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

[avoigt]

Ihor Dusaniwsky on what will happen when TSLA joins the S&P:

"HUUUUUGE amount of long buying by long only and index based managers would drive $TSLA's stock price through the roof - now that would be a short squeeze."

Ihor Dusaniwsky on Twitter

In a nutshell Ihor predicts that a S&P inclusion will likely result in a short squeeze. @Papafox did point out in his analysis that is not likely.

I am aware this has been discussed many times in this forum but would like to understand what are the circumstances or lowest profits required for Tesla in Q2 to be added.

Not sure of a squeeze will ever happen but a lot of oddness happened with the SP and I expect good and solid numbers to be released.

I heard many motivated quite opposite opinions about that topic. Looking forward to some guidance.

Thanks

 

[Silentk]

Mobileye will trial robotaxis in Israel next year

More robotaxi lies from Elon... oh sorry it’s Mobileye, will be fantastic.

 

[Right_Said_Fred]

In a nutshell Ihor predicts that a S&P inclusion will likely result in a short squeeze. @Papafox did point out in his analysis that is not likely.

I am aware this has been discussed many times in this forum but would like to understand what are the circumstances or lowest profits required for Tesla in Q2 to be added.

Not sure of a squeeze will ever happen but a lot of oddness happened with the SP and I expect good and solid numbers to be released.

I heard many motivated quite opposite opinions about that topic. Looking forward to some guidance.

Thanks

A profit of $251 million is needed in Q2 for a positive result over the last 4 quarters. That is unlikely. Q4 had a lower profit than that ($139 million), with probably around the same number of deliveries but a lower number of Model S/X and high margin Model 3.

It's more likely to happen later this year or in 2020. But I'm pretty sure the TESLAQ crowd will stick around until then.

 

[avoigt]

A profit of $251 million is needed in Q2 for a positive result over the last 4 quarters. That is unlikely. Q4 had a lower profit than that ($139 million), with probably around the same number of deliveries but a lower number of Model S/X and high margin Model 3.

It's more likely to happen later this year or in 2020.

Hm, that interesting as I thought a higher number is required.

It would play well into Elons playbook to create a scenario where the market believes its impossible and short sellers are at ATH. Very good setup I would say.

Not sure if they have some aces in the sleeve they can pull or other but agree to your assessment.

 

[mariaaa]

A profit of $251 million is needed in Q2 for a positive result over the last 4 quarters. That is unlikely. Q4 had a lower profit than that ($139 million), with probably around the same number of deliveries but a lower number of Model S/X and high margin Model 3.

It's more likely to happen later this year or in 2020.

I thought they'd need that for S&P 500 inclusion, profitable in 4 consecutive quarters:

Quarter X-3 profit: positive
Quarter X-2 profit: positive
Quarter X-1 profit: positive
Quarter X profit: positive

But can it also work the following way?

Quarter X-3 profit: positive 100
Quarter X-2 profit: negative 100
Quarter X-1 profit: negative 300
Quarter X profit: positive 500

= net profit of 200 in 4 consecutive quarters.

 

[Right_Said_Fred]

I thought they'd need that for S&P 500 inclusion, profitable in 4 consecutive quarters:

Quarter X-3 profit: positive
Quarter X-2 profit: positive
Quarter X-1 profit: positive
Quarter X profit: positive

But can it also work the following way?

Quarter X-3 profit: positive 100
Quarter X-2 profit: negative 100
Quarter X-1 profit: negative 300
Quarter X profit: positive 500

= net profit of 200 in 4 consecutive quarters.

No, it isn't the first one. One of the other requirements is that the last quarter is positive. That would not be specified if all 4 quarters have to be positive.

It's a simple sum: $312 million profit in Q3 + $139 profit in Q4 - $702 miillion loss in Q1 = $251 million profit needed in Q2 for a positive total over 4 quarters.

 

[AlexS]

did @luvb2b create model for q2 , in his thread are too many posts, can't find it?

 

[uselesslogin]

did @luvb2b create model for q2 , in his thread are too many posts, can't find it?

I don't think so but he didn't post Q1 either until after the delivery report so if we are lucky he'll post again in early July.

