TSLA Market Action: 2018 Investor Roundtable

[Sudre]

To my understanding, Fremont is capped at 500 000 and China factory is not yet producing 2020.

I don't recall any tents on the site before Elon showed up. That puts max production at 502,000! LOL

 

[CorneliusXX]

I'm going to start calling him FrUD at this rate! Seriously, why tag "still a lot more to go" onto the headline, which is clearly trying to spin a negative into a positive scenario.

A better headline would be "Tesla raises first $680 towards GF3 in China".

View attachment 333668

FrUDrick Lameburt. Amirite.

 

[AWDtsla]

One short story that doesn’t seem to die is that if the share price gets too low Elon might get margin called or his broker could sell shares and that that point is $250. This seems extremely unlikely to me as we were below that earlier this year and even under $200 in the last two years. Besides this fact is there any way to get to the truth?

How do you get margin called if your account is worth 8.5 billion dollars?

 

[Tslynk67]

Those who know me, know that I am a big Tesla and TSLA fan and investor. Since 28 dollars. Am an Elon cheerleader. Taking delivery of my third car, a P3D on the 29th. Have a 2013 Model S85 (trade in I think) and a Sig Model X.

Can we PLEASE stop talking about the how shorts are trapped and desperate every time the stock pops five percent. The shorts have completely cleaned our collective clock the past 30 days. The smart ones are SWIMMING in cash. Shorts have to be traders. Shorts who have been trading TSLA well are KILLING it. They are NOT going to disappear. Can't do it because I am emotionally invested in the success of TSLA (which is not a wise investing move BTW) but damn, I WISH I had shorted the hell out of TSLA post going private tweet so that I could be converting it to long positions now. Instead, I did quite the opposite...much to my chagrin.

So please, all this talk of how smart and long and strong we are, how the shorts are getting screwed, how the fear is in the air and they must close their short positions in a panicked stampede, please stop. It makes us sound like...well, like trolling shorts on the opposite side.

Except for those 600k shares that were sold short on Friday

 

[Reciprocity]

If I remember right that's just the high number from back in the heyday. I think it's safe to assume Tesla can get quite a bit more capacity out of it than that, plus they could have lines going in Nevada, New York, China, Europe by then. It took 3 weeks to setup the tent line in Fremont and I believe in a conference call or maybe upthread? they mentioned sending it, or others to China.

Elon once said a million cars but then said they wouldn't want to do that because they would be shipping to many cars to far away, best to build them closer. But more recently Elon said they where stuffed to the gills, no room for anything more. Then they built a GA line in a tent.

My guess is 500-600k S3X. But I also think China can come online much faster then the original model 3 ramp. When they say 2020, maybe they mean the beginning of 2020. If they do 300,000 S3X this year, double that next year, then China 2020 could help them on the way to a million my 2021, when Europe comes online.

 

[wipster]

You know, some of you guys may want to kill me for thinking this, but what if this executive move was planned for a month or so and a large part of the pay package for the new positions was composed of stock options and those options were based at say 80% of the current SP at time of award AND Elon took actions to lower the SP thereby making those options worth even more than originally contemplated?

Go ahead, shoot me, but I wonder...?

 

[Fact Checking]

Besides this fact is there any way to get to the truth?

I believe he has paid back a large chunk of the loans he took against his Tesla shares as collateral. He owns more than 50% of SpaceX which is generating nice profits.

But even at the peak the loans were less than 1b IIRC - he's not going to get "margin called" ...

 

[MP3Mike]

I don't recall any tents on the site before Elon showed up. That puts max production at 502,000! LOL

The limit isn't the GA lines, it would be the paint shop, which isn't in the tent, which last we heard only has a permit to get to 500k cars per year. Of course it is possible they could increase the capacity of the paint shop, or build a second one, but getting the additional emissions permit is the difficult part.

 

[Big Earl]

FrUDrick Lameburt. Amirite.

While I don't agree with some of the things he's been posting lately, this type of response is neither productive nor appropriate.

 

[mutle]

I believe he has paid back a large chunk of the loans he took against his Tesla shares as collateral. He owns more than 50% of SpaceX which is generating nice profits.

But even at the peak the loans were less than 1b IIRC - he's not going to get "margin called" ...

Thanks. This tweet is getting a lot of hype with shorts, but as it is stated it’s based on assumptions which seem to be wrong:

Twitter

 

[ZachF]

You know, some of you guys may want to kill me for thinking this, but what if this executive move was planned for a month or so and a large part of the pay package for the new positions was composed of stock options and those options were based at say 80% of the current SP at time of award AND Elon took actions to lower the SP thereby making those options worth even more than originally contemplated?

