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

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At this share price level, I'm fine with them doing a small offering to appease S&P but 65 million shares seems very much overkill. The Fed is openly saying debt will be extremely cheap for the foreseeable future. Unless Battery Day reveals potential to scale faster by throwing more money at it, I'm sticking with what Elon has said himself "Throwing more money at things would not make scaling any faster and just create inefficiencies in the company".

There's some bravado in that statement. The expansion of the Supercharger Network has been put on hold due to cost cutting needs in several recent quarters. Staff at GF2/Buffalo were temporily reassigned to Fremont during the Model 3 'all-hands-on-deck' episode of 2019Q1. That miscalculation led to Tesla doing a Cap raise at $267 for 3.3 million shares. Ouch! when it was expensive to borrow money.

Those events, and the entire wave itself (end-of-Qtr delivery rush), are fundamentally business decisions made to prioritize profitablity for the current quarter vs. doing what's optimal for Tesla's long term growth. This is what you seem to be missing, and its a symptom of an undercapitalized business.

More money will allow Tesla to focus on doing what's best for the business. It doesn't have to lead to wasteful spending, but sufficient capital can eliminate the type of systemic waste due to conflicting priorities as I've describe above.

This isn't some little startup operating out of the founder's garage anymore. We're Multi-National now. Let's act like it. ;)

Cheers!
 
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Time to introduce phase 2 of the 'Hiro plan': burying abusive Market Makers and Hedgefunds. Follow along:
  1. the S&P Committee will naturally be conflicted over admitting TSLA to the NDX
    1. they want large, high growth Companies, however
    2. they don't want stock tickers that are constantly whip-sawed by shorts
  2. so to move on to phase 2 (S&P 500 listing), TSLA must 'shred the shorts'
  3. note that large passive index funds (ie: Vanguard) are 'Shareholders of Record', not 'Beneficial Owners'
  4. this means that MM shenanigans are no longer possible for the ~26M shares going to these NDX funds
  5. this effectively decreases the float available to abusive MMs, because their disengenuous 'promises to deliver' will carry no weight while NDX funds pursue fewer and fewer shares
  6. if any MMs tries massive naked shortselling post-S&P announcement, those phantom shares have a very strong likelyhood of being bought with the (very real) money of a 'Shareholder of Record', one who will not be satisfied with a 'failure to deliver' event: they want the actual SHARES
  7. any such MM will be forced to borrow actual shares to deliver to replace their failed phantom shares, which will drive up the cost of borrowing, and ultimately reduce the supply of shares available to borrow
  8. this last bit is the key: the market forces of supply and demand will be restored to TSLA when phase 2 kicks in, that is, the S&P 500 announcement
  9. Supply will meet demand at an elevated equlibrium share price; this is not novel, this is the way Markets are supposed to work
TL;dr Abusive MMs/Hedgies are stuffed. Elon tried to warn them. Poetry is in motion. Buckle up.

Cheers!

buckle-up-cause-its-about-to-get-bumpy.jpg

First, a small nit: the S&P committee isn't looking for "high growth," they're looking for steady growth.

Second, this is Aug 27th, so chances are the committee has already met to discuss including Tesla, yet no action has been taken. They're certainly not in a rush to add Tesla to the index. I'd speculate the committee members have already decided what to do:

1) Are they going to take advantage of this weekend's suspension of Extended Hour trading? Probably not a lot of benefit for them.
2) Are they simply waiting for the split to have occurred?
3) Are they going to do something over the US Labor Day weekend?
4) Are they gong to wait for the Sept 18 rebalance?
5) Are they going to wait another full quarter and hope that Tesla shows a GAAP loss and can therefore decide not to include Tesla for a while longer?

One thing seems certain to me, and that's if they make any S&P 500 index announcement that doesn't mention Tesla TSLA will drop precipitously. I believe there has been a lot of buying to front-run inclusion and that money may flee if it looks like inclusion isn't going to happen any time soon.
 
At this share price level, I'm fine with them doing a small offering to appease S&P but 65 million shares seems very much overkill. The Fed is openly saying debt will be extremely cheap for the foreseeable future. Unless Battery Day reveals potential to scale faster by throwing more money at it, I'm sticking with what Elon has said himself "Throwing more money at things would not make scaling any faster and just create inefficiencies in the company".

