TSLA Market Action: 2018 Investor Roundtable

[mongo]

All this argument against buybacks is reason why Apple has hundreds of billions of unproductive cash just sitting on its balance sheet.

We all agree that TSLA is deeply underpriced, and that Tesla will soon turn profitable, if it hasn't already. I expect $1B in GAAP profits and $2B in free cash flow in 2H18, and I do not expect ASP's to decline much, as production increases throughout 2019 and Tesla starts international deliveries of higher priced variants.

Given the above, it makes no sense to not buy back stock now at $300, and go for it after the short squeeze at much higher prices.

Tesla's growth is limited, not by lack of capital, but by non-financial factors (e.g. lack of electricians as Elon noted on the last call). He's not avoiding to raise capital just to stick it to WS; that would be emotional, personal, and dumb. He's not raising capital, because more capital does not automatically translate to quicker growth, as Elon himself explicitly said on the last call, and the excess cash would just sit there, like Apple.

Are you saying to buy back now and then do a capital raise later?
Otherwise, unless Tesla cares about EPS (beyond being positive) or dividends I'm not seeing the advantage to reducing the shares outstanding...

 

[Zhelko Dimic]

BTW., here's a very interesting thread of a BMW enthusiast turned Tesla enthusiast.

Some gems:

Long time BMW (~20 years) enthusiast here. Registered just to throw my two cents on this thread (I am active on n54tech & bimmerpost but only lurked here), . I currently have an E36 325i with track suspension setup and a E82 135i with Performance Suspension upgrade and many M3 suspension part upgrades. The 135i is tuned and is a beast especially with the upgraded suspension setup.

I was in the market for a new car and cross shopped between the M2 Competition and either latest or upcoming M3 and the Performance Model 3. Well, I test drove the Performance Model 3 and was just blown away. The hyper-low center of gravity and low polar moment of inertia (just a frunk where a heavy engine would be) and insanely quick, smooth and silent acceleration just threw a curve-ball to everything I knew about sport sedans & performance cars. Especially one in this weight class. The car is simply a beast and absolutely out performs anything BMW has to offer today. After a few days of taking it up my favorite mountain twisty roads with very spirited driving I'm absolutely convinced of this. I would most likely need to go to a Porsche Cayman to beat the handling aspects of this car but even that wouldn't have the instantaneous power & torque of the Performance Model 3.

It was hard to leave the BMW family (I was initially certain I was going to go for the M2 CS) and enter the unknown of Tesla startup and build quality issues, but frankly the product is just too good and wouldn't leave my mind and eventually I decided I had to have it.

Order was placed and now having lived with it for a couple of weeks I'm more impressed than ever. I can say I was very hesitant on the ultra minimalist interior but now I absolutely love it. For me this is very much an iPhone moment - when a new product suddenly makes everything else seem outdated and old.

I have a lot of BMW enthusiasts in my social circle, go to BMW CCA events. I give out demo rides to anyone that asks. One of my friends who is as long of a BMW enthusiast as me (a driving instructor for our local BMW CCA) was so impressed he ended up ordering a Performance Model 3 and now selling his M3.

My 2011 135i which I absolutely love (esp. with suspension work) will be going up for sale soon. I'll be keeping my E36 325i (for now) when I feel like driving a stick shift but I have a feeling it may not end up getting much use.

Tesla has a ways to go in the customer service, delivery, and production parts of their company. Especially right now, they are having major growing pains. But I can say, the car is phenomenal and so far has been worth the hassle of the current delivery process and the bit of risk I'm taking with service and potential issues of a new car model.
​

But read the rest of the discussion as well, such as where he explains that he's a sound enthusiast:

On fidelity they are decent for car audio. I am very picky and not a lot of car audio setups make me happy - as long as they rate decent I'm fine, not going to throw a ton of money into it when I already have to fight the acoustics of the car along with engine and road noise. I may rate the fidelity of the speakers 135i a bit higher than the Model 3 'Premium Sound'. However there is a HUGE difference beyond the fidelity of the speakers - the Tesla is silent and actually lets me enjoy the music without the underlying drone of the engine.

