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

[Thumper]

To execute construction like Tesla has been requires great planning and drawings. Who is their architectural firm? Do they do it in-house? Do they use different firms in China, Germany and US to deal better with local issues? Haven't seen any discussion of this here.

 

[omgwtfbyobbq]

See what he speaks about as of the 7th minute, and that is, adding over 550M to their cash position, point being, that is a clear sign they're now deeming themselves as self-sustaining. Thoughts on the relevance of this ?

It could be because they don't think they're self-sustaining.

I think they're being cautious about the risk of a prolonged and deep recession and are hedging against that. For instance, if FCA goes under, there goes $1.5+ billion in emissions credit payments, plus the normal drop in auto sales everyone will experience. I'm sure some of their large energy projects will also be postponed.

 

[Christine69420]

I can just sit back and watch this video for hours, it's like meditation.

Freakin' unbelievable what Tesla is doing in China!

Yeah, me too! Why do you think I post all these links..

It's interesting to see how different the factories are. And how they are constructed by different means. Then it's the first two factories I've ever followed the construction of!

Now we have a new one to follow since some guy is already been filming from Giga Texas! Or will it be Tera Texas? I just love these movies. Netflix must wait until later.

 

[Jack6591]

That's not going to capture more mindshare. We can do better. Who doesn't remember these catch phrases from Politics, Sports, the Movies, and Advertising over the years?

• 1940s: "Who’s on First?"
• 1950s: "I Like Ike"
• 1960s: "We Choose to Go to the Moon", "Float like a Butterfly, Sting like a Bee"
• 1970s: "Houston, We Have a Problem", "May the Force be with you"
• 1980s: "I'll Be Back", "I Feel the Need, the Need for SPEED!"
• 1990s: "To Infinity and Beyond!", "Show me the money!"
• 2000s: "My Precious"

The art of creating these slogans is big business. Here's some pointers for success:

Guidelines to Create Great Slogans

1. Identification. A good slogan must stay consistent with the brand name either obviously stated or strongly implied. It’s better to include the name of your business to it.
2. Memorable. Some of the best taglines or slogans are still being used today, even though they were launched several years ago.
3. Beneficial. Reveal your purpose and benefits of the product by conveying the message in consumer language. Turn bad into good. Suggest the risk of not using the product. Create a positive feeling for the consumers.
4. Differentiation. In an overcrowded market, companies on the same industry need to set themselves apart thru their creative and original tagline or slogan.
5. Keep it simple. Use proven words and short keywords. One word is usually not enough.

Tesla...the cure for automotive halitosis

 

[RabidYak]

Since some folks seem eager for Tesla to be spending all of its cash, I wanted to share a thought.

It takes cash to run a company. Cash in their bank account is not like cash in your account or mine. They use cash to run the business day to day to day and week to week, and this is especially impactful when you have a company that’s going to be as large as Tesla.

Let’s talk about their quarterly inventory waves and make some assumptions:

• Let’s say they sell half their volume in the last few weeks of the quarter.
• Oversimplified, let’s translate this into half their quarterly volume in cars that need to be built before they’re sold.
• This inventory will be sold by the end of the quarter.

Okay, now the math assuming 500k cars per year:

• 500k cars / 12 months * 1.5 months / half quarter = 62.5k cars to be sold in the last weeks of the quarter.
• 62.5k cars * $40k cost to build the car = $2.5 billion

Say at the beginning of the quarter they have $8 billion in the bank. Half way through the quarter, this starts to convert to inventory that will be sold in the last weeks of the quarter.

The nadir of their account balance is $6.5 billion, with $2.5 billion sitting in cars waiting to be sold. (While it’s not truly this simple, see example caveats below, I think the concept still holds.)

They’re using over 1/3 of their cash balance just to build cars for the quarter – to fund their ongoing operations. Sure that money comes back at the end of the quarter, but they needed to spend it in the interim to build cars – hence it takes money to make money.

If you scale to 3 million cars per year, this cash requirement now because 6x as larger, or $15 billion.

Now, you can start talking about accounts receivable and accounts payable and net terms (customers paying you faster than you have to pay your suppliers), but I don’t think it changes the fact that you want and need a cash buffer to run a business.

