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

[Buckminster]

Tesla are executing so well across the board that it going to become embarrassing.

One thing I thought about this morning was how EV adoption is slower than I thought it was going to be a couple of years ago. This too is playing into Tesla's hands as they have been able to absorb nearly all the increase. Had more customers placed orders for the few non-Teslas that are available then maybe the OEMs could have placed larger battery orders. Now they are playing second fiddle to Tesla on CATL and LG order books.
The OEMs will have plenty of batteries to choose from when Tesla drops them over the next 5 years. By then, CATL, Pana and LG will have significant investment tied up in making adequate 2170s. The OEMs will have to make do.

Meanwhile Tesla will be 100% in:

Cathode - entirely new (Maxwell)
Electrolyte - Hibar high speed filling
Anode - entirely new (SilLion)
Cell form factor - x3+ in size
Modules - gone
Packs - entirely new

Game Over

Check out what Mercedes are already saying:

Daimler can’t meet European CO2 targets but struggles with EV production - Electrek

 

[StealthP3D]

The AH drop is not insignificant. A barrage of negative news and distortion of the truth is a concerted effort by the media to push TSLA down. We have every right to get upset about this, it has nothing to do with being a “granny investor”.

You say you won’t blink if the stock goes all the way down to $400. Really? A drop of almost 50% would be very upsetting to most of us here. Nobody likes to see hard fought gains evaporate.

Also, such a drop would require a gain of 85% just to get back to where the stock was. Be careful what you wish for.

What I wish for? Please show me where I said that!

Hey, you can be upset about it, nobody can say anything different. And if I thought I could control the movement of the share price, even I might get involved. But I can't and you can't so that's a non-starter.

A drop to $400 would only upset me if it was caused by a fundamental (negative) change to the company's business. Anything else is just noise. You can get upset about the manipulation but, if you are powerless to change it, it is just part of the game that you have to accept if you want to participate in the innovations and profit that is being created right before our eyes. You can bitch and moan all you want and it's not going to change that at all. In the end, the share price is going to reflect their accomplishments. If you don't think Tesla will be successful, or wildly successful, you should get out now. In that case, there is zero point in hanging around (as a shareholder).

Personally, I'm going to enjoy the ride. I think it will return far better than average with lower risk. But there is some risk, I just don't see it as being too significant compared to the probable returns. I've been wrong before but this is one of the better bets I think.

 

[StealthP3D]

Yes, but I have plans to turn my account balance INTO "real money" within the next five to ten years. I find it disconcerting that the share price can be driven to arbitrary levels for someone else's gains. I’m holding out the hope that this nonsense stops with S&P inclusion.

Don't play the game if you don't accept the rules!

S&P 500 inclusion will reduce the leverage of the game players but it will not stop them altogether.

 

[deffu]

There has been a data JUMP...

I am not sure why yet, but you can see the chart just turned up...

Also note, we are at the stage when recovery numbers are increasing.



View attachment 510714

The epidemic center Wuhan city relaxed diagnosis standard. it doesnt require pcr test anymore. a pure CT scan can confirm the desease now. hence the sudden jump in confirmed cases. ccp changed the city/province boss. the new party bosses want to have a clean cut.

 

[Fact Checking]

I am interested in understanding how stock compensation works for Tesla employees, so I asked Vicky Salvador:

A fair warning though: she's rather antagonistic toward Tesla after she got fired last year for (allegedly) violating her NDA, and she is now suing Tesla.

We did quote her production numbers leaks from the Fremont paint shop here numerous times in 2018, and quite a few TMC members warned that what she is doing looks like a clear-cut NDA violation.

Stock awards are routine in Silicon Valley, I haven't seen anything in Tesla's stock compensation policies that are unusual. Unvested stock options being lost when a worker is laid off (especially when fired for cause) is normal.

Edit:

The worker being offered a "cash or stock" choice is unusual, I've never seen such a scheme: the whole point of RSU programs is to reward in equity options well in advance of the worker performing, which creates incentives with all employees to increase shareholder value. It also lowers the GAAP expense cost basis: as the options expenses are non-cash, and will only have to be valued based on a probabilistic options pricing formula when they are granted, not when they vest.