Go ahead, shoot me, but I wonder...?

Ummm, that seems like seeing a fly on your foot and deciding to use a handgun to kill it.

 

[EVMeister]

While I don't agree with some of the things he's been posting lately, this type of response is neither productive nor appropriate.

But it is funny! Humour is always productive when talking about Tesla and TSLA.

 

[Ratanpara]

Chart flashed Buy signal at 282.89

 

[LordAstinus]

To my understanding, Fremont is capped at 500 000 and China factory is not yet producing 2020.

~520,000 Model 3 + ~180,000 S/X (using 2170 cells by then, so not capped to 100,000).

In the last earnings call when Elon was talking about China, I think to remember he was expecting around 600,000/700,000 coming from Fremont. He was talking about 2021, but he didn't say when he was expecting Fremont to reach maximum level.

 

[Dan Detweiler]

The greatest Tweet you'll see today.

Bear = well, bears
Dog = everyone here

Nature is Amazing on Twitter

Dan

 

[Fact Checking]

Thanks. This tweet is getting a lot of hype with shorts, but as it is stated it’s based on assumptions which seem to be wrong:

Twitter

LOL, it's always fun reading these:

• Firstly, their thesis is ridiculous even by their own numbers: do they really expect Tesla to drop to $58, a company that Volkswagen was willing to invest billions into under the going-private plan, at $420?
• Secondly, they "forgot" to factor in that Elon owns about 60% of SpaceX, a hot rocket launch company which is dominating commercial launches and which is valued north of $25b currently, but which is probably worth much more. Do they really believe that Elon couldn't restructure any debt he might still have ($750m?) with SpaceX shares as collateral?

That's some industrial strength Kool-Aid there ...

 

[Krugerrand]

Electrek impulse posting again,

Tesla vehicle was found in a junkyard fire, cause unknown

Nope, will not click unless you want to give me 10 Tesla shares.

 

[JBRR]

This is basically a variant of the "negative working capital" FUD. A quick summary:

• "Working capital" is assets minus liabilities and various definitions exist to calculate it.
• The GAAP definition is pretty strict that requires Tesla to count many 'possible' probabilistic liabilities that normally don't turn into real liabilities, and also don't allow them to recognize Tesla's most valuable assets:
  • For example AutoPilot, probably worth well over 10 billion dollars, is worth zero according to the GAAP working capital definition. Same for brand recognition, or the network value of the Supercharger network: it's only accounted as the sum of real estate, not the infrastructure and franchise value, etc.
  • On the liabilities side, reserves/warranties Tesla has set aside with conservative over-allocation, repurchase obligations it has on older Model S's are all accounted as 100% liabilities, while in reality a lot of these liabilities just 'go away' once the time span they are valid for pass and they are de-recognized.
  • Furthermore, during the Model 3 expansion Tesla has a rapidly increasing inventory: started the year with $2.2b, in Q1 it was $2.5 billion in Q2 $3.3 billion. This is representative of a higher number of cars 'in transit' across quarter boundaries: ~3.3k at year's begin, ~6.1k at the end of Q1, ~15k at the end of Q2. This artificially decreases working capital: inventory is recognized as an asset only on a cost basis, even if it's Model S/3/X's a day away from delivery. Liabilities to suppliers and customer deposits are 100% recognized on the other hand. So by increasing their inventory Tesla is artificially decreasing 'working capital' - but that's both temporary and largely an accounting fiction.
  • As a fourth factor, Tesla has invested over 3 billion dollars into the Model 3 expansion, which required heavy frontal payments: tooling and equipment suppliers want to be paid regardless of where Tesla is in the Model 3 ramp-up. This debases working capital by another 3+ billion dollars: those payments are going to be a drain on Tesla's cash until the end of 2018, while the actual income from the greatly expanded manufacturing capacity only began last quarter.
• By the GAAP definition Tesla has negative working capital of somewhere around -$2b right now. For a regular business like a bog standard department store that would normally spell trouble: more debt than assets, trouble rolling forward short-term debt, etc.
• For high-tech companies and for manufacturing companies that are at the apex of their capex spending these rigid definitions of 'working capital' are accounting fictions to the level of ridiculousness:
  • For example Apple has a current working capital of around 30 billion dollars only, while it's a trillion dollar company. (!)
    
