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

[jerry33]

Initially losing money is integral to nearly all great missions!

That's losing money because of capital and development costs. Far different than losing money on sales of product.

 

[Esme Es Mejor]

No kidding. I noticed the spike down into the 230s, but by the time I put in a limit order to buy a bit more, it was already back above $240! It appears that someone is soaking up every relatively cheap share that they can get.

Sad that I missed out on the flash crash sale, too. Had my brokerage app up while doing some chores & saw 236. By the time I refreshed and was ready to place an order, it was already back to 241. Those chores cost me a quick $500.

 

[AlMc]

Sad that I missed out on the flash crash sale, too. Had my brokerage app up while doing some chores & saw 236. By the time I refreshed and was ready to place an order, it was already back to 241. Those chores cost me a quick $500.

Take away point...STOP doing chores!

 

[Chickenlittle]

It looks like AAPL took a similar hit to everyone else in response to the rate cut.

I'm curious why you thought they would respond differently?

Huh. At 3:30 aapl up 6.60

 

[MarcusMaximus]

Huh. At 3:30 aapl up 6.60

Before the dip, they were up almost 9. At the bottom of it, up <2. They just started from a higher point thanks to better than feared earnings.

 

[Tslynk67]

So we may have finished slightly red, but overall much better than others - DAQ and DOW over 1% down, APPL, after a well received ER, was 5% up at one point, closed 2% up, losing 3%, TSLA was mostly 1.5 - 2% up, so considering, it's not too bad.

 

[MarcusMaximus]

So we may have finished slightly red, but overall much better than others - DAQ and DOW over 1% down, APPL, after a well received ER, was 5% up at one point, closed 2% up, losing 3%, TSLA was mostly 1.5 - 2% up, so considering, it's not too bad.

There was also what appeared to be a pretty fierce battle at the end to stop it from closing green. I'm guessing an attempt to convince people that the streak is broken. I'm thinking it's unlikely to work, because it looks an awful lot like a single big player loading up on shares right now.

 

[StealthP3D]

Huh. At 3:30 aapl up 6.60

When you posted you thought everyone but AAPL would take a hit (at 6:42AM PST) Apple was trading at $220.99/share. AAPL closed the day at $212.86.

I'm just saying it looks like AAPL took a hit in line with everyone else. TSLA actually performed better than AAPL from the time of your comment. APPL is not special or immune to normal market forces.

 

[Chickenlittle]

When you posted you thought everyone but AAPL would take a hit (at 6:42AM PST) Apple was trading at $220.99/share. AAPL closed the day at $212.86.

I'm just saying it looks like AAPL took a hit in line with everyone else. TSLA actually performed better than AAPL from the time of your comment. APPL is not special or immune to normal market forces.

No aapl closed up on the day as predicted. I should give you my pass code on TMC so you can rewrite my posts

 

[StealthP3D]

I do not predict where tsla will go today but I suspect overall market will drop (except aapl).
No rate drop—-market down
.25% drop in interest rates—so expected sell off on announcement
.5% drop in interest rates—“fed knows something we don’t” so sell off

I didn't re-write it, that's exactly what you wrote. AAPL sold off just as hard as the others when the rates were announced.

 

[MarcusMaximus]

I didn't re-write it, that's exactly what you wrote. AAPL sold off just as hard as the others when the rates were announced.

I’m guessing he meant overall for the day? It is ambiguous.

 

[VValleyEV]

That test, if accurate, isn't as impressive as it sounds. Dropping 4 ft, with an initial downward speed of 0mph gives an end speed of ~11mph. The real test would be what happens if you hit that pointy boulder at normal driving speeds(20-30 mph, say). Vertical falling speeds aren't ever going to be much unless you drive off the side of a cliff. Lateral speeds are what will damage things.

Point taken.

