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

[ZeApelido]

Fact Checking has calculated that 90% of the float will be accounted for post inclusion. Infinity squeeze is the phrase of the day.
https://twitter.com/truth_tesla/status/1284247153146236932

Elon is tweeting again btw.

I can't even.... 90%?! Can anyone verify his analysis?

 

[ZeApelido]

When Elon first mentioned getting into mining I was as surprised as everyone else.
But after watching a lot of videos (I linked some in the battery day thread) Tesla Battery Investor Day

My hunch is a 60% chance Tesla would get into mining and processing of battery raw materials.

The reasons to do it are the same as the reasons to do anything else:-

• Assets are well priced, relative to future cost savings.
• Supply certainty de-risks other investment decisions
• Investment in Battery raw material mining and processing lags projected future demand - price spikes/materials shortages are likely.
• Tesla can scale vehicle and cell production - this is a potential bottleneck.

Some mining and materials projects are "shovel ready" what they need is capital, others need R&D so are higher risk but offer potentially higher returns. Projects of both types exist in the US, and are at early stage..

My hunch is that investments might reduce the cost of raw materials for a car battery by a significant amount.

My guess 5-7 year payback, perhaps shorter, 20-50 year operational life.,

There is also the "Tesla effect" that this will get other investments off the fence, and get other projects built...


When people say some other type of battery might obsolete Li-ion, the questions are:-
1) What is that battery?
2) When will it be ready at scale?

Every Tesla sold in the next 1-2 years possibly sells another 5 Teslas over the next 5-7 years..

It is by no means a certainly that Tesla would get into mining and processing, but it isn't something they should dismiss without a "deep dive". They have done that "dive" and we will find out the answer on Battery Day.

This is why Elon has overthrown the Bolivian government.

 

[ZeApelido]

P. S. Lake Titicaca - great place and phenomenal name. The best. Amazing salt flats

 

[DaveT]

Once the wolves were brought back to Yellowstone, balance was restored to the environment. The deer, elk, bison, moose, and beaver populations came roaring back. Planet Earth is a living and breathing, environment. I expect that once we switch to sustainable transportation, the Earth — like Yellowstone — will rewild. It will come roaring back.

Petrichor, is that pleasant smell, that frequently accompanies the first rain after a long period of warm, dry weather.

The Los Angeles Basin, after long traffic filled summers fills with smog. Fresh winter rainfalls wash the air clean and reveal the snow-covered mountains that surround the city. It is startling, a beautiful site.

My expectations: A new beginning, clear beautiful skies, thriving nature, and fresh air to breath. Given a chance to breath, our planet will stop choking and begin to heal.

I just saw about 100 bison in Yellowstone this afternoon.

 

[UnknownSoldier]

This is why Elon has overthrown the Bolivian government.

Ah, so Elon was a member of Quantum all along!

Spoiler

I'm still mad they retconned Quantum of Solace in order to make the awful Spectre movie.

 

[DaveT]

Maybe this has been discussed here before, but what exactly does being “benchmarked” to the S&P 500 mean? And will these “benchmarked” funds be under any obligation at all to buy any TSLA if TSLA is added to the S&P 500?

 

[FrankSG]

I can't even.... 90%?! Can anyone verify his analysis?

I don't think it's quite that high either.

63M owned by funds indexed and benchmarked to S&P 500 is a reasonable assumption.

25M shares held by non-S&P 500 index funds seems too high to me. I'd think that this number is far smaller than the 26M shares that will be held by S&P 500 index funds. Maybe 10 or 15M would be more accurate? It's a guess on my part though.

40M as delta hedges is imo too high. Even if SP skyrockets to $3,000 or $4,000, I'm not sure it'll ever get to that number. My guess it's around 15M today, although I could be off. Say it runs up to 25M as the stock price increases to $2,500 or $3,000.

63M + 15M + 25M = 103M.

If short interest declines to 5M shares, the float would be ~150M shares, so 103M / 150M = 69% Simulation confirmed

Also, if stock price really starts squeezing, options holders will start selling their options, allowing market makers to sell shares held as delta hedges. Unless most option holders dump their proceed immediately into TSLA shares or most options are held by people who plan to exercise, the number of shares needed to be delta neutral should at some point drop and somewhat limit the effect of any large squeeze.

