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

[Highway2Heel]

I do this sort of trading in options, and it just shot up way too fast this morning Found myself chasing a rocket up.

Now, if it goes higher, I could get to the point of re-selling previously bought-back options. But as things stand, it doesn't seem to want to do that either :Þ

I set my buys at $726 and $730...which shows you how fast it was moving. Didn’t check the order book, I just frantically (and quickly) set some limit buys on my phone when I saw the nonsensical premarket trend.

 

[mad474]

Side note: If you visit the website of the German BAFA because of "Umweltbonus" (Environmental Bonus For Electric Vehicles), you get the following information:

Note
The Federal Minister for Economic Affairs and Energy, Peter Altmaier, issued a press release on February 11, 2020 on the new version of the directive on the promotion of electromobility. BAFA will shortly provide you with a new, much more convenient application procedure ...

Maybe they'll host a Model 3 "Buy" button

BAFA - Elektromobilität

 

[lafrisbee]

"we expect to recognize $751 million of (deferred) revenue in the next 12 months."

And there it is!
Before I boast, remember this is a total newbie expressing his understanding of what Tesla would do so to meet the requirements to make it into the S&P 500.
It was my understanding that certain requirements had to be met to be included in the S&P 500, and the only one remaining for TSLA was to be profitable this quarter. I thought "Cashing-in" the Chrysler/Fiat credits would be the move IF it were possible... and here it is...i think?

 

[lascavarian]

If nothing happens in the next 12 months that makes it clear why they raised this $2B in equity, I'd be quite disappointed. I just don't see why they need extra money just to strengthen their balance sheet. Tesla used to sit on $2-3B just twelve months ago, which admittedly was on the low side, but $6B in cash with much more cash flow to come in the coming quarters, seems like plenty to me.

I am just wondering if StarLink might play into this in some way. Seems like a high speed global data path might be useful for automation and the Tesla Network. As a part owner, Tesla may be able to have something special available for their autonomous fleet. Just a musing.

 

[Fact Checking]

Wedbush analyst Daniel Ives likes the capital raise:

Wedbush analyst Daniel Ives weighed in on Tesla (NASDAQ: TSLA), calling the stock offering a "smart and strategic move."

"Earlier this morning it was announced that TSLA will be offering 2.65 million shares to raise ~$2 billion to support its balance sheet as the company continues its impressive build out of Giga 3 in Shanghai and many more endeavors in the pipeline. We note that Musk plans to participate in the offering up to $10 million and Board member Larry Ellison will purchase up to $1 million of stock."

"This will be a bit of a shock to some given the company talked about no need to raise capital on its recent conference call, although the bulls (which we agree with) will say this essentially rips the bandaid off and takes the doomsday cash crunch scenario some predicted down the road now off the table."

"In our opinion the size of this offering is larger than many had anticipated, but we believe it’s a smart move by Musk and the Board to take advantage of being back in a position of strength with the Street and focus on raising capital at a time when EV demand is just starting to inflect with China the main fuel in the growth engine."

"To this point, given CapEx with Giga 3, Europe, and autonomous we ultimately believe this morning is a potential "game changer" move putting Fremont in a much stronger capital position over the coming years with competition increasing from all angles on EV and the pressure on new models/production/global factories. In a nutshell, the Tesla story changes today (for the positive) with this capital raise in our opinion."​

I particularly liked his "EV demand is just starting to inflect with China the main fuel in the growth engine" rocket engine analogy, although I think in the next 10 years analysts will eventually have to come up with new analogies that kids who never saw a gas engine would understand too.

 

[Chickenlittle]

I hope admins don’t call this stupid but look at every past stock raise price goes up pushed by issuers. Goldman May even raise previous price target but be careful once complete and Goldman sells shares will drop a bit to previous level

 

[jerry33]

Has Tesla announced that Aprils "Company Talk" at GF2 Buffalo will also include topics they have been saying would be covered at Battery Day? Or is that just what people are assuming from a recent statement that Battery Day would be sometime in April?

Sorry if this has been covered and I missed the memo!

They will be different (from what I've read). My take is that the Buffalo presentation will be on solar, and Battery Day will be on batteries.

 

[Mike Smith]

Without this raise we would have been $20-30 lower for sure. The shallow FUD and macros were getting traction, but this blew it all out of the water

I was blown away that this was initially seen as negative news. This is a disaster for Tesla's competitors.