I wouldn’t be so hasty to spend cash if you want for Tesla to continue to grow – they’ll need more and more of it to fund not only their growth (e.g., build factories), but they’ll also need more and more cash to fund their day to day operations as they get larger and larger. This is all good stuff, just don’t be in a rush to get rid of it

Same goes for another offering. Why so eager to sell more of the company? I think the cash would be helpful (more will be needed as Tesla grows), but again Elon has stated himself that growth will soon (already?) start to be constrained by their ability to hire good engineers. I’m not at all surprised by this – there are a lot of smart people out there, but that’s different than good engineers, which is also different than finding them, recruiting them, and getting them fully effective.

In the coming years Tesla will continue to increase their cash balance as they continue to sell cars. Will it be too much cash? Not for awhile in my eyes.

Do they need more cash right now? It doesn’t appear that way to me either. Having said that, who knows what Elon has in store for us, and isn’t that part of the fun?

 

[RobStark]

Tesla will never do dividends. If it shocks me and it does, I am outta here.

Of course Tesla will do dividends.

After Elon sells his shares to colonize Mars and Institutions are in control.

If Tesla never did dividends(or buybacks) the stock is worthless.

 

[Maxstorz]

Q1 report was Aug 29. After hours it went to high 800s. By close Friday it was down to 701 (more than 10% drop). The following week it started climbing again. I might consider buying near the end of trading today.

Interesting info

Thanks

 

[Maxstorz]

Of course Tesla will do dividends.

After Elon sells his shares to colonize Mars and Institutions are in control.

If Tesla never did dividends(or buybacks) the stock is worthless.

A company that reinvests 100% of your dividends in its own stock by not paying out any dividends is giving you compound interest through the growth of their stock

 

[mongo]

Since some folks seem eager for Tesla to be spending all of its cash, I wanted to share a thought.

It takes cash to run a company. Cash in their bank account is not like cash in your account or mine. They use cash to run the business day to day to day and week to week, and this is especially impactful when you have a company that’s going to be as large as Tesla.

Let’s talk about their quarterly inventory waves and make some assumptions:

• Let’s say they sell half their volume in the last few weeks of the quarter.
• Oversimplified, let’s translate this into half their quarterly volume in cars that need to be built before they’re sold.
• This inventory will be sold by the end of the quarter.

Okay, now the math assuming 500k cars per year:

• 500k cars / 12 months * 1.5 months / half quarter = 62.5k cars to be sold in the last weeks of the quarter.
• 62.5k cars * $40k cost to build the car = $2.5 billion

Say at the beginning of the quarter they have $8 billion in the bank. Half way through the quarter, this starts to convert to inventory that will be sold in the last weeks of the quarter.

The nadir of their account balance is $6.5 billion, with $2.5 billion sitting in cars waiting to be sold. (While it’s not truly this simple, see example caveats below, I think the concept still holds.)

They’re using over 1/3 of their cash balance just to build cars for the quarter – to fund their ongoing operations. Sure that money comes back at the end of the quarter, but they needed to spend it in the interim to build cars – hence it takes money to make money.

If you scale to 3 million cars per year, this cash requirement now because 6x as larger, or $15 billion.

Now, you can start talking about accounts receivable and accounts payable and net terms (customers paying you faster than you have to pay your suppliers), but I don’t think it changes the fact that you want and need a cash buffer to run a business.

I wouldn’t be so hasty to spend cash if you want for Tesla to continue to grow – they’ll need more and more of it to fund not only their growth (e.g., build factories), but they’ll also need more and more cash to fund their day to day operations as they get larger and larger. This is all good stuff, just don’t be in a rush to get rid of it

Same goes for another offering. Why so eager to sell more of the company? I think the cash would be helpful (more will be needed as Tesla grows), but again Elon has stated himself that growth will soon (already?) start to be constrained by their ability to hire good engineers. I’m not at all surprised by this – there are a lot of smart people out there, but that’s different than good engineers, which is also different than finding them, recruiting them, and getting them fully effective.

In the coming years Tesla will continue to increase their cash balance as they continue to sell cars. Will it be too much cash? Not for awhile in my eyes.

Do they need more cash right now? It doesn’t appear that way to me either. Having said that, who knows what Elon has in store for us, and isn’t that part of the fun?