This is not to say a large squeeze can't happen, but just as the option market amplifies a squeeze, it also dampens it somewhat. I personally think it's likely that the peak on Feb 5th @ $960 and the peak on Monday this week at $1,795 saw steep drops due to somebody selling out of a large options position.

 

[FrankSG]

Maybe this has been discussed here before, but what exactly does being “benchmarked” to the S&P 500 mean? And will these “benchmarked” funds be under any obligation at all to buy any TSLA if TSLA is added to the S&P 500?

Excerpt from the S&P 500 blog that I posted today:

Whereas funds indexed to the S&P 500 are passive funds and make no investment decisions, funds benchmarked to the S&P 500 are actively managed funds and do have freedom in what stocks they invest in. Being benchmarked to the S&P 500 means that the fund's performance will be compared to the performance of the S&P 500, and therefore the fund manager will be praised for gains made compared to the S&P 500 and blamed for losses made compared to the S&P 500.

I do not have experience working in the mutual funds industry, so I do not know exactly how fund managers approach the fact that their performance will be measured against the S&P 500, but I imagine that different funds and fund managers have different approaches. I imagine that some funds are very conservative, take the S&P 500 as their base, and only deviate from it slightly where they think they can eek out slightly better returns. As a results these funds behave quite similarly to S&P 500 index funds. However, I'd imagine there are also funds that deviate from the index more, and even funds that only use the S&P 500 as a benchmark, but basically have their own unique investment strategy and philosophy.

Regardless, TSLA is a very large stock, and if it were to be added to the S&P 500, it would make up around 1% of the entire index. Previously, fund managers that were skeptical about TSLA or simply didn't know a lot about TSLA could ignore it, but this is no longer the case. Even if a fund has its own unique investment strategy, after TSLA is in the S&P 500, a 50% drop in TSLA will mean a more than -0.5% loss to the index and a 100% gain in TSLA will mean a more than 1% gain. The 20-year annualized average return of the S&P 500 is currently 5.9%, so this matters quite a bit, and therefore at the very least all fund managers, whose funds are benchmarked to the S&P 500, will have to take a serious look at TSLA and consider whether they think it will under- or outperform the rest of the index. They can choose to not own TSLA, but if that turns out to be a mistake, they will have to answer for it, and be able to articulate why they thought it would underperform the index.

So to summarize, upon inclusion into the index, some of the $4.6T indexed to the S&P 500 will for certain be liquidated, in order to buy 17.9% of TSLA's 146.36M shares float, which comes out to 26,198,440 shares. Furthermore, an additional $6.6T benchmarked to the index will have to decide whether to own 25.7% of TSLA's 146.36M shares float, which comes out to 37,614,520 shares. Some funds will allocate that exact amount to TSLA, some bearish funds will decide to allocate less, and some bullish funds will decide to allocate more. If the bearish and bullish benchmarked funds were to even out, funds indexed and benchmarked to the S&P 500 could end up owning a combined 63,812,960 shares.

I mostly based this on the Investopedia article on benchmarks.

 

[FrankSG]

Model Y stamping shop coming online in Shanghai

 

[MP3Mike]

I don't think it's quite that high either.

63M owned by funds indexed and benchmarked to S&P 500 is a reasonable assumption.

25M shares held by non-S&P 500 index funds seems too high to me. I'd think that this number is far smaller than the 26M shares that will be held by S&P 500 index funds. Maybe 10 or 15M would be more accurate? It's a guess on my part though.

I think the biggest thing they have left out is that some of the ~60M shares will come from the extended market funds selling TSLA as it moves into the S&P500. (I don't know how many shares that is, but it will be a chunk of them.)

 

[ABCTG]

Model Y stamping shop coming online in Shanghai

View attachment 565856

Wow, been watching all the drone videos, and didn't even think they had started installing equipment!

 

[ggr]

I think the biggest thing they have left out is that some of the ~60M shares will come from the extended market funds selling TSLA as it moves into the S&P500. (I don't know how many shares that is, but it will be a chunk of them.)