At a stoplight or stop and go traffic, ALL I hear is the music. It's just so incredibly nice and a bit unjarring at first. I feel like I'm sitting in my quiet living room coasting along and enjoying the music. This is just one of the small experiences of the Tesla that combined with a few dozen other small things really elevate the ownership and driving experience that's hard to explain without owning one for a bit.

The Tesla also has (I believe) a combined total of 15 speakers compared to the 7 or 8 in the 135i so that along with the silence give it a 'concert hall' experience.
​

And this is from a 20+ years BMW enthusiast with multiple BMWs enhanced for racing. These kinds of super invested and super loyal customers are the ones BMW was expected to lose last.

Guys and gals, mark the date: it's happening, and the $TSLA stock price will eventually reflect this new reality of the car industry.

You're right.
I'm Porsche guy, have over 100 days at the track, and the only category Porsche still has Tesla beat is steering feel, brakes and durability at the racetrack.
I may still get another Porsche as a track day toy, but no way I'd get Taycan or any other electric car from them.

And if I thought that BMW M3 was a proper track car I'd replace it with Tesla M3, but my experience with BMW (had few) is that they need too many upgrades and fiddling to get them ready for track once you get a bit more quicker/advanced. Porsche's are only factory cars that can (so-so) go on the track with factory brakes. So my impressions is Tesla P3M is track ready in the same way BMW M3 is track ready, but not Porsche ready, if that makes sense.

 

[Artful Dodger]

Had you said that you wish he didn't inform shareholders about the going private process then you'd have a point, but your claim that he wrote "false info" is blatantly untrue.

Not informing shareholders isn't a valid position either. Elon explained exactly why he had to send the tweet in this Tesla blog post on Aug 13:

"Why did I make a public announcement?"

"The only way I could have meaningful discussions with our largest shareholders was to be completely forthcoming with them about my desire to take the company private. However, it wouldn’t be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time. As a result, it was clear to me that the right thing to do was announce my intentions publicly. To be clear, when I made the public announcement, just as with this blog post and all other discussions I have had on this topic, I am speaking for myself as a potential bidder for Tesla."​

The Financial Times had already reported on the $2B Saudi share purchase. TSLA's share price went up $15 in the 30 min BEFORE Elon's tweet (people were trading on a situation that was NOT made clear to the public until Elon did so). The Tweet was sent at 12:48 pm EDT. Elon clearly was acting to protect small and retail shareholders. And he did so after talking to Tesla's Board. The tweet was not a knee-jerk reaction, it was part of Elon's plan for taking Tesla private. Here's TSLA market action showing the SP reaction to the Financial Times report at 12:18 EDT and Elon's tweet at 12:48 EDT: (Google chart uses 5-min smoothing)

I have an Excel worksheet from NASDAQ if you are interested in min-by-min trading. I also posted this DISQUS comment reporting on the Financial Times news at 12:24 pm. That's 6 min after the Financial times Saudi/Tesla news, and 24 min before Elon's Tweet, and the runup in TSLA was already well underway.

BREAKING: Saudi Arabia's sovereign wealth fund builds $2bn Tesla stake. TSLA SP up $10 in 3 minutes.​

I also posted this DISQUS comment at 12:32 pm EDT on Tue, Aug 07, 2018 (16 min before Elon's Tweet):

Artful Dodger > David Gilmore • 2 months ago

Indeed they are. I expect the new Crown Prince to contract with Tesla to provide a gigawatt-hour powerpack for the new solar powered city, Neom, on the Red Sea coast.
SP up $16 now after 12 minutes. :^D​

Clearly, time-lines-critical events can be easily omitted by the Financial Media when the timing of those events disproves their narrative. That's not Journalism; that's Urinalism.

Cheers!

 

[Unpilot]

They can buy some of my shares back...for ....hmm..say $3000?