Yeah, quarterly cash balance is important. Two items that will also help:

They have lines of credit to buffer the wave:
>$2.4B in US
> $3.5 RNB in China ($0.5B USD)
tsla-8k_20190301.htm

Vehicle time in transit needs to drop as production increases. Regionalization reduces the wave and improves the timing of raw goods to sold vehicles.

 

[heltok]

Some nice augmented reality showing the final buildings overlayed!

 

[Beltsbear]

Since some folks seem eager for Tesla to be spending all of its cash, I wanted to share a thought.

It takes cash to run a company. Cash in their bank account is not like cash in your account or mine. They use cash to run the business day to day to day and week to week, and this is especially impactful when you have a company that’s going to be as large as Tesla.

Let’s talk about their quarterly inventory waves and make some assumptions:

• Let’s say they sell half their volume in the last few weeks of the quarter.
• Oversimplified, let’s translate this into half their quarterly volume in cars that need to be built before they’re sold.
• This inventory will be sold by the end of the quarter.

Okay, now the math assuming 500k cars per year:

• 500k cars / 12 months * 1.5 months / half quarter = 62.5k cars to be sold in the last weeks of the quarter.
• 62.5k cars * $40k cost to build the car = $2.5 billion

Say at the beginning of the quarter they have $8 billion in the bank. Half way through the quarter, this starts to convert to inventory that will be sold in the last weeks of the quarter.

The nadir of their account balance is $6.5 billion, with $2.5 billion sitting in cars waiting to be sold. (While it’s not truly this simple, see example caveats below, I think the concept still holds.)

They’re using over 1/3 of their cash balance just to build cars for the quarter – to fund their ongoing operations. Sure that money comes back at the end of the quarter, but they needed to spend it in the interim to build cars – hence it takes money to make money.

If you scale to 3 million cars per year, this cash requirement now because 6x as larger, or $15 billion.

Now, you can start talking about accounts receivable and accounts payable and net terms (customers paying you faster than you have to pay your suppliers), but I don’t think it changes the fact that you want and need a cash buffer to run a business.

I wouldn’t be so hasty to spend cash if you want for Tesla to continue to grow – they’ll need more and more of it to fund not only their growth (e.g., build factories), but they’ll also need more and more cash to fund their day to day operations as they get larger and larger. This is all good stuff, just don’t be in a rush to get rid of it

Same goes for another offering. Why so eager to sell more of the company? I think the cash would be helpful (more will be needed as Tesla grows), but again Elon has stated himself that growth will soon (already?) start to be constrained by their ability to hire good engineers. I’m not at all surprised by this – there are a lot of smart people out there, but that’s different than good engineers, which is also different than finding them, recruiting them, and getting them fully effective.

In the coming years Tesla will continue to increase their cash balance as they continue to sell cars. Will it be too much cash? Not for awhile in my eyes.

Do they need more cash right now? It doesn’t appear that way to me either. Having said that, who knows what Elon has in store for us, and isn’t that part of the fun?

your post takes into account the ‘pulse’ that has been going on for years with shipments. As more factories are built there will be far less pulsing and therefore less draining of the account temporarily. Also as profit is larger, Tesla will reduce the end of quarter pushes which are actually inefficient. They will make slightly more per car without pulsing. Tesla’s cash situation will improve noticeably when GF 3.5 and GF 4 are running.

 

[CyberDutchie]

Of course Tesla will do dividends.

After Elon sells his shares to colonize Mars and Institutions are in control.

If Tesla never did dividends(or buybacks) the stock is worthless.

If Tesla is asked by S&P to do a secondary offering to increase the float, I recommend Tesla does a stock buyback with the proceeds. Then everyone wins, not only the S&P 500 index funds.

 

[RobStark]

A company that reinvests 100% of your dividends in its own stock by not paying out any dividends is giving you compound interest through the growth of their stock

If Tesla's stated policy is not to do dividends/buybacks for ten thousand years the compounded interest is meaningless and worthless.

It is the same as giving money to charity to do good work. And they are doing good work.