Looking at the history, I think that most of the occurrences in which Elon said they don't need to raise money, Tesla raised money within 3 months.
 
There's some bravado in that statement. The expansion of the Supercharger Network has been put on hold due to cost cutting needs in several recent quarters. Staff at GF2/Buffalo were temporily reassigned to Fremont during the Model 3 'all-hands-on-deck' episode of 2019Q1. That miscalculation led to Tesla doing a Cap raise at $267 for 3.3 million shares. Ouch! when it was expensive to borrow money.

Those events, and the entire wave itself (end-of-Qtr delivery rush), are fundamentally business decisions made to prioritize profitablity for the current quarter vs. doing what's optimal for Tesla's long term growth. This is what you seem to be missing, and its a symptom of an undercapitalized business.

More money will allow Tesla to focus on doing what's best for the business. It doesn't have to lead to wasteful spending, but sufficient capital can eliminate the type of systemic waste do to conflicting priorities that I describe above.

This isn't some little startup operating out of the founder's garage anymore. We're Multi-National now. Let's act like it. ;)

Cheers!

No I get all that. And as I said before, if Tesla wants to throw the S&P a bone and raise 10 billion cash....sure go ahead at these price levels. That's plenty of cash for things like expansion of the business operations. But it doesn't solve the big bottleneck and that's batteries. No matter how much money Tesla throws at their cell development right now, it's not going to magically speed things up. If they had an extra 10 billion in cash for this past year, it would not have sped up Giga Berlin or Giga Austin. Those factories are in a lot of ways waiting on the advancements that will be announced at Battery Day to be scaled.

We're also not talking about the fact that Tesla is just now entering it's period of massive positive free cash flow on a quarterly basis due to the ramped up production. 10 billion is fine to raise.......30 billion is just Tesla sitting on cash for no reason. They don't need the Fed's money or a Moody's upgrade, they're self sufficient now. As as shareholder, I want Tesla to stay lean and I do not want Tesla to just have loads of cash for no reason.
 
Welcome to another ATH intraday record and close record. It was also a day for roller coaster riding. Overall, I think you have some big players determined to acquire a certain number of TSLA shares prior to Monday's split. The morning's trading volume was actually somewhat low for morning trading, and this low volume wasn't allowing the buyers to acquire shares quickly enough for reaching their goals before the end of this week, and so you can see as the volume picked up the stock price rose. The reverse is also true: as the stock began to rise, Fear Of Missing Out set in and generated additional volume.

I think Papafox is spot on here. It really looked like there was a big buyer, that continued to up its limit by ~20$ each time selling was insufficient. SP traded around $2,220, $2,235, $2,245, $2,275, and $2,295 for ~10 minutes each during the large run up.
 
Last Friday I initiated a straddle option play:

Bought 4 (Oct 2) calls strike $2050
Bought 4 (Oct 2) puts strike $2050
TSLA price at time of trade: ~$2050
cost of straddle $44,710ea = $178,840 total

If price stays around $2050 through Oct 2 max loss is $178,840.

Here is where it stands today:

TSLA sh price= $2238
Oct 2
Call strike $2050 : $51,664 profit
Put strike $2050 : -$20,884 loss
Total profit/loss: $30,780 profit (17.21%)
TSLA sh price $2238- $2050 = $188 ( 9.17%)

So a straddle play that there will be price volatility (doesn't matter if it's up or down) resulted in a 17.21% profit on a share price movement of 9.17%. What I like is that this trade provides downside risk in the event of a major correction or negative volatility.

I noticed option IV went up to the high 90s today too. I expect we will continue to see a lot of volatility in TSLA due to the short term events we are expecting and option straddles seem like a good tool to use during these times.

Jack Rickard did something similar. Would you lose money if IV dropped though? It is high now although presumably is also likely to increase further.
 
No I get all that. And as I said before, if Tesla wants to throw the S&P a bone and raise 10 billion cash....sure go ahead at these price levels. That's plenty of cash for things like expansion of the business operations. But it doesn't solve the big bottleneck and that's batteries. No matter how much money Tesla throws at their cell development right now, it's not going to magically speed things up. If they had an extra 10 billion in cash for this past year, it would not have sped up Giga Berlin or Giga Austin. Those factories are in a lot of ways waiting on the advancements that will be announced at Battery Day to be scaled.

