You can install our site as a web app on your iOS device by utilizing the Add to Home Screen feature in Safari. Please see this thread for more details on this.
Note: This feature may not be available in some browsers.
I keep reading stories of peeps putting their Tesla (car) money into TSLA and waiting for it to grow to buy their vehicle. Why can't Tesla put theirs into TSLA and do the same? The vehicle of course will be start-up businesses, mines, & etc. I keep reading the next TSLA is TSLA.
On the topic of share buyback, here are my thoughts:
I would like to see Tesla announce a buyback. It can be a small amount, say $3-5B. Just enough to signal to the street (including shorts and hedgies). And it should be open-ended as to when, leaving Zach the option to not even buy back shares until cash balance is higher. Something like, 'up to $5B over the next 3 years.' That amount and timeframe would give Zach and Elon a lot of flexibility.
I'm torn between taking down some debt to do this, a la Apple. I'm leaning towards not taking down debt. Just use a small percentage of operating cash flow.
I appreciate and agree with the POV that cash balance at end of quarter is higher than it during the rest of the quarter. I am curious as to how low the cash balance gets at the lowest. Clearly, this will factor into the decision.
While I would like to see it, I am 99% confident they won't this year. We all know how close Tesla came to bankruptcy just a few short years ago. I'm sure Elon still remembers the stress and pain of that time. This, coupled with the current macro and geo-political environment, gives Elon every incentive to be financially conservative and hoard cash. I don't see him taking whatever small amount of risk there is just to shore up the stock price.
The one caveat to #2 above is any pressure coming from investors, employees and/or the board to shore up the stock price. There is growing pressure from retail investors and PMs such as Gary Black. And I expect there are employees who would like to see it happen also. We know Elon loves burning shorts. But as much as some of us would like to see it, I don't see Elon caving into this small amount of pressure.
1. $3-$5 Billion over an extended timeframe wouldn’t even cover the dilution from employee grants, the share count would continue higher under that plan.
2. The only reason Apple borrowed to perform their buyback was due to the fact its $200 Billion in cash was mostly held offshore and it would have been taxed heavily to repatriate it for the buyback. They always kept a massive amount of cash on hand (it took them 5 years of buyback activity to take their net cash under $100 Billion, and even today they still have $179 Billion cash on hand)
3. Teslas working capital requirement needs are going to skyrocket in the immediate future as its production rate continues to rise dramatically. Shanghai output is ~$5 Billion per month now for example - another long covid enforced shutdown would increase working capital requirements. This is in addition to the growing capital expenditure now hitting as it builds the massive amounts of 4680 lines, the cybertruck production line, the semi line, expanding Nevada, and starts work soon on at least one new factory (probably more than one given they have a new site ready to go in Shanghai)
4. I hope you are right, I definitely hope they don’t do one this year.
5. Any company management that chooses to prop up share price with precious cash during a time of great uncertainty on multiple fronts (War in europe with a cornered Putin / potential CV mutations / China Covid Zero policy and china citizens housing asset bubble bursting / Taiwan / Rampant Inflation and associated rising interest rates as a possible recession driver) just to please disgruntled shareholders who have in recent years enjoyed 10-100x gains….I sure hope tesla management are not of that variety.
I keep reading stories of peeps putting their Tesla (car) money into TSLA and waiting for it to grow to buy their vehicle. Why can't Tesla put there's into TSLA and do the same? The vehicle of course will be start-up businesses, mines, & etc. I keep reading the next TSLA is TSLA.
I keep reading stories of peeps putting their Tesla (car) money into TSLA and waiting for it to grow to buy their vehicle. Why can't Tesla put there's into TSLA and do the same? The vehicle of course will be start-up businesses, mines, & etc. I keep reading the next TSLA is TSLA.
More like, minimum finance and put principal into TSLA and drive the car while waiting for the stock appreciating over the years to pay for interest plus more.
We got a free 2016 model x and 2018 model 3 that way, thanks to teslaq relentless subsidy.
General Motors Co said on Tuesday it will invest up to $69 million and take an equity stake in Queensland Pacific Metals to secure a new source of nickel and cobalt for battery cells for use in the U.S. automaker's vehicles.
www.reuters.com
QPM is piloting the Direct Nickel Process (DNi), which sounds WAY too good to be true, yet someone I trust says it’s legit… extracting battery materials (nickel, cobalt, and others) with way less energy and chemicals, and with few residuals (and the residuals that are created are non toxic)… and you can use waste from past mines as feedstock!
The future of nickel laterite processing High-grade nickel laterite ore will be imported from New Caledonia for processing at the TECH facility using a patented recovery and recycling process called the DNi Process™. The DNi Process™ is owned by the Altilium Group. Queensland Pacific Metals has...