However, a friend who is an off-road driving instructor and Jeep expert extraordinaire would say that driving over large boulders should be limited to very slow speeds, probably less than that 11mph you calculated. If you are rolling along at 25mph and suddenly run over a large boulder, you may need a new pair of eyeglasses. The rule of thumb is something like “if it is larger than a basketball, put a tire on it”.

A Jeep scraping the undercarriage with a pointy boulder at 25mph is likely to sustain a lot of damage, including mine with the lift kit and extra armoring. A stock 4x4 pickup may do worse.

 

[Chickenlittle]

I didn't re-write it, that's exactly what you wrote. AAPL sold off just as hard as the others when the rates were announced.

Doesn’t change Apple ended up for the day. Let me put it differently. Ending higher than its opening means it did not drop today. At the time I wrote that indices were higher. My prediction was that they would drop for the day I.e. close lower than they opened. If that’s not clear to you I will not answer further. Would rather talk to a wall. My first person to be put on ignore. Congrats

 

[skybluecgreen]

The more I think about this, the more I'm convincing myself this acquisition is very likely to happen, at least for the GF1 US business (the Japan S/X factory maybe unlikely).

Panasonic has invested $1.6bn in GF1 capex. I guess it also has cumulative cash operating losses at GF1 of around $0.5bn? It may have invested some working capital too, let's say $0.2bn? (Tesla payables to Panasonic will be higher, but Panasonic has its own payables to suppliers). Then the remaining value in this business is the staff experience and manufacturing IP. The value of this part is very different for Tesla vs Panasonic. Assuming Panasonic knows Tesla plans to make cells for Model Y and future expansion in-house, it knows it is never going to get the scale to make its GF1 business significantly profitable - so discounted cash flow value of this IP is actually very low to Panasonic (unless they think they can sue Tesla for IP theft). For Tesla however, Panasonic's GF1 staff experience and parts of their manufacturing IP are likely very valuable (though parts of the IP will probably be substituted out with products from Tesla's R&D lab), particularly given the scale of its future ambitions and how much this acquisition could lower execution risk with cell ramp for Model Y.
Tesla looks in the stronger negotiating position here to me. Tesla will likely just go it alone with cell production if Panasonic don't sell up (possibly at risk of some lawsuits). If Tesla offers $2.5-3bn for Panasonic's GF1 business I can see Panasonic accepting (around 15% of Panasonic's market cap for a business with annualised EBIT at more than negative $200m with no obvious prospects for significant future cash generation).

If this is part of Tesla's plan, then they want to get the acquisition closed before they start to ramp their own new cell capacity for Model Y and before their March battery investor day. Given M&A can take time to close, then a deal announcement could be due very soon. Of course only if i'm not just going crazy with meritless speculation!

This scenario seems reasonable as it fits with Tesla's shareholder meeting reference to taking control of their own destiny, the terawatt talk of the Q2 call and the recent Maxwell acquisition. Though it is an exciting prospect for Tesla, I think it could cause a short term drop in the share price.

The analysts and media would surely paint it as Panasonic giving up on a sinking ship with Tesla having to bail it out. It could result in another capital raise to pay for it and the further investment needed for that path toward a terawatt.

 

[jerry33]

However, a friend who is an off-road driving instructor and Jeep expert extraordinaire would say that driving over large boulders should be limited to very slow speeds, probably less than that 11mph you calculated. If you are rolling along at 25mph and suddenly run over a large boulder, you may need a new pair of eyeglasses. The rule of thumb is something like “if it is larger than a basketball, put a tire on it”.

A Jeep scraping the undercarriage with a pointy boulder at 25mph is likely to sustain a lot of damage, including mine with the lift kit and extra armoring. A stock 4x4 pickup may do worse.

For washboard roads that are reasonably maintained 25-30 mph with lowered tire pressure (to save the body, and yours).
For tracks with boulders, usually dead slow is the correct rate of speed. 10 mph is fast for this situation. (I don't see any current Tesla being okay for this kind of use).
Be sure to pump the tires back up when getting back to the highway.
Use the highest sidewall tires possible.

 

[StarFoxisDown!]