We're also not talking about the fact that Tesla is just now entering it's period of massive positive free cash flow on a quarterly basis due to the ramped up production. 10 billion is fine to raise.......30 billion is just Tesla sitting on cash for no reason. They don't need the Fed's money or a Moody's upgrade, they're self sufficient now. As as shareholder, I want Tesla to stay lean and I do not want Tesla to just have loads of cash for no reason.

10 Billion is in the right ballpark.....

We will not know their actual plans for expansion, or the limiting factors until after Battery Day.....

The fact they they are talking about mining means raw materials and staff are probably the limiting factors...

I think Tesla will soon be making their own cells in:-
  • Fremont
  • Nevada
  • Shanghai
  • Berlin
  • Texas
I expect that cell production expansion to be capex efficient.

There are obviously big plans for Texas.... and we don't know how Tesla is financing that...

My way of looking at things is 8-10 Billion in cash is a reasonable buffer to keep for an economic downturn, any other money they raise they should intend to spend within 1-2 years.

But I also think it is worth compromising to get the S&P 500 deal over the line....

I'm not worried about Tesla spending inefficiently...
 
Actually you can use this same "assumed purchase price" for holdings held less than 10 years, but the it is 20% of selling price. So holding over 10 years is really quite beneficial here.

Thanks/kiitos, Samppa! As a newbie shareholder, I wasn't aware of this taxation feature in Finland. Now I know much better, what to do. Holding the core shares at least 10 years is a lot easier knowing "the tax bonus" waiting. :)
 
And so, Tesla accelerates the World's transition to renewable energy. I'm for it.

I've been thinking the same way for a long time Dodger ... Tesla doesn't do slow acceleration .. it may be pedal to the metal after Battery Day.

We know after Texas Tesla isn't planning another US factory for another 4-5 years, but the world is a big place, plenty of countries where a car factory would be useful, and even more places where a battery factory would be useful.....

And the shorts don't want to just be hopelessly wrong, let's help them redefine hopelessly wrong...
 
Thanks/kiitos, Samppa! As a newbie shareholder, I wasn't aware of this taxation feature in Finland. Now I know much better, what to do. Holding the core shares at least 10 years is a lot easier knowing "the tax bonus" waiting. :)

Hankintameno-olettama. But your shares must not be in Osakesäästötili if you want to use this.
 
What's been on my mind lately is that this looks a lot like the tech bubble of y2k.

The argument against that right now is that it is different and look at all these tech companies actually making all these profits.

But we had that too in y2k. Msft ibm has been making profits forever. We also had petrocks.com with billion dollar valuations and burning cash like crazy which is similar to many tech companies I am looking at.

Most of the other tech stocks I have are finally reaching their all time highs. We are 10x from this decade's trough in nasdaq.

I'd start mentally getting prepared for any tech stock to lose half its value going forward. It's been a good run.
 
I think it would be wise for everyone to pay attention to how well the Renault Zoe is doing, in terms of how important it is that Tesla consider making a small hatch for Europe ASAP.

Edit: In fact, there might be an argument that the 2nd stage in Berlin factory should be for a hatch rather than the model 3.

How much profit is Zoe delivering for Renault vs Model 3 for Tesla?

How much extra profit would Model 3 deliver to Tesla once made inside the EU?

Should Tesla conquer Zoe sales and intenders or go after 3 Series,A4, and C Class?

Making itty bitty car doesn't necessarily mean more profit for Tesla OR furthering the mission than sticking to dominating premium compact and larger sales class.
 
I've been thinking the same way for a long time Dodger ... Tesla doesn't do slow acceleration .. it may be pedal to the metal after Battery Day.

We know after Texas Tesla isn't planning another US factory for another 4-5 years, but the world is a big place, plenty of countries where a car factory would be useful, and even more places where a battery factory would be useful.....

And the shorts don't want to just be hopelessly wrong, let's help them redefine hopelessly wrong...

"The Big Bang started very, very smōl" ;)

Cheers!