  • Amazon, another company that has crossed 1 trillion dollars in market capitalization, has a current working capital of only 1.8 billion dollars by some estimates. (!!)
• Does anyone with a functioning brain truly believe that Apple, if they raised 30 billion dollars of debt, would get into trouble due to slipping into negative working capital territory? Or that Amazon would get into trouble by raising just 3 billion dollars of debt?
• So the whole 'Negative Working Capital' thesis of the shorts is just another proof that they don't know high-tech, don't know valuations and don't know accounting - in short: shorts on Twitter know absolutely nothing.
• A Mechanic Lien is basically just a technical accounting expression, a guarantee used by lenders to secure short term loans - to make sure they get priority before more speculative long term loans. A department store can use it against their valuable building on Main Street to secure a loan to renovate their building. Tesla has used similar loan constructs to temporarily raise cash, secured by their factory buildings. This expression is used by shorts to sound as if they knew what they were talking about, and to unify the 'negative working capital' FUD with the 'bankwuptcy' FUD: they are passive-aggressively insinuating that Tesla is on the verge of bankwuptcy even in the tweets where they are not saying that explicitly.
• Tesla has no trouble raising cash, and recently extended their short term lines of credit to 2020, because banks actually know all of what I've written above. What matters isn't the absolute level of working capital which is highly sensitive to high-tech valuation, but the expected balance of cash payments for the next 1-2 years - and those are excellent for Tesla.

Nevertheless shorts are going to use that kind of FUD, and to counter them when they are using it on Twitter just point out the sheer ridiculousness of it:

• Ask them whether they think that Amazon, a trillion dollars company, with just 1.8 billion dollars of 'working capital', is in danger of bankwuptcy? Here's a link to an estimate of Amazon's working capital. Note, I actually think it's a bogus estimate - but it's out there.
  
• Confront them how ridiculous it is for their definition of 'working capital' to assign zero asset value to the SuperCharger network, to Tesla's brand value and customer base, to AutoPilot and Tesla's new AI Chip that is 10 times faster than the Nvidia solution and to the Gigafactory technologies overall. (Not to mention a ton of other Tesla intangible assets, worth billions.) I.e. Tesla's 'high-tech enterprise value' is largely off the balance sheet for Tesla and is not recognized as a basis for 'working capital' on a GAAP basis.
  
• Point out that Tesla is right now paying more than $600m of cash per quarter for the Model 3 equipment. Those payments will continue for Q3 and Q4 2018, but in 2019 they will decrease significantly, while cash flow will literally explode with that additional contribution. Working capital will be strongly positive in 2019 even by GAAP standards which values most of Tesla's real assets as zero.
  
• Point out the fact that Tesla working capital has already improved by about 300 million dollars in Q2 and is expected to improve by another billion dollars in Q3 alone.

Note that the managing working capital and cash flow actually matters a lot to the health of a business, be it high-tech or not, what doesn't matter is this largely fictitious passing from "positive" into "negative" that shorts pretend happened with Tesla as they ramped up Model 3 production.

Summary: the 'Tesla negative working capital' short thesis is basically a confidence trick: the sophisticated, neutral sounding argument is in reality based on an accounting fiction that is seriously detached from reality not just for Tesla but for absolutely every other high-tech company on the west coast.

One of the best posts I have read on this forum. Thank you.

Can you share your thoughts on the bond pricing?
I specifically keep an eye on Bond Factsheet - TSLA 5.300% 15Aug2025 Corp (USD) || bondsupermart as a metric for solvency guidance. The recent drop has me less confident than I used to be.

 

[LoveTSLA]

Those who know me, know that I am a big Tesla and TSLA fan and investor. Since 28 dollars. Am an Elon cheerleader. Taking delivery of my third car, a P3D on the 29th. Have a 2013 Model S85 (trade in I think) and a Sig Model X.

Can we PLEASE stop talking about the how shorts are trapped and desperate every time the stock pops five percent. The shorts have completely cleaned our collective clock the past 30 days. The smart ones are SWIMMING in cash. Shorts have to be traders. Shorts who have been trading TSLA well are KILLING it. They are NOT going to disappear. Can't do it because I am emotionally invested in the success of TSLA (which is not a wise investing move BTW) but damn, I WISH I had shorted the hell out of TSLA post going private tweet so that I could be converting it to long positions now. Instead, I did quite the opposite...much to my chagrin.

So please, all this talk of how smart and long and strong we are, how the shorts are getting screwed, how the fear is in the air and they must close their short positions in a panicked stampede, please stop. It makes us sound like...well, like trolling shorts on the opposite side.

Disagree. It is a day for we Longs to cheer up a little bit. Why not?

 

[MP3Mike]

Nope, will not click unless you want to give me 10 Tesla shares.

I'll click it for one share. (But I have the ads blocked anyhow.)