The more I think about this, the more I'm convincing myself this acquisition is very likely to happen, at least for the GF1 US business (the Japan S/X factory maybe unlikely).

Panasonic has invested $1.6bn in GF1 capex. I guess it also has cumulative cash operating losses at GF1 of around $0.5bn? It may have invested some working capital too, let's say $0.2bn? (Tesla payables to Panasonic will be higher, but Panasonic has its own payables to suppliers). Then the remaining value in this business is the staff experience and manufacturing IP. The value of this part is very different for Tesla vs Panasonic. Assuming Panasonic knows Tesla plans to make cells for Model Y and future expansion in-house, it knows it is never going to get the scale to make its GF1 business significantly profitable - so discounted cash flow value of this IP is actually very low to Panasonic (unless they think they can sue Tesla for IP theft). For Tesla however, Panasonic's GF1 staff experience and parts of their manufacturing IP are likely very valuable (though parts of the IP will probably be substituted out with products from Tesla's R&D lab), particularly given the scale of its future ambitions and how much this acquisition could lower execution risk with cell ramp for Model Y.
Tesla looks in the stronger negotiating position here to me. Tesla will likely just go it alone with cell production if Panasonic don't sell up (possibly at risk of some lawsuits). If Tesla offers $2.5-3bn for Panasonic's GF1 business I can see Panasonic accepting (around 15% of Panasonic's market cap for a business with annualised EBIT at more than negative $200m with no obvious prospects for significant future cash generation).

If this is part of Tesla's plan, then they want to get the acquisition closed before they start to ramp their own new cell capacity for Model Y and before their March battery investor day. Given M&A can take time to close, then a deal announcement could be due very soon. Of course only if i'm not just going crazy with meritless speculation!

When Tesla did the secondary to raise cash in Q1(or was it early Q2?), I called out here that my belief was that they were raising the money to buy out Panasonic. Raising the money for any other reason didn't really seem to make sense unless they were very worried about returning to positive FCF in Q2 and going forward.

The cash raise could have been to shore up the balance sheet but idk, it didn't seem absolutely necessary especially when at that time, they were stating they were confident about returning to positive FCF in Q2. Especially considering the fact that they were raising the money in the position of a weak share price. They could have easily waited for Q2 for a better stock price to do the secondary if it was just about shoring up the balance sheet

 

[StealthP3D]

This scenario seems reasonable as it fits with Tesla's shareholder meeting reference to taking control of their own destiny, the terawatt talk of the Q2 call and the recent Maxwell acquisition. Though it is an exciting prospect for Tesla, I think it could cause a short term drop in the share price.

The analysts and media would surely paint it as Panasonic giving up on a sinking ship with Tesla having to bail it out. It could result in another capital raise to pay for it and the further investment needed for that path toward a terawatt.

I would prefer more debt over the dilution of shares. But it would likely be some combination of both. Either way, I totally support Tesla taking charge of their destiny. There are big profits to be had when displacing big oil. The destiny of the 21st century commands it and people will listen. They are tired of being flooded out, baked to a crisp and choked by smog.

 

[ReflexFunds]

This scenario seems reasonable as it fits with Tesla's shareholder meeting reference to taking control of their own destiny, the terawatt talk of the Q2 call and the recent Maxwell acquisition. Though it is an exciting prospect for Tesla, I think it could cause a short term drop in the share price.

The analysts and media would surely paint it as Panasonic giving up on a sinking ship with Tesla having to bail it out. It could result in another capital raise to pay for it and the further investment needed for that path toward a terawatt.

I agree, I think there is no doubt that is how the media will spin it and there is a chance it would lead to a short term decrease in stock price. That's irrelevant to me though. I just care about what increases the long term odds of Tesla's success and the odds that the world will end fossil fuel consumption before its too late, and I'm confident this acquisition would help with this.

