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

[Nocturnal]

I live 3 miles from Citadel's offices. I can tape the IOU request to their door.

Would you mind leaving a package on the door mat for me as well? Just don't look inside.

 

[Ogre]

Please understand that Model Y is the definitive most scalable product Tesla has offered, even more so than was the Model 3.

The Model Y is scalable because Tesla invested in scaling it. The Model 3 or Model S could be scaled just as easily.

The Cybertruck will be scalable because Tesla designed it to be scalable from the ground up.

I know… Cybertruck is not released yet. Just mentioning it because it is the only Tesla designed from the ground up for scaling.

 

[hacer]

Your Stock Award

Know what tax rules apply to you and learn some strategies that can help to reduce your tax burden.

www.schwab.com

• Restricted stock awards let you take advantage of a so-called "83(b) election," which allows you to report the stock award as ordinary income in the year it's granted and then start the capital gain holding period at that time
• Caution: if the stock fails to appreciate, you don’t get a refund of the tax you paid when you made your election
• Your alternative is to defer paying any tax until the stock is fully vested

"Determine if an 83(b) election is an option for you. If you're granted a restricted stock award, you have two choices":​

1. you can pay ordinary income tax on the award when it's granted and pay long-term capital gains taxes on the gain when you sell, or
2. you can pay ordinary income tax on the whole amount when it vests."

Further, Elon already has share equity loan facilities with 2 large investment banks. He could easily borrow against any new shares to cover a 20% long-term capital gains tax just on the equity in those shares alone.

That is, WITHOUT needing to provide any other collateral. I think that the Barron's article was sensationalizing the situation for clicks.

Paging @st_lopes

Cheers!

Except that this is irrelevant because it applies to restricted stock awards but that is NOT what Elon has. He was awarded options, not restricted stock. He has to pay the exercise price to exercise the options and he has to pay (ordinary income) taxes on the difference between the current market value of the stock (at the time of exercise) and the strike price ($6.24/share for the options under discussion). He also could allow some or all of the options to expire in which case he gets no stock and it costs him nothing out of pocket for that portion he allows to expire. Very highly unlikely for the latter to happen, but if it did, I think that Tesla's earnings might have to be restated to reflect that those options were not actually a cost against GAAP earnings.

 

[JohnnyEnglish]

I know… Cybertruck is not released yet. Just mentioning it because it is the only Tesla designed from the ground up for scaling.

??? From a scaling perspective the Cybertruck will be small/medium scale. Probably higher production than the Semi and S/X but not as high as the 3, the Y or the $25k vehicles

 

[Dan Detweiler]

??? From a scaling perspective the Cybertruck will be small/medium scale. Probably higher production than the Semi and S/X but not as high as the 3, the Y or the $25k vehicles

Ohhh...I think not.

Dan

 

[Discoducky]

I'm still surprised that no legacy auto maker has thrown in the towel and attempted to license Tesla tech, software, drivetrain and/or FSD. I know egos are strong but joint ventures have been very common in the industry.

TL;DR - I did as well in 2014, but when I hired a few engineers away from legacy, it hit me. They are in bed with oil for all time.

Up until working at Tesla, I had only been at high tech companies pushing the bleeding edge of what you could do with silicon and pony-tailed dev's.

These former engineers, while anxious to work at Tesla, were absolutely floored how fast we were moving and how we thought anything was possible. We threw the full force of the tech industry at re-imagining the car.

Anywho...legacy auto is so unabashedly arrogant and pompous. According to these engineers, legacy auto believed Tesla was a joke and would fail in a matter of a few years. Legacy auto wanted nothing to do with electric as they **ALL** were totally in bed with oil for all time, contracts and agreements in place for years to buy parts, resources...etc. Turning the ship, even a few degrees was impossible and had never entered into their processes. Ugh, I could go on...

Another short tid bit. Elon pulled all the HQ managers into a room and declared TSLA would be bigger than Apple eventually. If my memory serves, he predicted 2025 (roughly in a decade). Now imagine what % of my investment money I put into TSLA?

 

[Rarity]

??? From a scaling perspective the Cybertruck will be small/medium scale. Probably higher production than the Semi and S/X but not as high as the 3, the Y or the $25k vehicles

This seems like it is still to be determined. More like, we'll see how easy it is to manufacture once they start manufacturing it. The "using an inexpensive hand-brake is a simple manufacturing method" has started to turn into "we'll have to manufacture custom automated hand-brakes." Hopefully, we can avoid Model X flashbacks.

 

[Paul_SF]

TL;DR - I did as well in 2014, but when I hired a few engineers away from legacy, it hit me. They are in bed with oil for all time.

