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

[Todd Burch]

Nikola — The hybrid truck manufacturer’s stock whipsawed and fell 2% after the closing bell. Bloomberg reported Wednesday that company founder Trevor Milton exaggerated the capability of Nikola’s debut vehicle in 2016. Milton suggested during the unveiling of the company’s prototype that the Nikola One truck was drivable even though it wasn’t, according to the report. Milton refuted the Bloomberg article on Twitter.


Doesn't surprise me to be honest.....

it’s currently slightly green after hours, because there’s a fool born every minute

 

[dc_h]

Excerpts:
...
Nationwide data isn’t yet available. But across the 24 states that Dominion tracks, Tesla registrations declined 33% to 14,151 vehicles during the first two months of the quarter compared with a year ago, while those for the broader industry fell 43%. The researcher estimates the markets tracked, including New York, Florida, Texas, make up 65% of the whole U.S. auto market.
...
Analysts surveyed by FactSet now project 430,000 vehicle deliveries, on average, down from their estimate of 510,000 in February. Tesla hasn’t reiterated its full-year outlook; before the pandemic, Mr. Musk predicted deliveries increasing more than 36% to over 500,000 vehicles.
Deliveries in the second quarter, analysts believe, could fall 31% to 66,000, which would be the company’s worst performance since the first quarter of last year,

Wouldn’t this be a good time for Tesla to be ramping up a second plant to offset issues in the USA? An extra 30,000 cat\rs at that second plant could even everything put.
We can only dream.

 

[bpjod]

Nikola — The hybrid truck manufacturer’s stock whipsawed and fell 2% after the closing bell. Bloomberg reported Wednesday that company founder Trevor Milton exaggerated the capability of Nikola’s debut vehicle in 2016. Milton suggested during the unveiling of the company’s prototype that the Nikola One truck was drivable even though it wasn’t, according to the report. Milton refuted the Bloomberg article on Twitter.


Doesn't surprise me to be honest.....

Wow, he’s coming unhinged. Imagine if someone from Tesla reacted that way every time the truth about Tesla was twisted in the press...

 

[dl003]

it’s currently slightly green after hours, because there’s a fool born every minute

My only question is: where were these fools June last year???

 

[StealthP3D]

Deliveries in the second quarter, analysts believe, could fall 31% to 66,000, which would be the company’s worst performance since the first quarter of last year,

That's hilarious!

Analysts are concerned sales and deliveries this quarter could be lower than they were a year ago, before Coronavirus had any impact or was even discovered.

First of all, I think they might be wrong. Secondly, how many companies can say their sales in Q2 this year won't be lower than last year?

If Tesla can beat their performance of a year ago in the middle of a pandemic, it will be a signal of incredible strength, growth and resiliency. And I think they will beat it, shutdowns and all.

 

[StealthP3D]

Wow, he’s coming unhinged. Imagine if someone from Tesla reacted that way every time the truth about Tesla was twisted in the press...

Now would be a good time to smoke some weed on Youtube as a diversionary tactic!

 

[UnknownSoldier]

The Battle of $1000 should be a good one. It's hard to believe last year we were being riveted by the Battle for $300, and then the Cuban $180 Crisis, and then the Short Massacre at $420, and now here we are. And somehow we passed through $300 a second time during the Corvid Incursion too. What a wild ride it's been just this last year!

 

[dl003]

Now would be a good time to smoke some weed on Youtube as a diversionary tactic!

careful, he's already telling his shareholders to sell the stock!

 

[dl003]

The Battle of $1000 should be a good one. It's hard to believe last year we were being riveted by the Battle for $300, and then the Cuban $180 Crisis, and then the Short Massacre at $420, and now here we are. And somehow we passed through $300 a second time during the Corvid Incursion too. What a wild ride it's been just this last year!

I remember the last time we passed 400 on the way down very well. It happened all because some guy felt cute and decided to buy a bunch of SPY 100p and MMs had to sell off to delta hedge.

 

[Hock1]

All true. I was addressing the case of the person trading in/out with a portion of their investment. If they end up with fewer shares because of this behavior, over time their profit will likely be dramatically less (even though their effective amount of original money on the line might be lower due to SOME profitable trades).

I get a kick out of the concept of "trading shares". It is nothing more than a justification to succumb to one's gambling instinct and/or the belief that one can time his/her trades in and out of a good long-term investment and "gild the lily", so to speak. I.e., outsmart the market. Losers' game.

 

[StealthP3D]

This is probably a dumb question, but is it cheaper labor rate to install solar on a pergola structure? Easier to get permits, or worse?

It could vary a bit but, in general, it would cost about the same or a bit more to put them on a pergola (if a suitable pergola already existed) to a lot more if the pergola needed to be built. As to permitting, that would likely be about the same although it could vary by local. Every situation is different but the pergola would likely require a longer run to the panel (more wire and conduit and digging).

 

[adiggs]

it’s currently slightly green after hours, because there’s a fool born every minute

Heck - people are bidding UP shares of Hertz, the company that recently declared Ch 11 bankruptcy and has indicated that shareholders are likely to receive nothing (shares are actually worth nothing).

So why not bid up Nikola - those shares aren't actually worthless yet!

 

[StealthP3D]

careful, he's already telling his shareholders to sell the stock!

Milton is telling his shareholders to sell the stock? In what context?

 

[dl003]

Heck - people are bidding UP shares of Hertz, the company that recently declared Ch 11 bankruptcy and has indicated that shareholders are likely to receive nothing (shares are actually worth nothing).