While I completely agree with the beginning and ending of this argument the middle section doesn't concern me.
Should Tesla hold enough cash to mitigate unexpected circumstances - absolutely!
Should Tesla worry about one or even two of their factories being hit by an "act of God" - not so much
Let me explain, modern factories built to modern code eliminate a lot of this risk. Also, these are typically short term aberrations that can be recovered from relatively quickly.
The professional seismologists at the US Geological Survey who have expertise with the geology and seismic risk in the San Fransisco Bay Area are saying stuff that does not make it sound to me like building codes are adequate to prepare the East Bay for the next Big One from the Hayward fault, a "tectonic time bomb" ready to release a "powerful, damaging earthquake...at any time". This could happen next week for all we know. Their analysis also in no way whatsoever indicates that such an earthquake "can be recovered from relatively quickly" as you suggest.
A 7.0+ quake from the Hayward fault would be one of the most destructive natural disasters in the history of North America. It sucks, but it's reality and Tesla needs to be prepared for this possibility and have plenty of extra cash on hand in case it happens soon. We are lucky as investors and a species that this fault didn't rupture between 2012 and 2020, because that probably would have bankrupted the company when they were low on cash, low on market cap, and solely reliant on Fremont.
I urge investors who are advocating for Tesla to part with precious cash for a buyback right now to read these two fact sheets and then see how confident you feel afterward that the Fremont factory's cash flow is anywhere close to 100% reliable just because Tesla is awesome and smart.
These USGS reports don't explicitly use the term but that's probably the most accurate single-word summary of the potential outcome, and for those of you reading this who live in the Bay Area, on a personal level please make sure you have a serious plan for earthquake preparedness. This will come, and the only main questions are exactly when, where and how much energy will be released all at once.
On October 21, 1868, a magnitude 6.8 earthquake struck the San Francisco Bay region. Although the region was then sparsely populated, this quake on the Hayward Fault was one of the most destructive in California’s history. Recent studies show that such powerful Hayward Fault quakes have repeatedly jolted the region in the past. U.S. Geological Survey (USGS) scientists describe this fault as a tectonic time bomb, due anytime for another magnitude 6.8 to 7.0 earthquake. Because such a quake could cause hundreds of deaths, leave thousands homeless, and devastate the region’s economy, the USGS and other organizations are working together with new urgency to help prepare Bay Area communities for this certain future quake.
The Hayward Fault is the single most urbanized earthquake fault in the United States—in 1868 there were only 24,000 residents living in Alameda County; now there are more than 2.4 million people. Hundreds of homes and other structures are built along the fault trace, and mass transit corridors, major freeways, and many roadways cross it at numerous locations. Also, critical regional gas and water pipelines and electrical transmission lines cross the fault. In 2018, the USGS released the HayWired earthquake scenario (see “More Information” box), which included updated forecasts of major impacts of a large earthquake on the Hayward Fault, including the loss of housing resulting from the shaking and fires caused by the quake and long-term outages of drinking water. Ongoing slip and aftershocks along the Hayward Fault may last for months, further damaging buildings and infrastructure that straddle the fault.
The 150th anniversary of the 1868 quake was observed in 2018; scientists are convinced that the Hayward Fault has reached the point where a powerful, damaging earthquake can be expected at any time. According to a 1996 Earthquake Engineering Research Institute report, the next major Hayward Fault earthquake is expected to produce extensive damage to residences, businesses, and to transportation and public utility infrastructure. Several hundred thousand people are likely to be homeless after the quake. As demonstrated by the aftermath of Hurricanes Katrina, Sandy, and Maria, recovery from catastrophic events can take years. According to a 2013 study (see “More Information” box), a repeat of the 1868 earthquake could cause extensive economic losses (including damage to buildings and contents, business interruption, and living expenses) exceeding $100 billion, with 85 percent or more of both residential and commercial losses being uninsured. Damage to infrastructure, such as transportation and utilities, and other long-term economic effects could substantially increase the losses.
This is just the Hayward fault. The San Andreas is further away from Fremont, but it has even more potential energy stored up and has had 7.9-magnitude quakes in 1857 near southern California and in 1906 right next to San Francisco. The Richter scale is logarithmic. A 7.9 quake has 8x more energy than a 7.0 quake like the USGS modeled for a likely outcome from the Hayward fault.
Also, the Fremont plant was built in 1961. I would not be surprised if was built to a lower standard than something built today and the retrofitting, if any, is not good enough to fully prepare it for a huge quake. Even if it is, the tremendous destruction and chaos surrounding it, with mangled roads and rail lines and other public utilities, thousands of homeless, fires everywhere, etc. would prevent it from keeping production going like it is now, or maybe at all for months on end.