 

[AlexS]

Norway is tracking today again 200-250 delivery range, continues probably until the end of qtr. So most probably markets in EU also going well. I really hope Tesla is going to build GF in Germany to crack also German market.

 

[Artful Dodger]

The pain he is describing with sharing power between charging columns sounds legit from an engineering point of view

Engineering problems have solutions, in this case, existing solutions.

Bjørn Nyland Shows Off World's Largest EV Charging Enabled Parking Structure (In Oslo, Norway) | CleanTechnica

A commercial solution already exists to share power across a hundred EVs in a single parking garage. This solution includes V2G, so the building itself gets the benefits of demand shaving and power security.

 

[aubreymcfato]

Norway is tracking today again 200-250 delivery range, continues probably until the end of qtr. So most probably markets in EU also going well. I really hope Tesla is going to build GF in Germany to crack also German market.

the *best* thing is that we haven't seen any SR/+ sold in Norway. Best case scenario is that a sh!tton of SR+ arrived with ships, and they will deliver them in the last days. Norway managed to sell >500 *per day* in March.

 

[sixela]

A sh*tload of Model 3s on trucks was seen on the Antwerp ring traveling North by yours truly, from the Grand Dahlia, coming from Zeebrugge. I'm sure some were for Groningen, but some were possibly for Denmark or Norway.

Almost everyone in the Netherlands that have had SR+ VINs assigned now have appointments for this week and next week. They're even enlisting new Delivery Centers that weren't supposed to deliver Model 3 here in Belgium, and in the Netherlands planning home deliveries...

So yeah, there seems to be a big push (after last month's RWD LR big push).

 

[Boomer19]

s&p stuff, to finally put it to bed

https://us.spindices.com/documents/methodologies/methodology-sp-us-indices.pdf

as of april 2019;
pages 5-8

as of the opening of trading on the announcement of inclusion to s&p500 date, the prospective company must,
- structure must be corporation or common stock, no LPs, Pfd’s, ETF, ETN, etc etc
- file 10ks
- fixed assets and rev constitute plurality of the total, but need not exceed 50% (there’s a bunch of technicalities on how to interpret domicile - not impactful in tesla case, they are US)
- primary us listing
- mkt cap: for s&p 500, unadjusted company mkt cap of 8.2b or more otherwise s&p midcap 400, or lower would be s&p small cap 600
- liquidity: annual dollar traded ratio >= 1
(avg close price over period multiplied by historical volume); and volume of 250k shares minimum in each of the 6 months leading into eval date
- Investable weight factor .1 or more
- financial viability
* sum of recent 4 consecutive qtrs gaap earnings need to be positive, AS SHOULD the most recent quarter

finally, the index committee can overrule their criteria and make exception to add a company if they deem appropriate (under rule exceptions section)

__________________

also, a study on the impact of s&p inclusion:
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.192.7439&rep=rep1&type=pdf
i didn’t read through this yet so not sure the parameters of the study (except they used examples over broad period from 1976-2005)

 

[Right_Said_Fred]

s&p stuff, to finally put it to bed

https://us.spindices.com/documents/methodologies/methodology-sp-us-indices.pdf

as of april 2019;
pages 5-8

as of the opening of trading on the announcement of inclusion to s&p500 date, the prospective company must,
- structure must be corporation or common stock, no LPs, Pfd’s, ETF, ETN, etc etc
- file 10ks
- fixed assets and rev constitute plurality of the total, but need not exceed 50% (there’s a bunch of technicalities on how to interpret domicile - not impactful in tesla case, they are US)
- primary us listing
- mkt cap: for s&p 500, unadjusted company mkt cap of 8.2b or more otherwise s&p midcap 400, or lower would be s&p small cap 600
- liquidity: annual dollar traded ratio >= 1
(avg close price over period multiplied by historical volume); and volume of 250k shares minimum in each of the 6 months leading into eval date
- Investable weight factor .1 or more
- financial viability
* sum of recent 4 consecutive qtrs gaap earnings need to be positive, AS SHOULD the most recent quarter

finally, the index committee can overrule their criteria and make exception to add a company if they deem appropriate (under rule exceptions section)

__________________

also, a study on the impact of s&p inclusion:
Download Limit Exceeded
i didn’t read through this yet so not sure the parameters of the study (except they used examples over broad period from 1976-2005)

So the index committee cannot make an exception and NOT include a company that meets the criteria, right?