If Tesla is indeed negotiating an acquisition of this business, then its recent extremely unsubtle public hints about in-house cell production, press leaks about in-house cell R&D, Maxwell acquisition, Tesla's recent cash raise and validation of additional cell suppliers for Tesla cars could all be read as Elon attempting to increase leverage in valuation discussions.

On the whole I think a cash raise to fund this hypothetical acquisition would be unlikely - the raise this year may well have been in preparation for this. I'll put $1.5bn Tesla stock and $1.25bn cash as a base case acquisition price (but it could easily be much higher than this with more Tesla stock offered). Another cash raise to fund acceleration of its massive cell expansion plans after the battery day next year seems more likely.

By the way I think Drew's even worse than Elon at letting the cats (or monkeys) out the bag.

Elon: "We don't want to let the cat out of the bag too much."

JB: "I think its right on. Those are the right problems we need to solve to scale, and they have been for some time but its more obvious now than I think it ever was that we need a large scale solution to cell production."

Drew: "And we're not sitting idly by, we're taking all the moves required to be masters of our own destiny here, technologically and otherwise. I think through all the experience we've developed through partners and otherwise we have solutions in place."

 

[tschmidty]

I agree, I think there is no doubt that is how the media will spin it and there is a chance it would lead to a short term decrease in stock price. That's irrelevant to me though. I just care about what increases the long term odds of Tesla's success and the odds that the world will end fossil fuel consumption before its too late, and I'm confident this acquisition would help with this.

If Tesla is indeed negotiating an acquisition of this business, then its recent extremely unsubtle public hints about in-house cell production, press leaks about in-house cell R&D, Maxwell acquisition, Tesla's recent cash raise and validation of additional cell suppliers for Tesla cars could all be read as Elon attempting to increase leverage in valuation discussions.

On the whole I think a cash raise to fund this hypothetical acquisition would be unlikely - the raise this year may well have been in preparation for this. I'll put $1.5bn Tesla stock and $1.25bn cash as a base case acquisition price (but it could easily be much higher than this with more Tesla stock offered). Another cash raise to fund acceleration of its massive cell expansion plans after the battery day next year seems more likely.

By the way I think Drew's even worse than Elon at letting the cats (or monkeys) out the bag.

I am not sure what would really be in this for Tesla though. From my understanding the maxwell tech (if it pans out) will require a different manufacturing process. So either extensive re-tooling (interrupting existing production) or new machinery. 2.75B goes a long way towards expanding their own facilities to build new production which will be needed in any case.

So why not just continue as is? I can see why Panasonic may want to get out, but I see less incentive for Tesla to buy them out at this point. Doesn't mean it won't happen but I think Tesla has the upper hand here.

 

[ReflexFunds]

I am not sure what would really be in this for Tesla though. From my understanding the maxwell tech (if it pans out) will require a different manufacturing process. So either extensive re-tooling (interrupting existing production) or new machinery. 2.75B goes a long way towards expanding their own facilities to build new production which will be needed in any case.

So why not just continue as is? I can see why Panasonic may want to get out, but I see less incentive for Tesla to buy them out at this point. Doesn't mean it won't happen but I think Tesla has the upper hand here.

Maxwell tech is for manufacturing cathodes and anodes - these are cell components not the cells themselves (Panasonic also makes cathodes at GF1 but many cell makers import them). I'm sure Tesla has developed processes in-house to make cells too, but i'm also sure there are parts of Panasonic's process they would like to incorporate - Panasonic are currently the best cell manufacturers in the world after all.
More importantly, no employees in the US know how to manufacturer battery cells at scale apart from the thousands of Panasonic employees already working in Tesla's own factory. These are obviously the best people to use to ensure a smooth ramp up of Tesla's own cell lines in the same building for Model Y next year.

Remember Tesla plans to build 2TWh of cells per year - $200bn annual revenue/cost for cells alone at current pricing. A few $bn now is nothing if it helps Tesla increase the odds of reaching this goal. And owning Panasonic also reduces the risk of future lawsuits that Tesla stole their tech/staff.