What about Giga Shanghai? We've already seen that the Chinese Communist Party is willing to shut it down for weeks on end for no good reason (and Alameda County, California has shown this willingness too, now that I think about it). What if they did it for three months? What if another even worse pandemic than COVID is right around the corner? Mother Nature doesn't care that we just had a pandemic and want to be done with it. Bacterial and viral evolution is all random and the timing can be unfair and cruel.
But for Shanghai the big risk is severe flooding. Does any building code really save the city and factory from severe damage in the event of a five-hundred-year flood? If I remember correctly, Giga Shanghai's land was a swampy marsh before Tesla drained it and built a factory on it. It sits about 3 meters above sea level and is just a few kilometers from the sea, with a network of nearby canals for the farms that neighbor it on the floodplain.
Do this look like good real estate for being protected if and when a tsunami or storm surge hits the Shanghai peninsula?
Hurrican Katrina hit New Orleans in 2005. It took until 2022, 17 years, for the New Orleans metro area population to once again reach 1 million people where it was at in 2004. Storm surge flooding from Hurricane Sandy caused tens of billions of dollars of damage to New York City and disrupted the city for weeks. As some of our Houston and Galveston members can personally attest, Hurricane Harvey flooding caused severe damage that was not exactly recovered from quickly, with an estimated total damage of $125 billion. Oil refinery capacity, which the US Gov't considers critical to national security, took a major hit and production output in the Gulf Coast fell by 21%. (link) Where was the code preventing that from happening? Severe flooding can cause tremendous damage with long-lasting aftereffects.
As far as I can tell, Shanghai is about as vulnerable as New Orleans, if not more. I didn't look into this very long, but here is one study from the University of Leeds that puts Shanghai as the most vulnerable to flooding out of 9 major coastal cities at high risk.
Chart and table of population level and growth rate for the New Orleans metro area from 1950 to 2023. United Nations population projections are also included through the year 2035.
www.macrotrends.net
I think the data is clear that Tesla does have serious risk of disasters causing extended disruptions of business continuity at Shanghai and Fremont. Shanghai and SF are just unfortunately located. They're great spots for ports to the Pacific Ocean, which is why they became so big and prosperous in the first place, but they're right in the line of fire for Mother Nature's wrath.
Let's say one of their 4 major factories does get decimated. They would just accelerate the ramp up at the other three. Yes, they would definitely take a short term hit but in the grand scheme of things Tesla would still be growing at double digit numbers a quarter or two later.
Tesla is in such a strong position right now that a small amount of share buybacks would not hurt anything. Should they do it? I'm undecided. I guess we'll let the master of coin do his thing, so far he has been steering the ship at a speed that any other company would die for even half of.
I'm not very confident that it's as simple as just accelerating the growth at the other three factories. I don't believe production allocation between factories on opposite sides of the planet is necessarily fungible like that, and even to the extent that it is fungible, accelerating a ramp is generally going to require extra capital and there will almost certainly be a lag of at least a month before additional supplies can be redirected to a different factory. Boats are slow and Earth is big. If Fremont is out of commission for half a year, can Austin just pick up the slack? Possibly not. It depends on what the limiting factor is for Austin. If not, we might have to wonder why Austin wasn't just producing more in the first place, considering that it has a much cheaper cost of production than Fremont has.
There is a material risk that something terrible happens to Fremont, Shanghai, or both, and in that time are we really sure that Berlin and Austin could suddenly start making 300k cars per quarter?
There is a material risk that something terrible happens to Fremont, Shanghai, or both, and in that time are we really sure that Berlin and Austin could suddenly start making 300k cars per quarter?
Exactly. Why now? With geopolitical risk the highest it’s been in decades, only $18B in the bank (at the end of the quarter when inventory is cleared out), and huge cash on the way, how about we wait at least another year before blowing cash on reducing the float by 1 or 2%? The risk is much lower after we have more cash and Berlin and Austin are in volume production. Right now there is still substantial vulnerability and these events I’m describing also contribute to macroeconomic risk that can compound the risk for Tesla, at least the risk of not being able to grow as fast as planned.
Hurricane Katrina was one of the precursors for the rising US gas prices that helped trigger the mortgage foreclosure crisis and plunged the whole world into the Great Recession. Hurricane Sandy’s disruption of NYC and the Mid-Atlantic Coast was a significant factor in the slow recovery from the recession in 2012. This stuff is all connected, and as we can clearly see from this year, macroeconomic issues can affect a growth business like Tesla more than the average company. The SF Bay Area quake would send shockwaves through the entire US tech industry, would cause immense disruption to all of the US and global economy depending on that tech industry and the ports in and around the bay. It very well could cause a global recession at the same time it smashes a critical nexus for Tesla’s business, and that’s just one of many risks Tesla is facing. Unlikely, but not so unlikely I’m willing to brush off the concerns.