 

[Boomer19]

So the index committee cannot make an exception and NOT include a company that meets the criteria, right?

well, yeah, just because a company meets the criteria, doesn’t entitle them to automatic inclusion. they still have to be selected

therefore i’d say that any company that meets criteria that isn’t in s&p is 86’d at that time for whatever reason

 

[Fact Checking]

So the index committee cannot make an exception and NOT include a company that meets the criteria, right?

They do have discretion, it's their index - but there's no precedent of them skipping a company that meets the S&P 500 eligibility criteria that I could find, and in 2018 they included Twitter (TWTR) in the S&P 500 who (when it was included in the S&P 500) only met the profitability criteria very narrowly:

"Twitter About to Be Even More Ubiquitous With S&P 500 Add" (Bloomberg)

Twitter: quarterly net income 2019 | Statistic​

But yes, they have the discretion to make an exception against Tesla. Despite the wide reaching corruptive influence of Jim Chanos and his ilk I'd be surprised if the S&P committee, who are basically a buy side institution, discriminated against Tesla here. Too small a fish in the trillions of dollars of passive index fund flows.

Also, the $260m+ profit in Q1 doesn't look possible - Tesla guided for a GAAP loss.

(I could be wrong, and this is not advice.)

 

[j6Lpi429@3j]

TBH ensuring its 4 straight quarters of profit seems...dumb as hell.
Say you have a super-seasonal business, and Q1 and Q2 always mean 10 billion profit a quarter, Q3 and Q4 always mean about a $50 loss... you will never be included in the S&P. Seems...a bit of a dumb system?

 

[BoerumHill]

TBH ensuring its 4 straight quarters of profit seems...dumb as hell.
Say you have a super-seasonal business, and Q1 and Q2 always mean 10 billion profit a quarter, Q3 and Q4 always mean about a $50 loss... you will never be included in the S&P. Seems...a bit of a dumb system?

Sum of the trailing 4 quarters...

 

[j6Lpi429@3j]

aha.. i am stoopid

 

[Fact Checking]

They do have discretion, it's their index - but there's no precedent of them skipping a company that meets the S&P 500 eligibility criteria that I could find, and in 2018 they included Twitter (TWTR) in the S&P 500 who only met the profitability criteria narrowly.

But yes, they have the discretion to make an exception against Tesla. Despite the wide reaching corruptive influence of Jim Chanos and his ilk I'd be surprised if the S&P committee, who are basically a buy side institution, discriminated against Tesla here. Too small a fish in the trillions of dollars of passive index fund flows.

Also, the $260m+ profit in Q2 doesn't look possible - Tesla guided for a GAAP loss.

(I could be wrong, and this is not advice.)

So to explain the trillions of dollars part a bit: there's hundreds of indexes, new indexes get defined all the time in the hope of them being picked up, and the primary 'customers' of index committees are index funds who make a particular index popular or not.

So let's suppose Tesla posts a surprise Q2 GAAP profit of say $400m late July or early August. There's a few (low probability) scenarios under which that could happen in principle, despite the price cuts across all products. The moment they report this, all the passive index funds will assume that TSLA will be part of the S&P 500 sometime in September, and they'll be obliged to own up to ~10 million shares of TSLA, and another 10 million from various other entities that typically try to mirror S&P 500 behaviorally. Stock price will go up significantly, well beyond the crash and burn factor of most TSLAQ thesis elements. Major short squeeze adds to the buying frenzy, TSLA of $420+ secured.

The index funds will be buying TSLA (options) almost immediately to at least avoid some of the index arbitrage losses they'd be exposed to.

While the S&P 500 is a historic institution that doesn't require any promotion, if the index committee then mysteriously decides to change the rules retroactively, or to openly discriminate against Tesla based on the small print that is present in the index definition document, then the stock price would crash, and the passive index funds would sit on big losses unless there's a stupendous amount of illegal insider trading to warn all of them in advance.

I.e. while I can see Chanos and the rest of the TSLAQ cult having broad influence to create volatility, they are nobody compared to the influence of the buy side.

Anyway, this is probably academic because Tesla guided for a GAAP loss, and this is not advice whichever way you interpret it!