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

[Unpilot]

What happens to the FCA credit's when FCA goes bankwrupt?

Good morning all...you folks remind me of a large dysfunctional family.
Except we don't have the awkward seating arrangement's

 

[Ellec]

Wonder if they're trying to squish some shorts. A quick release after positive results likely means their arguments lack weight, and then they don't have time to cover in between.

Nope, it means they are about to raise again. With Fremont closed till June they'll burn through billions. Demand could also drop over next 3-4 Q's leading to a cash crunch

 

[ByeByeJohnny]

From the 10-Q:



Correct me if I'm interpreting this wrong, but this sounds like all $354M in credits from this quarter came from this quarter, rather than from the deferred credits balance. So that must mean this is the FCA Deal in action as of Q1'20, and this level of credits is sustainable going forward, and will perhaps even increase if Tesla sells more EVs in EU and/or if the % of Fiat's sales that are EVs drops.

Are those $140 million from the deferred credits balance already sold so to speak? In the sense that the value is locked in and can be used no matter what happens with demand?

I'm thinking that would be an easy $140 million for Q2? Or are they valued at $140 million because of likely value when sold? In that case they could be harder to sell in Q2 because fewer ICE cars are sold so the ICE companies wouldn't need as many.

 

[ggies07]

Something that does not seem to be discussed (and I think elon is smart not to, because of the implications) is the whole automation / alien dreadnought thing...

A completely automated battery factory would be running flat out right now, without one moment of downtime, virus be damned. Even if that is a little way off, Elon must be thinking that the tradeoff of extra investment in automation in some parts of the line might be worth making, if it means he can argue for a re-opening or constant use of a plant even with serious social distancing measures in place.

Yep, I was just coming in here to post something along these lines. This is the first thought that came into my head after his rant last night. Another win for automation and UBI.

 

[LJS22]

FINRA-reported short volume was just 39.9% of their total volume today. That's the lowest value in over 6 weeks (Mar 6, 44 days ago).

I think Elon trapped more 'weak longs' than 'shortzes' with those tweets...

I saw some people on twitter yesterday showing some screen shots saying there were no more shares available to short. I’m not sure if that changed what they could do yesterday haha

 

[ggies07]

One of them, Toyota Motor North America, relocated its Torrance, California headquarters and 3,000 jobs to Plano in 2017.

Yes, it's a freakin huge building that is a waste in my mind with where the auto industry is going. Unless they can switch over to EVs there extremely quickly, it's at a loss.....

 

[Artful Dodger]

Look, I’m not cheerleading for Texas (well, maybe a little), but those are the facts. And our factory Is sitting idle indefinitely.

Hell, yeah. "Move it or lose it" comes to mind.

 

[scubastevo80]

And of course CNBC is out this morning with their standard fanfare... "Elon Musk says orders to stay home are ‘fascist’ in expletive-laced rant during Tesla earnings call"

 

[Unpilot]

Nope, it means they are about to raise again. With Fremont closed till June they'll burn through billions. Demand could also drop over next 3-4 Q's leading to a cash crunch

@Krugerrand

 

[LN1_Casey]

Nope, it means they are about to raise again. With Fremont closed till June they'll burn through billions. Demand could also drop over next 3-4 Q's leading to a cash crunch

I disagree; I don't think they'll burn through billions, not with everything closed. They're not paying their top execs, others got a pay cut, and a lot of the hourly workers are furloughed--all of which are one of the the largest expenses a company has. Further, the other large expenses are materials, which they're also not getting, since supply lines are cut down and they're not stock piling at this time (that we're aware of).

I don't think they'll do another raise, not so quickly after their last one in February--a mere two months ago.

 

[Prunesquallor]

Just to expand on my earlier comments on energy storage batteries:-
Solar, wind and battery storage now cheapest energy options just about everywhere | RenewEconomy



Utility-scale battery (four-hour storage duration) $145-167 per MWh - if this number is based on a 10 year battery lifetime a simple change to a 20 year lifetime halves that cost.