If what Vicky selected when accepting the RSU bonus was simply whether the RSU units should be paid out in shares or converted to cash immediately, then I don't see how that should matter to being fired: the cash doesn't come from Tesla, I suppose they are sold on the open market on vesting day by the bank used for Tesla's RSU program. (Although this too would be unusual.)

There's also RSU programs where employees can contribute part of their cash salary (typically up to 5-10%) to gain shares at a discount once every quarter or so. New RSU awards are usually distinct from such "voluntary employee contribution" RSU programs though. Btw., employees usually max out such programs, because it's free money in the long run.

So I don't know what Vicky is talking about there.

 

[Green Pete]

Unvested stock options being lost when a worker is laid off is normal.

Can speak to this being accurate from first hand experience.

 

[deffu]

A fair warning though: she's rather antagonistic toward Tesla after she got fired last year for (allegedly) violating her NDA, and she is now suing Tesla.

We did quote her production leaks from the Fremont paint shop here numerous times in 2018, and quite a few TMC members warned her that what she is doing looks like a clear-cut NDA violation.

Stock awards are routine in Silicon Valley, I haven't seen anything in Tesla's stock compensation policies that are unusual. Unvested stock options being lost when a worker is laid off is normal.

Agree. similar to other companies in SV. But Tesla is quite frugal. Average employees in R&D dont get much RSUs compared to google/facebook/aapl etc. Total compensation is way worse than other 1st tier IT companies in SV unless there is significant stock appreciation. The standard free meals/snacks/drinks thing in SV comanies does not exist in Tesla. Out of customers/shareholders/employees, a company can only treat at most two of them good. Although I feel tesla employees really deserve to be treated much better, we have to admire Musk for his excellent cost control. He achieved way more while spent way less than other SV giants such as google.

 

[Fact Checking]

Agree. similar to other companies in SV. But Tesla is quite frugal. Average employees in R&D dont get much RSUs compared to google/facebook/aapl etc. Total compensation is way worse than other 1st tier IT companies in SV unless there is significant stock appreciation. The standard free meals/snacks/drinks thing in SV comanies does not exist in Tesla. Out of customers/shareholders/employees, a company can only treat at most two of them good. Although I feel tesla employees really deserve to be treated much better, we have to admire Musk for his excellent cost control. He achieved way more while spent way less than other SV giants such as google.

Yeah, but it's a very different financing situation though:

• Google is juggling bits into different configurations using computer programs, which is near infinitely scalable, at very little capital cost.
• Tesla is juggling atoms into different configurations using machines and manual work, which is very hard to scale and comes at very high capital costs.

Also, Google is employing white collar nerds, which is a finite supply that is being bid up in Silicon Valley.

Tesla is employing blue collar workers at Fremont, and stock compensation in the auto industry is unusual.

For example it's so unusual that in 2017 the newly acquired Tesla Grohmann employees in Germany near revolted over the new stock options plan, and insisted on a cash bonus. Elon visited them and they got their wish in the end - but in hindsight it was a shortsighted decision.

Tesla's Palo Alto software positions on the other side of the Bay are paying lower than Apple/Google but are still competitive with many other SV companies, especially after a 400% rally of the stock. I'm sure Andrej Karpathy and most of his group are sleeping well these days.

 

[sparcs]

Found this and thought it might be worth at least discussing to see how it fit with expectations here for Q1...

Mayur M Thaker, CFA on Twitter

Mayur M Thaker, CFA @freshjiva
I’m seeing way too much unfounded optimism on $TSLA Q1 deliveries and profitability. Deliveries will be down sequentially but up YoY. GAAP loss and non-GAAP breakeven at best. Free cash flow breakeven as well, possibly even slightly negative. Still fully long as an LT investor.

@carsonight
As always, follow the batteries. No batteries, no EVs. GF1 is producing 6.5k to 7k batteries per week at present and supplies China. Add S/X and subtract inventory restocking for the total vehicles delivered. My guess is ~90k deliveries for Q1 2020. That barely covers overhead.

 

[adiggs]

The AH drop is not insignificant. A barrage of negative news and distortion of the truth is a concerted effort by the media to push TSLA down. We have every right to get upset about this, it has nothing to do with being a “granny investor”.

