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TSLA buyback / dividends
- Thread starter Buckminster
- Start date
Anyone think we get a buyback announcement today? Or maybe at least an update?
It’s been a year since it was mentioned at the last meeting as a real possibility. They wanted to see how 2023 went with the looming recession, and we’re almost halfway through and things aren’t too bad, right?
On the other hand, we have slipping margins and Elon’s recent “economic enema” tweet.
It’s been a year since it was mentioned at the last meeting as a real possibility. They wanted to see how 2023 went with the looming recession, and we’re almost halfway through and things aren’t too bad, right?
On the other hand, we have slipping margins and Elon’s recent “economic enema” tweet.
UkNorthampton
TSLA - 12+ startups in 1
There was a post on the main investment thread saying that if 99% of shares are held by HODLers, and 1% are traded, it's only the traded shares that affect the stock price & market cap. Therefore (if possible), maybe Tesla earmarks a sum and only uses it when stock price falls below a threshold.
Not a general buyback, but buying only when the market goes mad. You could argue the same if the price goes the other way & sell to get cash. Not needed as far as I know.
It may be manual judgement or algorithmic (moving average etc).
There may be legalities that stop this, but taking advantage of the extremes of price fluctuations (possibly annoying Shortzies) seems like a reasonable idea (but what do I know?)
jeewee3000
Active Member
Would a $5Bn buyback be that impactful though? Current market cap of around +$800 Bn. Seems like it would be a drop in the bucket for investors like us, but 1/4 or 1/5 of Tesla's cash reserves.
IF the macro environment does not improve in the coming years, those $5Bn would be very handy to keep R&D/growth rate up.
I think it would get us to an ATH. It means several things to the market:
- Buying of shares
- Removing shares from the pool
- Confidence from the insiders that this is a good time to buy etc.
- Economy
- Tesla specific
- Likelihood of more to come
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jeewee3000
Active Member
The confidence is indeed what would (short term) cause a SP bump.
The cash buildout since Tesla turned profitable has been decelerating though, given the currently lower margins on automotive. If buybacks were to happen I'd rather Tesla spend $0.5Bn or 1Bn per quarter, consistently for the next 12 quarters than start with a massive expenditure at once. I'd prefer an amount less than what Tesla has leftover per quarter, so the current cash can stay in the bank and only the "surplus" is used to buy back shares.
OK, this won't be as efficient (less return for Tesla buying higher priced TSLA shares if the stock creeps up the next few quarters), but it would show a trend.
Whilst I'm typing this I realise this won't happen. Elon and Zach have reasoned the exact opposite: why buyback? We need cash to grow.
If growing means that - once FSD and/or Optimus is "ready" - Tesla wants to spend all their cash on an FSD/Optimus-fleet for high ROI, then I'm all for it. And I guess that's what Elon is imagining right now.
The buyback therefore seems pretty "short sighted". An army of Optimi running the Gigafactories of the future, therefore unlocking massive margins in the future, is more like the "long haul". #superbulls #futurism
Such sentiments and the entire premise for this thread are built on a core fallacy about TSLA and Tesla resilience. Part of the extreme volatility in TSLA result from high individual investor proportional holdings, a highly emotional core that trades actively, large concentration of speculators, and an unconventional operating history and product base. Those conditions join with Elon Musk and BEV controversy to facilitate manipulation.
Share buybacks work well for companies with high free cash flows, stable businesses and modest capex.
Only the first one applies to TSLA. The very extensive set of risks for TSLA all argue that very high cash levels are necessary. Those arguing for buybacks are necessarily minimizing those risks.
Thus a tiny list:
1. Shanghai GF is essentially at sea level in a flood risk area;
2. Fremont GF is built in a high risk earthquake area;
3. Monterrey GF is being built in a drought-prone area;
4. Especially for German GF and Tesla Automation, Regulatory pressures in opposition to Tesla rise as legacy OEM effectiveness declines;
5. Several significant markets are imposing/have imposed/are being pressed to impose restrictions on Tesla operations including New York, Texas, etc.
6. Tesla now is beginning to move towards several exceedingly difficult and protectionistic markets, such as India, Indonesia etc.
Those factors are not exclusive to Tesla. However, legacy OEM dependency on regulatory support in extremist is obvious. Think GM, Ford, Chrysler (all of Sellantis), Hyundai/Kia, as definitive evidence that Government bail out OEM's with inadequate capital. Then consider the State-supported ones such as SAIC, Renault-Nissan-Mitsubishi etc. Tesla, unique among these, has no established major investors desperate to save them at any cost, nor governments eager to placate unions.
Tesla sinks or swims on its own, with some help in some cases but never unquestioned deference. That makes very, very strong Free Cash Flow and a very, very highly liquid cash position is crucial to avoid unforeseen catastrophic events. TSLA was there at least twice. Elon Musk knows the inherent risk of insufficient cash reserves.
In this situation it would be foolhardy to do a share buyback. TSLA is not AAPL. AAPL has an installed base of dedicated ecosystem users that dependably help them avoid any material single element risks, so can easily support high dividends and share buyback. Tesla may be in such as situation another decade from now, but right now definitely is not there. Moving towards that very, very quickly, but definitely not there yet.
Prior to advocating such a rash and injudicious step it is wise to examine the actual business risks. They're right there listed in the 10K, even beginning with a certain named key executive, preoccupied with several other demanding companies as well.
https://x.com/garyblack00/status/1696519522839347210?s=46
Yeah but Elon might FAFO it and buy $5bn on day one
Yeah but Elon might FAFO it and buy $5bn on day one
Square has a $26Bn market cap. Announced $1Bn buyback which has contributed to SP up 18% aftermarket.
UkNorthampton
TSLA - 12+ startups in 1
I'm now firmly against buybacks.... except for an announcement just before a Triple Witching: Definition and Impact on Trading in Final Hour event. I mean Tesla don't HAVE to buy, just announce & have it hanging over the shortzies.
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