The whole suite of measures that will be introduced by Battery Day is very likely to halve that cost...

If we apply that reduced battery cost, we can see all other forms of electrcity generation and storage are being challenged by RE+batteries:-
Onshore wind plus storage $41-$104
Fixed-axis PV plus storage $44-$129

Lithium-Ion Energy Storage Cost vs. Pumped Hydro Or Flow Battery Cost Are Dependent On Time | CleanTechnica

If we look at this chart the only bad news for Tesla is that Pumped Hydro and perhaps Sulphur flow batteries out complete Tesla batteries on > 4 hours of energy storage...



But again the halving of the cost probably pushes lithium-ion to break even at around 6-8 hours.

In fact CleanTechnica is more bullish:-


Perhaps there is even a virtuous cycle of Wrights Law allowing ithium-ion to keep lowering costs and unlocking more and more of the market as prices fall. CleanTechnicia has reached a similar conclusion.

The good thing is PV and Wind while being the cheapest for of electricity generation need storage and battery storage can do a lot more than just provide storage, for example it can help maintain stable frequency and voltage and reduce the need for transmission line upgrades.

So how big is the opportunity for Tesla in energy storage batteries?

We might get the answer at Battery Day.

I do hope we see more discussion of Tesla financials and market opportunities in here, fewer arguments and less pseudo-political discussion.

Excellent summary. I’ve bookmarked those articles.
You comment about a virtuous cycle points out something to watch for. It appears that renewable/storage is approaching all kinds of cost breakpoints. It reminds me of this article from last year:

Another Texas power plant is mothballed, raising concerns over reserves and prices

"In recent years, however, additional supplies from other sources, particularly wind, have moderated the summer price spikes that made it worth the cost of keeping peaker plants ready to go into operation. Peaker plants now face the growing likelihood that they may never be called upon to produce power, even as they maintain and staff them."

 

[MTL_HABS1909]

So pre-market seems to be trending downwards, but there’s no way we don’t shoot up after the MMD right? Especially given all the upgrades that are coming in. Although it is TSLA, so you never know....

 

[Artful Dodger]

I saw some people on twitter yesterday showing some screen shots saying there were no more shares available to short. I’m not sure if that changed what they could do yesterday haha

According to FINRA daily reporting, yesterday's "Short Exempt" volume was just 0.66% of all Short volume. This is at the 45th Percentile ranking of Shorts reported since Jan 31, 2020.

This means there was no particular difficulty locating shares for shorting yesterday. MMs (are supposed to) use their Exemption only to provide liquidity, and NOT in support of their own proprietary trading.

If certain Brokers were placing restrictions on potential short sellers, then they're actualy doing that client a solid.

Good Broker.

 

[ZachF]

Excellent summary. I’ve bookmarked those articles.
You comment about a virtuous cycle points out something to watch for. It appears that renewable/storage is approaching all kinds of cost breakpoints. It reminds me of this article from last year:

Another Texas power plant is mothballed, raising concerns over reserves and prices

"In recent years, however, additional supplies from other sources, particularly wind, have moderated the summer price spikes that made it worth the cost of keeping peaker plants ready to go into operation. Peaker plants now face the growing likelihood that they may never be called upon to produce power, even as they maintain and staff them."

Batteries are going to replace peaker plants. They are already more economical, and only getting more so as batteries drop in price.

By the late 2020s, IMHO, solar+ storage in the southwest will be able to beat hydro in cost.

 

[Artful Dodger]

I disagree; I don't think they'll burn through billions, not with everything closed. They're not paying their top execs, others got a pay cut, and a lot of the hourly workers are furloughed--all of which are one of the the largest expenses a company has. Further, the other large expenses are materials, which they're also not getting, since supply lines are cut down and they're not stock piling at this time (that we're aware of).

I don't think they'll do another raise, not so quickly after their last one in February--a mere two months ago.