I don't know a lot about these, but https://money.usnews.com/funds/mutual-funds/mid-cap-blend/vanguard-extended-market-index-fund/vexmx for example holds primarily small- and mid-cap stocks. If this kind of fund holds any TSLA at all, it will be a small amount compared to the amount that needs to be bought by other funds.

 

[ggr]

Maybe this has been discussed here before, but what exactly does being “benchmarked” to the S&P 500 mean? And will these “benchmarked” funds be under any obligation at all to buy any TSLA if TSLA is added to the S&P 500?

Speaking as an ex-trustee of a 401k plan: a lot of funds, such as those offered by Vanguard as "target retirement 2030" and so on, when they report the perfomarnce of those funds to the public and the pension plans and the 401k plans and so on, they compare the performance to something else that is meant to have comparable performance. For generic stock (or mostly stock) funds, they usually compare the performance to the S&P 500, which is the "benchmark" for their performance. If they underperform the return from the benchmark for some time (a couple of years in our case) the 401k might be required to move the investment somewhere else. So even though they don't have to hold exactly the proportion of shares in the S&P 500, if they deviate too far they might underperform, with severe (to them) consequences. Index funds, by comparison, have to hold pretty much exactly the proportion of the same securities as the actual index, varying only for a short time while adjusting.

 

[MP3Mike]

I don't know a lot about these, but https://money.usnews.com/funds/mutual-funds/mid-cap-blend/vanguard-extended-market-index-fund/vexmx for example holds primarily small- and mid-cap stocks. If this kind of fund holds any TSLA at all, it will be a small amount compared to the amount that needs to be bought by other funds.

If you look at the holdings of that fund you can see that TSLA is the #1 holding at 2.56% of the fund. And as of 6/29 it had ~$67.6 Billion in AUM which is ~1.7M shares of TSLA. And there are a few of these extended market funds.

So yeah, they aren't going to cover the majority of the need, but they will supply some of it.

 

[Mo City]

I've always thought about "disruption" in the macroeconomic sense, but today I think I found my first example of disruption at a microeconomic-level.

In a thread on Reddit about the new Tesla Solar pricing, a solar installer said "I just looked at Tesla pricing yesterday and ran the numbers and was shocked how they can sell a 4KW at $2.01 watt. Nonetheless, I’m in a career shift."

Probably a lot of cumulative factors led him to make that decision, but it's hard not to feel like Tesla just rocked the solar industry with these price cuts, and it's already forcing smaller installers to re-evaluate their business models.

For solar power, a brute force attack is probably the best way to get the train out of the station. If this is what it takes to move the needle, I'm for it.

I don't know if solar will ever be much of a profit generator for Tesla. This aspect of the company may be purely about the overall mission.

 

[Singuy]

For solar power, a brute force attack is probably the best way to get the train out of the station. If this is what it takes to move the needle, I'm for it.

I don't know if solar will ever be much of a profit generator for Tesla. This aspect of the company may be purely about the overall mission.

My friend just signed up and they are pushing powerwall with a bundle discount. Perhaps this is about deploying as much battery storage/solar as possible since they finally solved the battery bottle neck all for autobidder (the real money maker for solar).

 

[jhm]

My buddy was always making fun of me because for the last 5 years I was saying buy TSLA at 200 and at 300. He would laugh saying to you it always a good time to buy TSLA. I kept repeating myself that over the longterm it’s definitely a good buy. If he asks me again I will tell him to still buy TSLA but dollar cost average in. I wonder if he will laugh at me again.

He may laugh at you again if you wear these. Courtesy of Atlanta Shakespeare Tavern.

 

[jhm]

Lol. I think Model 2 is already locked in for the €25K car...

Then if China can mass produce an EV Citicar with Tesla-like standards for $15K, it'll be Hǎohǎo all over the World... And it's name shall be 'Model 1' as in UB#1

Cheers!

U R 2 S3XY

 

[Jack6591]

I went to the Third Row Tesla website tonight. Does anyone know if they have been hacked? I'm receiveing security warnings when I try to visit their store?

 

[Mo City]

Another thought from Fact Checking on Twitter, this time about a capital raise. Includes an interesting GIF.

https://twitter.com/truth_tesla/status/1284368559653695490