You say you won’t blink if the stock goes all the way down to $400. Really? A drop of almost 50% would be very upsetting to most of us here. Nobody likes to see hard fought gains evaporate.

Also, such a drop would require a gain of 85% just to get back to where the stock was. Be careful what you wish for.

I see this point of view. But I'm with @StealthP3D on this one.

To me, this comes down to whether you're a short term trader, or a long term buy and hold investor.

The latter is an owner of the company. In my case, my investment thesis is 10+ years. It was 10+ years when I first bought shares in 2012, and it's been updated over the intervening 8 years. Today it's 10+ years, with a reasonable probability that my wife and I will own our shares when we pass and leave them to charity.

In this context, the recent $9xx share price meant as much as the further back $1xx share price, and the current $7xx share price. Exactly nothing. We own the same fraction of the company / number of shares at all 3 share price levels. The recent $7xx share price is more fun, but the investment thesis hasn't changed. Or at least it hasn't gone down, and today's share price gyrations changed nothing. The only change to the thesis (again - my case) is that evidence of an excellent and expanding strategy, along with excellent and improving execution, is mounting. The addressable market(s) seem to expand constantly.


And yes - if you're a trader, which to me is every trade with a horizon of under about 6 months or a year, then a drop from here to $4xx would be a big deal (given that you're positioned long - if you're positioned short, then it's party time).


And if you search my post history, you'll see virtually the same post and same idea posted back when the share price was $1xx. The only difference between then and now is if I wanted more shares, I missed an excellent buying opportunity.

The weekly and even quarterly share price gyrations aren't meaningful (for long term buy and hold). It's strategy and execution against strategy, which don't change on a daily / weekly, or even much on a quarterly basis.

 

[Fact Checking]

Found this and thought it might be worth at least discussing to see how it fit with expectations here for Q1...

Mayur M Thaker, CFA on Twitter

Yeah, 90k deliveries in Q1 is my rough baseline as well (sequential drop due to seasonality and low inventory levels but good YoY growth), any delivery numbers above 100k would be well received by the market I think.

S&P 500 inclusion might slip to after Q2, unless Tesla makes use of some of the wildcards in Q1.

 

[adiggs]

I agree... the retail investor that went through this period has been hardened into a very resilient long.

For me, owning and using the product daily has shown me the value of understanding where the company is headed from first hand experience. I am referring to the software updates, improvements in NOA, and the repeated good service experiences, for 2 cars.

...

An important point here - owning the product (S / X / 3 / Y / CT); for me, this is a critical component of a long term buy and hold investment position. I realize not everybody will agree, but I've talked to too many people that are skeptical of the company and the possibilities, and every one of them doesn't own the car.

For me, I test drove Model S in the fall of 2012 for the first time. It was one of the first few thousand they had built, and was the first test drive car to make it to Portland. In today's Tesla technology, it is now old and decrepit.

It changed my world. It also caused 6 months of bad sleep as I was hunting for a Roadster to tide me over until Model X shipped. Somewhere soon after that test drive, I put together the idea that "The Product Matters". It matters a lot, and a product this much better is going to do well financially. (And that 'old' Model S is still one of the 1 million or so best cars on the road).

That test drive was enough for the initial investment (thank heavens!).


I've got people at work that aren't invested and aren't owners, but they're curious. None of them have moved on any of this, even though some of them heard this conversation about 1xx / 2xx / 3xx / 7xx share price doesn't matter for the long term strategy (back when the share price was 1xx / 2xx). They're still dithering - and I think partly because they haven't driven the car, and they're not in line to own one.

Owning the car matters to the investment.

 

[adiggs]

"You have to risk big to win big!"

I don't agree with this summary. For it to be true, we need to make volatility and risk close to synonymous.

If you own shares for 10+ years (no options, no trading in and out), how much risk do you see in a TSLA investment today (where risk has various connotations of bankruptcy and/or serious underperformance relative to the market)? I see nothing but blue skies on that horizon. I don't know WHEN the profits and share price improvements will happen (next month, quarter, year - in a decade), but I agree with Ron Baron that the company has line of sight to $1T in annual revenue (comparison - I read that Apple's around $250B right now).

Volatility ? Heck yeah - TSLA's about as volatile as you can find, especially in a big company. But volatility != risk.