 

[Artful Dodger]

Not "thats the dumbest thing I have heard in weeks". Be more like Zach.

I find your comments offensive (and I was in the Army). The reason they are offensive is because you insist on bashing Elon without quoting what he actually said. That's either lazy or disengenuous, or both.

At no point did Elon say "dumbest thing". You are making that up out of your fears and self-loathing. What Elon said is raising equity to pay debt is not wise. Further he said:

Elon Musk

Yes, we're going to pay down the debt just as time goes by and we paid down $0.5 billion worth the debt last quarter. So we'll just keep steadily paying it down and yes, so, yes. But, yes, I don't think we have any more say on that part, all right?​

Now tell us how you read "Dumb" out of that? Or, alternatively, quit putting your fears into Elon's mouth.

Word.

 

[SOULPEDL]

IMO its a good move and makes a lot of sense. Yes, Elon said tat ER call they spend what they can but lets not forget at that point in time the company value was many billions lower than today.

With a much higher SP everything changes and you reconsider if its a good time to plan for the future different than before. They did exactly the same back in 2013 and it has been proven to be good for shareholder at the end too.

The dilution is meaningless and now we own a portion of that cash collected to it does not make any difference unless you sell today at a low price and buy later again in at a higher one.

I did expect at the ER them to announce more capex investments which did not happen but now the situation is financially even better which may give them the opportunity to reconsider. They produce cash and collect cash to push faster forward.

ArkInvest has a similar opinion and is more confident in their bull case now because they see the requirement to build more GF to cope with the demand. Beside Texas there are Twitter rumors about talks in Bulgaria and we know from Germany (Nordrhine Westfalia and Lower Saxony) that the leaked GF talks last year have been correct.

.#Tesla’s capital raise increases our confidence that it will gain market share in the #EV market during the next 5 years, increasing the probability that our bull case for the stock is correct.

Cathie Wood on Twitter

@ARKInvest
included $15B of equity dilution in its 5 year forecast for $TSLA, so $2 billion+ now makes sense. We wouldn’t be surprised if Elon announces plans for another #Gigafactory in China, a vote of confidence in the resilience of that country.

Cathie Wood on Twitter

I was thinking, what about a GF in Mexico? Isnt that common for lower cost production on the Americas? Or is labor cost dropping with all the automation - now and planned? Location then boils down to shipping advantages mostly. (Maybe I answered my own question, lol)

 

[JBRR]

 

[Highway2Heel]

At 2.65M shares, the difference between the pre-earnings call price ($580) and now is around a half billion dollars.

Again, a smart move to capitalize on a position of strength that wasn’t anticipated back then.

 

[Artful Dodger]

No, it could be anything.

Understand your sentiment, and that may hold true for the broader market.

However, in Tesla's history, I think you'll find its NEVER been anything other than fully subscribed at the offer price, which has always been set at the Closing SP from the previous day.

My point stands.

Cheers!

 

[Zaxxon]

...wait, why?

Didn't Musk just say that Tesla wasn't able to spend all of their cash? Why raise money now?

For those who haven't followed Tesla forever: if Tesla says they may raise cash, they probably will. If they say they won't, they definitely will.

 

[Alphacrux]

I'm baffled by the equity raise. Given all the information I have available to me, I don't see why they'd want to dilute for some extra cash. They've said they're spending cash as fast as they efficiently can, and their cash flows will be even stronger a few quarters from now after MY and Giga Shanghai are in full swing.

Elon and Zachary aren't stupid though, so there must be a good reason for the raise that is neither disclosed in the announcement, nor any of us are aware of at this moment. If I were to speculate, I'd say it must be for either an acquisition (company or Panasonic battery lines in Giga Nevada), or a new factory/production capacity most likely for battery cells.

Hopefully we'll find out more in April. If nothing happens in the next 12 months that makes it clear why they raised this $2B in equity, I'd be quite disappointed. I just don't see why they need extra money just to strengthen their balance sheet. Tesla used to sit on $2-3B just twelve months ago, which admittedly was on the low side, but $6B in cash with much more cash flow to come in the coming quarters, seems like plenty to me.