What's the maximum realistic upside of doing a $10B buyback in the next few months instead of waiting until let's say Q1 2024? TSLA does 5x between now and the end of next year? Then $10B invested turns into $50B. Great, yay! The best case scenario is that we make $40B extra, effectively doubling next year's income (which is a drop in the bucket compared to the income coming over the next 10 years). Now, on the other hand, how likely is it that Tesla will really need that $10B if something goes horribly wrong. How much future income are we risking by dumping the cash now? How much is the transition to sustainable energy being risked by parting ways with that $10B?
For the first time ever, Tesla finally has “you money” and we already want to get rid of that advantage? And the main reason we want to do it is that Wall Street and other bad actors have pushed the stock price down? The very same actors whose maliciousness is one of the main reasons why the FU money is so important to have in the first place? Money is power. Please let’s not be greedy and give that power back to Wall Street and Big Oil and the Mainstream Media to make a few extra billion and risk trillions in the process. It’s not time to cash out yet.
Exactly. Why now? With geopolitical risk the highest it’s been in decades, only $18B in the bank (at the end of the quarter when inventory is cleared out), and huge cash on the way, how about we wait at least another year before blowing cash on reducing the float by 1 or 2%? The risk is much lower after we have more cash and Berlin and Austin are in volume production. Right now there is still substantial vulnerability and these events I’m describing also contribute to macroeconomic risk that can compound the risk for Tesla, at least the risk of not being able to grow as fast as planned.
Hurricane Katrina was one of the precursors for the rising US gas prices that helped trigger the mortgage foreclosure crisis and plunged the whole world into the Great Recession. Hurricane Sandy’s disruption of NYC and the Mid-Atlantic Coast was a significant factor in the slow recovery from the recession in 2012. This stuff is all connected, and as we can clearly see from this year, macroeconomic issues can affect a growth business like Tesla more than the average company. The SF Bay Area quake would send shockwaves through the entire US tech industry, would cause immense disruption to all of the US and global economy depending on that tech industry and the ports in and around the bay. It very well could cause a global recession at the same time it smashes a critical nexus for Tesla’s business, and that’s just one of many risks Tesla is facing. Unlikely, but not so unlikely I’m willing to brush off the concerns.
What's the maximum realistic upside of doing a $10B buyback in the next few months instead of waiting until let's say Q1 2024? TSLA does 5x between now and the end of next year? Then $10B invested turns into $50B. Great, yay! The best case scenario is that we make $40B extra, effectively doubling next year's income (which is a drop in the bucket compared to the income coming over the next 10 years). Now, on the other hand, how likely is it that Tesla will really need that $10B if something goes horribly wrong. How much future income are we risking by dumping the cash now? How much is the transition to sustainable energy being risked by parting ways with that $10B?
For the first time ever, Tesla finally has “F#ck you money” and we already want to get rid of that advantage? And the main reason we want to do it is that Wall Street and other bad actors have pushed the stock price down? The very same actors whose maliciousness is one of the main reasons why the FU money is so important to have in the first place? Money is power. Please let’s not be greedy and give that power back to Wall Street and Big Oil and the Mainstream Media to make a few extra billion and risk trillions in the process. It’s not time to cash out yet.
Tesla can always use their excess cash to build more batteries, and deploy these in grid batteries. If it is profitable to do so for a utility company, it is even more so for Tesla because they only pay the production cost of the battery system. I think Elon‘s master plan part 3 will go in that direction. Not necessarily in operating their own battery parks, but in deploying their massive cash position into something useful.
Q3 earnings is no guarantee for anything... what if EPS is a "miss" by Wall Street's opinion, what if it's a technical "beat", but not by enough? What if Tesla revise guidance downwards, even by a little bit? What if they announce a further delay to the CyberTruck?
I personally recall many Tesla earnings that were a solid beat, all on track, amazing, and yet the stock went down...
I do agree that the stock is horribly oversold, but I think it's the same for almost every stock on the market right now, and I don't see an FED pivot coming this side of Xmas
It's never a "given", plus we still have the spectre of Musk potentially selling stock after the ER
So yeah... been kicked in the face sp many times over the years with this one that I'm a tad cynical
/cloudfront-us-east-2.images.arcpublishing.com/reuters/U7WSE5XILFLLNKPARCJVJ5NERA.jpg)
www.reuters.com
qpmetals.com.au
www.macrotrends.net