With Tesla becoming self funding (whether it's an adequate funding level to invest in everything, as fast as Tesla wants to invest is a different question), what actual risk remains that isn't normal business execution risk?

 

[mrdoubleb]

European deliveries ramping up again:
≡ L ͧ ⷭ W ⷶ ͭ ͤ ͬ ᷝ ͦ ͭ≡ on Twitter

 

[MC3OZ]

Tesla are executing so well across the board that it going to become embarrassing.

One thing I thought about this morning was how EV adoption is slower than I thought it was going to be a couple of years ago. This too is playing into Tesla's hands as they have been able to absorb nearly all the increase. Had more customers placed orders for the few non-Teslas that are available then maybe the OEMs could have placed larger battery orders. Now they are playing second fiddle to Tesla on CATL and LG order books.
The OEMs will have plenty of batteries to choose from when Tesla drops them over the next 5 years. By then, CATL, Pana and LG will have significant investment tied up in making adequate 2170s. The OEMs will have to make do.

Meanwhile Tesla will be 100% in:

Cathode - entirely new (Maxwell)
Electrolyte - Hibar high speed filling
Anode - entirely new (SilLion)
Cell form factor - x3+ in size
Modules - gone
Packs - entirely new

Game Over

Check out what Mercedes are already saying:

Daimler can’t meet European CO2 targets but struggles with EV production - Electrek

There is also a chance Tesla keeps using 2170s for energy storage for sometime if they have long term supply contracts..

That might be another key difference, contract duration and volume, if Telsa is confident enough to offer long term high volume contracts, than Panasonic and LG can also be confident in their investments, as they have contracts to cover that production volume.

Perhaps those contracts are already signed and the investments are already happening... maybe those contracts do only run for the next 5 years, that that 5 years is critical...any new production takes time to ramp... even if contracts are signed today...

This is why we are all hoping Tesla can quick and efficiently scale their own battery production, for future contracts there may well be a queue at the door of Panasonic and LG...

 

[Rashomon]

In July 2019 Elon’s Gulfstream landed in Laramie WY. At the time my theory was he was acquiring a mine. Now I think he probably drove 2 hours south to Louisville CO to get some battery tech/talent.

The former SilLion CEO ended employment at SilLion in June 2018. He claims credit for the successful sale of the company. Musk might have been visiting, but the timing isn’t right for the acquisition.

 

[Green Pete]

The former SilLion CEO ended employment at SilLion in June 2018. He claims credit for the successful sale of the company. Musk might have been visiting, but the timing isn’t right for the acquisition.

You dont need to be employed somewhere to set up the connection for a sale. You don't leave as CEO and not continue to have a vested interest in the success of a company

 

[AlexS]

tslaq recovering some losses today

 

[KarenRei]

The AH drop is not insignificant. A barrage of negative news and distortion of the truth is a concerted effort by the media to push TSLA down. We have every right to get upset about this, it has nothing to do with being a “granny investor”.

You say you won’t blink if the stock goes all the way down to $400. Really? A drop of almost 50% would be very upsetting to most of us here. Nobody likes to see hard fought gains evaporate.

Also, such a drop would require a gain of 85% just to get back to where the stock was. Be careful what you wish for.

For the record: what's triggered this freakout is the stock being down after hours a whopping... checks the graph... 3 percent. I mean, oh no, the stock hasn't been this low since... checks the graph again... last Friday.

I'm with Artful Dodger. How can this faze anyone? Everyone should be sitting on a big pile of cash right about now - what's 3%? Sure, I prefer my volatility in the upwards direction rather than the downwards, but I'll take either, because none of what's going on affects the long-term picture. I gladly exploit the volatility to re-buy sold calls at local lows and re-sell them at local highs. Today will be the buying-end of that picture.

If people want to misinterpret a change in disease measurement standard as a spontaneous spike, and pretend like 15k 30-minute bolt replacements (perhaps half a million dollars) will bankrupt the company, by all means, go ahead!

 

[KarenRei]

In actual news... today is a momentous day at GF4

@GF4Tesla..️️.build #GigaBerlin. on Twitter

Harvesters are standing by, waiting for the signal:

@GF4Tesla..️️.build #GigaBerlin. on Twitter