just won't tender.

Is it possible Maxwell’s tech isn’t fully baked, but Tesla wanted to get them before they went under and lost their staff?

 

[neroden]

OT

I’ve seen these numbers before and question the veracity. Illinois gets half its electricity from nuclear, so should be closer to 80-90 mpg. I did t check the rest of the country.

Illinois has some seriously nasty coal in the south of the state. I mean, really bad. Take a look here:

Coal Pollution in America | Beyond Coal

Red blotches are coal plants with no announced closure date.

FWIW, the latest data is 2016 data, so every single area is better now that it was in the most recent UCS MPG map. In particular, MROE is a lot better due to several major coal plant closures. Southern Illinois is still really terrible, though.

 

[neroden]

"Judicial Notice" is more commonly taken to mean " fact is so notorious or well known, or so authoritatively attested, that it cannot reasonably be doubted."

A surprisingly large category, when FUDsters aren't active.

Well, my apologies to @Dan Detweiler - seems the Maxwell deal is far from going through?

"The depositary of the offer has advised that, as of 5:00 p.m., Eastern time, on March 27, 2019, a total of approximately 5,964,871 shares of Maxwell common stock had been validly tendered and not validly withdrawn in the offer."

Float is 35m - 10m shorted...

SEC Filing | Tesla, Inc.

Important number is shares outstanding which is 46 m. I don't know how they're calculating the float, but there are about 3.3 million shares in the hands of insiders.

Notably, there seems to have been some sort of weird short attack on MXWL since the merger was announced, with short interest jumping from ~4.5 million to 10.8 million. The simplest explanation is that these are people betting on the merger failing. If they stay around through a successful merger, they have to cover in TSLA stock, which could hurt given the direction of TSLA right now...

If there are 11 m shorted, then there's 57 m in the hands of "longs" -- and they need 23 million to tender their shares for the deal to go through (of which about 6 million have been tendered). Some financial institutions may be trying to get cash from lending their shares to short sellers and recalling to tender at the last minute or something like that.

Time is in Tesla's favor; it's a decent merger arb spread so merger arb traders should be buying and tendering at this point. The real question is if there are >23 million shares held by deliberate "holdout" investors who think the merger is offering too little money.

 

[neroden]

Tender extended to 10 April, right? But the stock price exchange rate is fixed, right? So a post-deliveries / post-SEC-ruling stock spike would effectively increase the buyout price and make the exchange more tempting, correct?

You get $4.75 worth of TSLA stock per MXWL share, period. (Unless TSLA drops below $245.90, which I strongly suspect it won't.)

If you own MXWL and think that TSLA is going to go up long-term you want TSLA to be LOW when the merger happens, because you get more shares.

If you own MXWL and think that TSLA is going to go down long-term you want TSLA to be high when the merger happens, because you expect it to drop immediately and you're going to try to sell it right away after the conversion.

If you own MXWL and have already shorted TSLA in anticipation of swapping MXWL stock for it, you will be reducing your short position (covering) as TSLA goes up.

If you think MXWL is worth more than $4.75, you would probably refuse to tender your shares and hope for the merger to fail. <-- this is the group we are worried about

Of course some people might be deciding whether to support the merger or not *based on* the news about Q1 deliveries or about the SEC case.

 

[neroden]

It's a shares instead of cash conversion, not an X shares of one for Y shares of the other type. So only if the post event spike is also post TSLA_price_for_conversion_at_4_75_a_share_of_MXWL. So 5 day average from April 5- 10 (may be off by one). If price is climbing during that time, it is also good for them (end point higher than average)

For an April 10 end-of-offer date, it's the average price from April 2 to April 8. Assuming it doesn't get extended again. (Tesla is required to extend it at least two more times if they don't have enough shares tendered.)