Texas Gigafactory

 

[Rashomon]

Wouldn’t the reduction in interest expense from the capital raise accelerate when Tesla has to change their tax loss accounting, providing a double positive bump to GAAP earnings? That is, the interest reduction plus the tax loss benefit accrual?

 

[jerry33]

I was thinking, what about a GF in Mexico? Isnt that common for lower cost production on the Americas? Or is labor cost dropping with all the automation - now and planned? Location then boils down to shipping advantages mostly. (Maybe I answered my own question, lol)

One of Tesla's advantages is that it's actually made in the U.S. (or China or Germany once GF4 gets going). Mexico is not one of Tesla's biggest markets. And having had a car and a refrigerator made in Mexico, I'm not keen on repeating the experience.

 

[Singuy]

I find yor comments offensive, and I was in the Army. The reason they are offensive is because you insist on bashing without quoting what Elon actually said.

At no point did Elon say "dumbest thing". You are making that up out of your fears and self-loathing. What Elon said is raising equity to pay debt is not wise. Further he said:

Elon Musk

Yes, we're going to pay down the debt just as time goes by and we paid down $0.5 billion worth the debt last quarter. So we'll just keep steadily paying it down and yes, so, yes. But, yes, I don't think we have any more say on that part, all right?​

Now tell us how you read "Dumb" out of that? Or, alternatively, quit putting your fears into Elon's mouth.

Word.

Okay I understand people here are stickler for 100% accuracy but most people here walked away from that conference call thought Elon was combative or irritated at the analysis who asked him about cash raises. So it was a summery of his attitude toward cash raises than anything. Not one person thought Elon would raise cash today given his attitude toward this during the call. I am obviously not the only person who thought this given the likes from my post. So it's not 100% about what was actually said but just a read on Elon.

Many of us were not even happy that he shuts down cash raises so hard after the call. I was in the indifferent camp.

 

[mrdoubleb]

Wedbush analyst Daniel Ives likes the capital raise:

Wedbush analyst Daniel Ives weighed in on Tesla (NASDAQ: TSLA), calling the stock offering a "smart and strategic move."

"Earlier this morning it was announced that TSLA will be offering 2.65 million shares to raise ~$2 billion to support its balance sheet as the company continues its impressive build out of Giga 3 in Shanghai and many more endeavors in the pipeline. We note that Musk plans to participate in the offering up to $10 million and Board member Larry Ellison will purchase up to $1 million of stock."

"This will be a bit of a shock to some given the company talked about no need to raise capital on its recent conference call, although the bulls (which we agree with) will say this essentially rips the bandaid off and takes the doomsday cash crunch scenario some predicted down the road now off the table."

"In our opinion the size of this offering is larger than many had anticipated, but we believe it’s a smart move by Musk and the Board to take advantage of being back in a position of strength with the Street and focus on raising capital at a time when EV demand is just starting to inflect with China the main fuel in the growth engine."

"To this point, given CapEx with Giga 3, Europe, and autonomous we ultimately believe this morning is a potential "game changer" move putting Fremont in a much stronger capital position over the coming years with competition increasing from all angles on EV and the pressure on new models/production/global factories. In a nutshell, the Tesla story changes today (for the positive) with this capital raise in our opinion."​

I particularly liked his "EV demand is just starting to inflect with China the main fuel in the growth engine" rocket engine analogy, although I think in the next 10 years analysts will eventually have to come up with new analogies that kids who never saw a gas engine would understand too.

What do you know... Wall Street loves a cap raise where they can make a buck off off their clients buying in. Completely unrelated to their buy/sell recommendation on the stock you know. Chinese Wall and all...

PS: Yeah, with 6 billion in the bank and positive cash flow, I was also very worried about "cash crunch scenario some predicted down the road".

 

[Cosmacelf]

I think you're combining the acquisition and debt response with the acceleration response:
Tesla, Inc. (TSLA) Q4 2019 Earnings Call Transcript | The Motley Fool
Acceleration:


Later, in the live q&a
Acquisition and debt payoff: (redundant in general)

So the credit Suisse analyst asked the second question about capital raise, and yet they are part of the underwriting group?

“Goldman Sachs & Co. LLC and Morgan Stanley are acting as lead joint book-running managers for the offering, with Barclays, BofA Securities, Citigroup, Credit Suisse, Deutsche Bank Securities, and Wells Fargo Securities acting as additional book-running managers, and Societe Generale acting as co-manager.”