Up until working at Tesla, I had only been at high tech companies pushing the bleeding edge of what you could do with silicon and pony-tailed dev's.

These former engineers, while anxious to work at Tesla, were absolutely floored how fast we were moving and how we thought anything was possible. We threw the full force of the tech industry at re-imagining the car.

Anywho...legacy auto is so unabashedly arrogant and pompous. According to these engineers, legacy auto believed Tesla was a joke and would fail in a matter of a few years. Legacy auto wanted nothing to do with electric as they **ALL** were totally in bed with oil for all time, contracts and agreements in place for years to buy parts, resources...etc. Turning the ship, even a few degrees was impossible and had never entered into their processes. Ugh, I could go on...

Another short tid bit. Elon pulled all the HQ managers into a room and declared TSLA would be bigger than Apple eventually. If my memory serves, he predicted 2025 (roughly in a decade). Now imagine what % of my investment money I put into TSLA?

150%?

 

[WattsHappening]

To phrase it in simple terms: You only live once. YOLO. Also die, unless your name is Bond.

Or Krugerrand.

 

[Ogre]

??? From a scaling perspective the Cybertruck will be small/medium scale. Probably higher production than the Semi and S/X but not as high as the 3, the Y or the $25k vehicles

They are dedicating 1/3 of Tera Texas to the Cybertruck. That’s nearly the size of Giga Shanghai. They bought a gigapress specifically for it.

They have a million + trucks on back order. The Cybertruck is going to blow away Model 3 once it hits it’s stride. Likely won’t surpass the Model Y, but it doesn’t have global appeal the way the Model Y does.

None of that is my point though. My point is everything about the Cybertruck‘s design is built for easy manufacturing. The folding body with very few welds. Single piece rear and and front end, structural battery, etc etc etc. Everything about it is designed to be easy to build. No other vehicle in their lineup has been designed with ease of construction as a primary design goal.

 

[ZsoZso]

What you quote above applies to RSUs, but that's not what Elon has. He has options.

When you exercise these options with a strike price of $X, and the current price of $Y, you have to pay the company $X, and you have made an instant income of ($Y-$X), and you owe tax on that amount immediately. As Elon pointed out, the number is so large that he's instantly in the top tax bracket which is >50% given the CA state tax. There are three ways to go:
1. Have enough cash/margin/borrowing available to cover both the company and the tax bill, and hold all the shares.
2. "sell" enough of the options to cover the costs associated with exercising all of them, and hold the shares that are left. This is called "sell to cover".
3. "sell" all of the options and keep the leftover cash.

I write "sell" in quotes because actually it's a three step process. First the broker lends you enough money to exercise the options and remit the tax, secondly the broker sells some or all of the resulting shares, and thirdly pays themselves back; it all happens in an eyeblink.

The equivalent to the 83(b) election is to exercise the options early, while their value is still relatively low, then hold the resulting stock. I have friends who were badly burned in the dot.bomb because the tax they incurred was actually more than the value of the stock after the bubble collapsed. Common wisdom is that if you believe in the company, delay exercise as long as is reasonable/allowable.

Aside: exercising the options is actually good for the company. It was carrying a liability on the books, and it gets to exchange the liability for $X in cash!

Thank you for the detailed explanation. My only problem is understanding the "common wisdom" in the sentence I highlighted. That wisdom (delaying the exercise as long as possible) is logical for the last 2 ways of exercise -- where share sales are used to pay for the tax -- as long as the company growth rate is higher than the tax rate, as that means fewer shares will pay for the tax. However, if someone really believes in the company and chooses the first way to exercise -- keeping all the shares and paying from pocket for $X as well as the tax, then it seems more logical to exercise the options as soon as possible, so that the ($Y-$X) tax burden is as low as possible. In case of Elon's options about to expire next year, I believe they have vested already before the great TSLA run-up of 2020, so he could have exercised them at much lower tax burden (when the delta was a small fraction of what it is today).

 

[hacer]

My understanding is that Sec. 83(b) elections generally are not relevant to stock options. I haven’t looked into all of the details of the options at issue, but based on what I know I don’t believe a Sec. 83(b) election would have been on the table.

It really couldn't have because the options grant were subject to meeting milestones so early exercise would have been impossible. Even if it was possible, it hasn't happened so that ship has sailed. The taxes will be due if he exercises.

 

[Lessmog]

It really couldn't have because the options grant were subject to meeting milestones so early exercise would have been impossible. Even if it was possible, it hasn't happened so that ship has sailed. The taxes will be due if he exercises.

So, a big windfall is about to hit California?
Guess the money is needed.

