Thinking about Q1 2013 earnings

[Citizen-T]

Agreed. Seems like he will exercise his options, then Tesla will announce what they are going to do with that money. To me faster roll-out of the Supercharger network doesn't amount to being more significant than profitability. WHAT DO YOU HAVE UP YOUR SLEEVE, ELON?!?!?!

 

[Yuri_G]

Agreed. Seems like he will exercise his options, then Tesla will announce what they are going to do with that money. To me faster roll-out of the Supercharger network doesn't amount to being more significant than profitability. WHAT DO YOU HAVE UP YOUR SLEEVE, ELON?!?!?!

I'm sure it has been said already, but maybe fast tracked Gen III development?

 

[Citizen-T]

I'm sure it has been said already, but maybe fast tracked Gen III development?

I can't imagine $50 million is enough to do that. Besides, I think battery tech is what is holding Gen III up. It isn't clear that more money would change anything there.

 

[HawaNY]

Agreed. Seems like he will exercise his options, then Tesla will announce what they are going to do with that money. To me faster roll-out of the Supercharger network doesn't amount to being more significant than profitability. WHAT DO YOU HAVE UP YOUR SLEEVE, ELON?!?!?!

Quick novice question: to plow the 50 m or so from his options back into the company, how does that work? Does he have to actually sell them, or just borrow against them somehow? And it does dilute the stock by a bit either way right (although small in the big scheme of things, I understand)?

 

[Citizen-T]

Quick novice question: to plow the 50 m or so from his options back into the company, how does that work? Does he have to actually sell them, or just borrow against them somehow? And it does dilute the stock by a bit either way right (although small in the big scheme of things, I understand)?

This is not all going to be technically correct, but will give you the idea:

The options allow Elon to purchase stock that previously didn't exist at some fixed price well below the current price every else has to pay. If he buys those shares, he's effectively placing a new private investment with Tesla. That's how Tesla nets a few million dollars. Elon can then either hold those shares unto the end of the world, or he can sell them on the open market. If he sells them, then he too will make millions of dollars (because he can sell them at today's prices, not the fixed price he paid for them).

Yes, current shareholders will be diluted. This is inconsequential if the $50 million Tesla gets from the deal provides growth that it couldn't have achieved without it. In other words, we need to split the pie into more pieces, but the pie might grow a lot depending on what Tesla does with that money.

Now, where things get really interesting is if Elon exercises the options, then sells his new-found shares, then turns around and does something with that money to help Tesla. A double-whammy.

 

[30seconds]

just to add on to Citizen-T's post - his description is true for every company that issues stock options to employees - Google, Pfizer, Microsoft, P&G. The shareholders & board vote to create a dilutive option pool that can be earned by employees that gives them a right to buy stock at the price point set at option pool creation. This is accounted for in the financials. If the employee has earned the options (typically they are given over 3-5 years) and the trading price is in excess of the option price then the employee can buy the stock directly from the company at the option price.

 

[HawaNY]

This is not all going to be technically correct, but will give you the idea:

The options allow Elon to purchase stock that previously didn't exist at some fixed price well below the current price every else has to pay. If he buys those shares, he's effectively placing a new private investment with Tesla. That's how Tesla nets a few million dollars. Elon can then either hold those shares unto the end of the world, or he can sell them on the open market. If he sells them, then he too will make millions of dollars (because he can sell them at today's prices, not the fixed price he paid for them).

Yes, current shareholders will be diluted. This is inconsequential if the $50 million Tesla gets from the deal provides growth that it couldn't have achieved without it. In other words, we need to split the pie into more pieces, but the pie might grow a lot depending on what Tesla does with that money.

Now, where things get really interesting is if Elon exercises the options, then sells his new-found shares, then turns around and does something with that money to help Tesla. A double-whammy.

Much appreciated. Right, so the $50 million or so is the amount that Tesla would get automatically, and if Elon sells them first and then uses that money for Tesla, that would be more like $250 million, I suppose. Now that's a lot of superchargers.

But he's probably not allowed to sell all just like that, right? Has to do some kind of set schedule to avoid insider trading right?

Thanks 30seconds too--really helpful.

 

[Johan]

Much appreciated. Right, so the $50 million or so is the amount that Tesla would get automatically, and if Elon sells them first and then uses that money for Tesla, that would be more like $250 million, I suppose. Now that's a lot of superchargers.

But he's probably not allowed to sell all just like that, right? Has to do some kind of set schedule to avoid insider trading right?

Thanks 30seconds too--really helpful.

Previous reported insider trades have very often been "option exercised" (i.e buy) followed directly by "sale" (on the open market). So no, I think he is allowed to.

 

[kenliles]

But he's probably not allowed to sell all just like that, right? Has to do some kind of set schedule to avoid insider trading right?

I believe these are all fully vested- He can buy and sell them all at once if he wishes; In fact, on the same trade with most brokers

 

[HawaNY]

I believe these are all fully vested- He can buy and sell them all at once if he wishes; In fact, on the same trade with most brokers

OK, thanks, so Elon would have the ability to put more like $250 million into the company based on just these options, right, if he sold them right away?