 

[Curt Renz]

I don't think this matters much. I think the main 3 causes of the dip are:

• Profit taking. Happens after pretty much everything earnings. Even after Q3'19, which I consider Tesla's best ER during the 5 years I've followed it from 2015 to 2020.
• Macros. Macros were terrible the last 2 days, and tech/growth stocks were hit particularly hard.
• Delta hedging requirements. This table from @generalenthu shows that the # of shares market makers need to be delta neutral on TSLA, dropped from 42M pre-ER, to 29M right now. Market makers won't delta hedge 100% of this, so they probably didn't sell quite as much as 13M shares over the past 2 trading days, but they dumped at least a couple million shares.

Looking at that delta hedging table, if TSLA rises $200 back to $1,615, market makers will need to buy 14M shares to stay delta neutral, if MMs were short 100% of open interest, and delta hedged 100%. In reality it may only amount to a couple of million shares being bought by market makers, but either way this 14M number is very large.

Considering this, if macros are good at the start of next week and any sort of buying pressure shows up, I think we're in for a very big move upwards.

Good observations. But I'll add that four MLB teams opened their seasons on Thursday and all the rest on Friday. Many of those sports bettors who had been sidelined and started playing the stock market, may have cashed in their stocks and options in order to resume placing baseball bets. That could have been an overlooked factor weighing on TSLA and the macros during the last couple of sessions.

 

[vikings123]

If Tesla is asked by S&P to do a secondary offering to increase the float, I recommend Tesla does a stock buyback with the proceeds. Then everyone wins, not only the S&P 500 index funds.

This would not make sense. By definition stock buyback decreases the float/liquidity of shares. How would you time such a thing? Buy low sell high?

edit: I obviously meant to say Sell low Buy High.

 

[CyberDutchie]

This would not make sense. By definition stock buyback decreases the float/liquidity of shares. How would you time such a thing? Buy low sell high?

Start buying back after the index funds have bought their required share. Spread the buy back over a certain time frame, for example 1% every week for two years.

The point of this is: Tesla doesn't have use of cash right now, Elon has stated this several times. The speed of growth is not dependent on external cash (since they can fund growth from cash generation) but rather the limiting factor is the available talent pool.

 

[Buckminster]

Anyone noticed that Google is showing it's first TSLA p/e ratio - 729.

 

[dc_h]

That's not going to capture more mindshare. We can do better. Who doesn't remember these catch phrases from Politics, Sports, the Movies, and Advertising over the years?

• 1940s: "Who’s on First?"
• 1950s: "I Like Ike"
• 1960s: "We Choose to Go to the Moon", "Float like a Butterfly, Sting like a Bee"
• 1970s: "Houston, We Have a Problem", "May the Force be with you"
• 1980s: "I'll Be Back", "I Feel the Need, the Need for SPEED!"
• 1990s: "To Infinity and Beyond!", "Show me the money!"
• 2000s: "My Precious"

The art of creating these slogans is big business. Here's some pointers for success:

Guidelines to Create Great Slogans

1. Identification. A good slogan must stay consistent with the brand name either obviously stated or strongly implied. It’s better to include the name of your business to it.
2. Memorable. Some of the best taglines or slogans are still being used today, even though they were launched several years ago.
3. Beneficial. Reveal your purpose and benefits of the product by conveying the message in consumer language. Turn bad into good. Suggest the risk of not using the product. Create a positive feeling for the consumers.
4. Differentiation. In an overcrowded market, companies on the same industry need to set themselves apart thru their creative and original tagline or slogan.
5. Keep it simple. Use proven words and short keywords. One word is usually not enough.

2010’s: WTF, YOLO

The text and twitter decade.

 

[mongo]

If Tesla is asked by S&P to do a secondary offering to increase the float, I recommend Tesla does a stock buyback with the proceeds. Then everyone wins, not only the S&P 500 index funds.

Start buying back after the index funds have bought their required share. Spread the buy back over a certain time frame, for example 1% every week for two years.

If TSLA keeps going up then less shares will be bought back for the same amount of dollars. Net result is more shares outstanding and no increased cash to offset that dilution.

 

[StealthP3D]

What I am disagreeing about is that Tesla/Elon are beyond criticism.

If you have to have direct or comparable experience to able to criticize then discussion of any topic would be limited to a tiny circle of professionals on any given topic.

Now that would be a good conversation!!

I get tired of all the amateur criticism because 90% of it comes from a place of not knowing. It's literally worthless.