 

[lafrisbee]

$4091.60 pre-split close
another chicken dinner

 

[hobbes]

Back to the 'ring, for some entertainment:

Tesla Model S Plaid returns to Nürburgring with active rear spoiler and 'Track Pack'

Tesla’s insane Model S Plaid active spoiler has been spotted at the Nürburgring racetrack in Germany. Tesla has been attempting to break its own lap record at the raceway, which it set on September 9th. Teslarati caught exclusive photos of the Model S Plaid’s active spoiler at the Ring earlier...

www.teslarati.com

 

[hacer]

After my conversation with a source familiar with the exciting details of the Giga Berlin press, I'm more confident than ever that the manufacturer's true competitive advantage is yet to come

The VW board is in a panic, rushing from one crisis meeting and wake-up call to the next, and the first top maneuverer may be to fired, Wöllenstein CEO VW China who received a clear warning. If he doesn't hit the low end of 80-100k IDs in China in 2021, he will likely be fired.

View attachment 721456

According to my source, Tesla is in talks to take a next step with a 12,000 ton Giga Casting Machine for a full body casting. The 8,000 ton casting machine for CT is already a done deal.

If you want to hear more, listen to my video

That's a brilliant strategy: fire the guy who can't sell the cars that can't compete. Much wiser than firing the people who made such a sucky car.

 

[Nocturnal]

That's a brilliant strategy: fire the guy who can't sell the cars that can't compete. Much wiser than firing the people who made such a sucky car.

Firing a scapegoat gives you time to cash out some stock options.

 

[hobbes]

Battery cell supply chain coming together:

Rock Tech Builds a Battery-Grade Lithium Hydroxide Plant Near Tesla Giga Berlin in Brandenburg

Rock Tech Lithium has announced the construction of a battery-grade lithium hydroxide plant in Guben, Brandenburg, just 37 miles from Tesla's Grünheide factory. It plans to produce about 24,000 tons of raw materials per year, which is enough to produce batteries for about 500,000 electric vehicles.

www.tesmanian.com

based on

Handelsblatt

www-handelsblatt-com.translate.goog

EDIT: Both sites are connected via rail (takes 1h 20 for passenger travel via Frankfurt/Oder) so lithium hydroxide can efficiently be transported

 

[Cherry Wine]

Thank you for the detailed explanation. My only problem is understanding the "common wisdom" in the sentence I highlighted. That wisdom (delaying the exercise as long as possible) is logical for the last 2 ways of exercise -- where share sales are used to pay for the tax -- as long as the company growth rate is higher than the tax rate, as that means fewer shares will pay for the tax. However, if someone really believes in the company and chooses the first way to exercise -- keeping all the shares and paying from pocket for $X as well as the tax, then it seems more logical to exercise the options as soon as possible, so that the ($Y-$X) tax burden is as low as possible. In case of Elon's options about to expire next year, I believe they have vested already before the great TSLA run-up of 2020, so he could have exercised them at much lower tax burden (when the delta was a small fraction of what it is today).

I think it's pretty clear from several publicly-made comments that Elon is surprised by the current stock price (and I'm not referring to "The Tweet"; he reiterated his view at CodeCon 2021 and made another passing reference to it more recently on Twitter). It's quite likely he didn't expect to be recognizing such a large gain.

 

[ggr]

Thank you for the detailed explanation. My only problem is understanding the "common wisdom" in the sentence I highlighted. That wisdom (delaying the exercise as long as possible) is logical for the last 2 ways of exercise -- where share sales are used to pay for the tax -- as long as the company growth rate is higher than the tax rate, as that means fewer shares will pay for the tax. However, if someone really believes in the company and chooses the first way to exercise -- keeping all the shares and paying from pocket for $X as well as the tax, then it seems more logical to exercise the options as soon as possible, so that the ($Y-$X) tax burden is as low as possible. In case of Elon's options about to expire next year, I believe they have vested already before the great TSLA run-up of 2020, so he could have exercised them at much lower tax burden (when the delta was a small fraction of what it is today).

While your logic is correct, the outcome isn't what you think it is. I speak here from experience.

Back in 1998, I had QCOM options vested at around $50, stock price at the time was just slightly higher, $55ish. I did what you say, and paid $50 to the company, and $2.50 to the IRS/FTB. In 1999, QCOM was the TSLA of the year, went to $1000 (in pre-split dollars comparable to the $50). I don't remember how many shares it was, call it 100. So I've paid $5250 for 100 shares currently (end 1999) worth $100k and just into long-term capital gains.

But here's the thing. I could have just bought 100 shares for $5500. Then, at the end of 1999, I'd have had $250 less profit on those shares because of the slightly higher cost, but I'd still have the options! Which are also worth $100k ish.