 

[luvb2b]

wow how did this thread get sidetracked off of earnings?

i really don't think elon exercising options is a very big deal at all. you're talking about a guy who's planning a mission to mars. when he says "really exciting" it's gotta be better than exercising options. it's gonna be something very exciting from the common man's point of view imo.

 

[kenliles]

wow how did this thread get sidetracked off of earnings?

i really don't think elon exercising options is a very big deal at all. you're talking about a guy who's planning a mission to mars. when he says "really exciting" it's gotta be better than exercising options. it's gonna be something very exciting from the common man's point of view imo.

that's my thought too - any option conversion is a small part of the announcement if at all;
HawaNY- CitizenT on another thread is working through those numbers to see what that total might amount to- but yes, could have those kind of implications, depending on how it's done

and back OT- this may actually make Q1 earnings report one for the history record books;

 

[HawaNY]

wow how did this thread get sidetracked off of earnings?

i really don't think elon exercising options is a very big deal at all. you're talking about a guy who's planning a mission to mars. when he says "really exciting" it's gotta be better than exercising options. it's gonna be something very exciting from the common man's point of view imo.

How could a cash infusion, for superchargers or whatever, something on $250 million level, with minimal dilution impact (just $50 mill worth) not be a huge deal? Free money at a time when cash flow is seen as THE fundamental risk to the long term survival of the company.

 

[kenliles]

How could a cash infusion, for superchargers or whatever, something on $250 million level, with minimal dilution impact (just $50 mill worth) not be a huge deal? Free money at a time when cash flow is seen as THE fundamental risk to the long term survival of the company.

It would be a huge deal for the company and even the stock;
But to Elon tweet audience those things are virtually meaningless, to accomplish the goals he's set for himself and Tesla, they are just mechanism to achieve -
it may well be the vehicle by which the headline announcement is funded; but what will be done with that money IS the key excitement - otherwise it's just another cash raising...

 

[Zythryn]

So has anyone tried a calculation of the margins Tesla reached this quarter?
We know the number delivered, that they made some profit both GAAP and non-GAAP.
If we assume a minimal profit, what can we figure out?

 

[CapitalistOppressor]

Here is my current analysis on the 4,750+ sales announced for Q1, starting with the relevant section of my last post on the matter -

However, at the actual production rate of 500 cars (which began in late February) they would have delivered a minimum of 2,000 additional cars by the end of the quarter, with another 500+ in process.

Here is what George Blankenship wrote on March 21st -

During the past three weeks we have averaged MORE than 500 Model S DELIVERIES per week, and it looks like we’ll be setting another record this week.

Again, 3000+ cars were delivered by March 1st. You can see the acceleration that week, which would correspond to the first week of the three that Blankenship is referring to. He refers to another record for deliveries anticipated for the week he wrote the blog. If you do the math, Tesla would have delivered 4,500+ cars by the end of that week. They still would have had a full week still remaining in March, at a time when they are flowing 500+ deliveries per week.

Every line of evidence points strongly towards Tesla delivering more than 5,000 cars in Q1 and your concern only addresses one of those lines of evidence.

Umm yeah, not so much...

They don't appear to have hit 5,000, but there are additional factors to consider. The math, and GeorgeB's blog still point to them having delivered 4,500 cars, with one week to go in the quarter. Two items -

The week ended with Easter.

Tesla knew they were going to report an excellent quarter, and so might have had reason to pull a page from the Silicon Valley playbook and slow down deliveries in the final week so they could have a head start on the next quarter. Microsoft and many other tech companies are notorious for modulating sales to game quarterly expectations in this way.

Either way, I look forward to the VIN data over the next few weeks to see how March actually sorted out. I still do not see how there could have been fewer than 3,000 sales by March 1st. 2,750 just does not fit the VIN data at all unless Tesla has reserved hundreds of VIN's for company use.

 

[HawaNY]

HawaNY- CitizenT on another thread is working through those numbers to see what that total might amount to- but yes, could have those kind of implications, depending on how it's done

and back OT- this may actually make Q1 earnings report one for the history record books;[/QUOTE]

Thanks, so many investment threads, hard to know where to invest! I'll try to find it. Sorry if i too off track. Anyway well know tomorrow. Should be fun.

 

[ppl]

HawaNY- CitizenT on another thread is working through those numbers to see what that total might amount to- but yes, could have those kind of implications, depending on how it's done

and back OT- this may actually make Q1 earnings report one for the history record books;

Thanks, so many investment threads, hard to know where to invest! I'll try to find it. Sorry if i too off track. Anyway well know tomorrow. Should be fun.[/QUOTE]
Nobody mentioning cost side. They pay for batteries with yen. Yen down 30% will signicantly reduce cost elevating margin

 

[CyberDutchie]

Hilarious 7 min discussion Tesla's Revved Up Sales: Bloomberg West (4/1) on how on earth Tesla could be profitable in Q1.

You can see the disbelieve on their faces, especially Cory Johnson.

One speculation I hadn't heard earlier was the idea that large number of the 15,000 Model S reservations were from shorts, putting down the fully refundable $5K without intention to ever buy the car. Interesting plot, but what good would that do them?

 

[Doug_G]

Ah, nothing like a good conspiracy theory. The problem with conspiracies involving thousands of people is only 10% of people can keep their mouths shut.