All true, but you hurt the part where Elon says "pedal to the metal"?

Go for the throat. Sweep the leg. Wax on, wax off.

 

[FrankSG]

Are those $140 million from the deferred credits balance already sold so to speak? In the sense that the value is locked in and can be used no matter what happens with demand?

I'm thinking that would be an easy $140 million for Q2? Or are they valued at $140 million because of likely value when sold? In that case they could be harder to sell in Q2 because fewer ICE cars are sold so the ICE companies wouldn't need as many.

Those are still on the balance sheet. They are proceeds from credits sold to FCA in 2019.

Yes, I believe the Q4'19 10-K also said they would be recognized within the next 12 months. Q2'19 seems as good a time as any. That could mean as much as $500M in revenue from credits sales in Q2, and combined with the temporary halt of stock-based compensation and 10-30% reduction in salaries and furloughs, this is making S&P 500 inclusion after Q2 seem more and more likely.

 

[ZachF]

I disagree; I don't think they'll burn through billions, not with everything closed. They're not paying their top execs, others got a pay cut, and a lot of the hourly workers are furloughed--all of which are one of the the largest expenses a company has. Further, the other large expenses are materials, which they're also not getting, since supply lines are cut down and they're not stock piling at this time (that we're aware of).

I don't think they'll do another raise, not so quickly after their last one in February--a mere two months ago.

I think doing a raise now would actually be pretty prudent. The SP is high, and a successful one, even though it's dilutive could easily increase the SP by reducing uncertainty of harm by a larger percentage than the SP was diluted.. If they don't end up needing the money for COVID related stuff, they'll have a fat stack of cash to get started early on GigaTexas.

 

[vikings123]

So pre-market seems to be trending downwards, but there’s no way we don’t shoot up after the MMD right? Especially given all the upgrades that are coming in. Although it is TSLA, so you never know....

It does take the market a few days to digest all the awesome things they heard yesterday so keep that in mind. You heard that guy on CNBC basically throw up his hands in the air and say I don't know how to valuate this stock anymore which speaks to the lack of understanding of Tesla's potential.

 

[Ellec]

I disagree; I don't think they'll burn through billions, not with everything closed. They're not paying their top execs, others got a pay cut, and a lot of the hourly workers are furloughed--all of which are one of the the largest expenses a company has. Further, the other large expenses are materials, which they're also not getting, since supply lines are cut down and they're not stock piling at this time (that we're aware of).

I don't think they'll do another raise, not so quickly after their last one in February--a mere two months ago.

The longer the factory is shut the more cash that's burned, they can make cutbacks but they still need to pay suppliers for all the parts they've used. Accounts payable is $4 billion and $2 billion is tied up in China so even if they burn $1 billion they are very close to the line. Remember companies don't just wait to cash goes to $0 to raise they need to have a decent cushion which is why I think they raise within weeks.

 

[Nocturnal]

Solar installations were down but I suppose between covid and seasonality that makes sense. I wonder if they have a large backlog of completed and/or sold solar roofs ready to be deployed in Q2/3 in large numbers. It would be great to see a bump in solar or energy make up for Q2 slower auto sales.

Batteries are going to replace peaker plants. They are already more economical, and only getting more so as batteries drop in price.

By the late 2020s, IMHO, solar+ storage in the southwest will be able to beat hydro in cost.

Add wind into that equation too. Here in Kansas we are at 41% wind power now. The great plains could easily power the entire nation on wind alone if scaled and stored properly.

I think doing a raise now would actually be pretty prudent. The SP is high, and a successful one, even though it's dilutive could easily increase the SP by reducing uncertainty of harm by a larger percentage than the SP was diluted.. If they don't end up needing the money for COVID related stuff, they'll have a fat stack of cash to get started early on GigaTexas.

Raise now so that they can begin GigaMidwest (I'm not pulling for TX because they can't even sell cars there) and Giga____ at the same time, to be ready for when the world economy has started to wake back up.