So why not bid up Nikola - those shares aren't actually worthless yet!

I feel obliged to post this

 

[FrankSG]

followed by
wed 6:23am on my IB news ticker

MS “reiterating” tesla underweight and price target 650 on china demand

they were quoting jonas talking to some MS china auto analyst saying that tesla china demand won’t last

...if it first you don’t succeed, try try again

——-
but we can’t be surprised by some sudden selloff. we’ve been warned now a few times. it’s probably coming. jonas and his consortium are scum of earth

aaaand the kicker

cowen initiates coverage of nkla with target $79 or something. “more than just a truck company”

the borrow rate on nkla now at ib neg 771

a general collateral stock is like spy or msft or aapl so you’d pay roughly .25% to .50% right now.

nkla costs 771.0%!!!

yes you read that right (according to my stock loan desk)

I am short NKLA. I get a message like this every day from ETrade:

The borrow rate for a hard-to-borrow security in your account below is above 25%.

Security:
NKLA
New borrow rate: 301.25%

So am I to assume the absurd cost of shorting Nikola is creating demand for buying nkla shares?

This article I came across yesterday helps explain wth is going on with NKLA and NKLA options.

Apparently <10% of all shares outstanding are currently tradable, and within the next month or so the float will increase in size by 200-300%.

A lot of the people who are not able to sell their stock yet, but will be able to in a month or so, are willing to pay HUGE premiums to lock in a profit now. They're willing to buy ridiculously expensive PUT options and pay ridiculous premiums for shorting to effectively lock in a selling price of ~$30, which is still much higher than what they invested at.

 

[dl003]

Milton is telling his shareholders to sell the stock? In what context?

https://twitter.com/nikolatrevor/status/1273354121664360449
"Im sticking up for you the shareholder. If you don't like that, you shouldn't invest in Nikola."
This guy is a trip

 

[adiggs]

I feel obliged to post this

OMG! Thank you for posting that. Anything good for 3+ minutes of laughter is well worthwhile.

 

[willow_hiller]

https://twitter.com/nikolatrevor/status/1273354121664360449
"Im sticking up for you the shareholder. If you don't like that, you shouldn't invest in Nikola."
This guy is a trip

I'm also not entirely surprised to see the usual suspects (Montana Skeptic for those on the block list), cheering Milton on in those replies: https://twitter.com/montana_skeptic/status/1273388162039963648?s=19

 

[Todd Burch]

https://twitter.com/nikolatrevor/status/1273354121664360449
"Im sticking up for you the shareholder. If you don't like that, you shouldn't invest in Nikola."
This guy is a trip

Kinda like what Elon said (about TSLA being volatile and if you can’t handle it you shouldn’t own the stock). Only what Elon said actually made sense.

 

[Dig deeper]

This is based on the loan-to-equity ratio, which is total liabilities divided by equity (assets minus liabilities). Leverage is about how much debt is boosting equity so that a company can get the assets it needs. A low leverage company is using proportionately less debt than its industry peers.

For example,

Tesla $37.25B assets, $28.08B liabilities, $9.17B equity, 3.06 D/E.
GM $246.6B assets, $206.5B liabilities, $40.1B equity, 5.15 D/E.
Ford $258.5B assets, $225.4B liabilities, $33.2B equity, 6.79 D/E.

Tesla has substantially less leverage than Ford or GM. Corporations often like to use greater leverage to improve the return on equity. That is, the cost of capital from debt is typically less than for equity, so higher leverage allows a smaller equity investment to yield higher returns. Companies with thin margins and little growth, like Ford and GM, are only able to deliver an attractive return on equity through leveraging. The downside, of course, is that more debt means more risk for shareholders.

Tesla, OTOH, has been using positive free cash flow to delever, reduce the D/E ratio. So far, the market seems to appreciate the reduction in liquidity risk that this implies, while the opportunity to grow equity remains very high for Tesla. So Tesla does not need to use lots of debt either to grow fast or to spice up ROE. Indeed, the equity only $2.3B capital raise a few months ago seems to be a substantial part to supporting the current high valuation around $1000/sh. That one raise improved D/E from 4.09 to 3.06. Shareholders are more confident that Tesla has both plenty of liquidity and capital for expansion. Had Tesla issued $2.3B in debt instead, the D/E ratio would have been 4.42 instead of 3.06. Either way, liquidity and capital available for expansion would have improved, but Tesla would have substantially more leverage had it borrowed. Likely, investors would have worried more about the ability to pay back $2.3B in incremental debt than an concern about dilution.

I think part of this issue here is that that Tesla has been so traumatized by shorts attacking the stock as a potential bankruptcy case that it is simply a relief to have low leverage. Lower leverage destroys the TSLAQ case. Total debt (excluding non-recourse product financing) is just $8.3B while cash is $8.1B. For a company with market cap over $180B, this is really quite a trivial debt load. That is, Tesla is in a very strong position to be able to raise more capital from equity and delever even more. It doesn't need to, and further deleveraging might not be as well received by shareholders. But for now, I think the last equity offer was a really savvy move.

Edit. Note that there are different variants of D/E ratios floating around. Some focus only on the long-term portion of debt while others include all liabilities in the numerator. I am following the latter, most inclusive definition, per Debt-To-Equity Ratio – D/E.

I just want to say, huge thanks for packaging that so neatly. These are the type of comments that make this forum special.

Also, I feel inspired to buy more shares

Cheers.