 

[ValueAnalyst]

Are you saying to buy back now and then do a capital raise later?
Otherwise, unless Tesla cares about EPS (beyond being positive) or dividends I'm not seeing the advantage to reducing the shares outstanding...

Tesla will never raise equity capital again. I made this call in August of 2017, and it's so far been correct. I also do not expect Tesla to need to raise any significant, high-cost, junk-rated debt capital. $300's are good prices to take some shares off the hands of weak longs who short sellers manipulate and abuse so easily.

 

[mongo]

Tesla will never raise equity capital again. I made this call in August of 2017, and it's so far been correct. I also do not expect Tesla to need to raise any significant, high-cost, junk-rated debt capital. $300's are good prices to take some shares off the hands of weak longs who short sellers manipulate and abuse so easily.

I'm confused. I agree with the lack of future cap raises so what is this "it" they are going for after the squeeze?

Given the above, it makes no sense to not buy back stock now at $300, and go for it after the short squeeze at much higher prices.

In general:
Won't taking shares off the market from longs (weak or otherwise) reduce the average trading volume leading to more fluctuation and a higher percentage of shorted shares vs float? Unless the buyback raises the price high enough to close out short positions, which might then not be a good price to be buying back at.

 

[ValueAnalyst]

I'm confused. I agree with the lack of future cap raises so what is this "it" they are going for after the squeeze?

"it" = buybacks

In general:
Won't taking shares off the market from longs (weak or otherwise) reduce the average trading volume leading to more fluctuation and a higher percentage of shorted shares vs float? Unless the buyback raises the price high enough to close out short positions, which might then not be a good price to be buying back at.

I suggested $250M quarterly buybacks, which represent only 0.5% of outstanding shares, so no material impact on forward volatility in the next two quarters, after which TSLA will be added to S&P 500 and volatility will sharply drop anyway.

The time do buybacks is now with near record short interest, low share price, upcoming positive catalysts, and GAAP/FCF+ future.

 

[MikeC]

 

[Fact Checking]

Interesting - so even when 1st was a Monday ?

BTW, rest of the industry will start reporting on Oct 2nd.

So here's the filing records going back to 2015/Q4:

2015/Q4: Filing Date: 2016-01-04 (Mon), Accepted: 2016-01-04 06:05:35 (Mon), Period of Report: 2016-01-03 (Sun)
2016/Q1: Filing Date: 2016-04-04 (Mon), Accepted: 2016-04-04 16:57:12 (Mon), Period of Report: 2016-04-04 (Mon)
2016/Q2: Filing Date: 2016-07-05 (Tue), Accepted: 2016-07-05 06:17:10 (Mon), Period of Report: 2016-07-03 (Sun)
2016/Q3: Filing Date: 2016-10-03 (Sun), Accepted: 2016-10-03 16:47:46 (Sun), Period of Report: 2016-10-02 (Sat)
2016/Q4: Filing Date: 2017-01-03 (Tue), Accepted: 2017-01-03 16:25:20 (Tue), Period of Report: 2017-01-03 (Tue)
2017/Q1: Filing Date: 2017-04-03 (Sun), Accepted: 2017-04-03 06:02:22 (Sun), Period of Report: 2017-04-02 (Sat)
2017/Q2: Filing Date: 2017-07-03 (Mon), Accepted: 2017-07-03 15:21:19 (Mon), Period of Report: 2017-07-03 (Mon)
2017/Q3: Filing Date: 2017-10-02 (Mon), Accepted: 2017-10-02 17:19:16 (Mon), Period of Report: 2017-10-02 (Mon)
2017/Q4: Filing Date: 2018-01-03 (Wed), Accepted: 2018-01-03 17:10:27 (Wed), Period of Report: 2018-01-03 (Wed)
2018/Q1: Filing Date: 2018-04-03 (Tue), Accepted: 2018-04-03 09:00:33 (Tue), Period of Report: 2018-04-03 (Tue)
2018/Q2: Filing Date: 2018-07-02 (Mon), Accepted: 2018-07-02 09:04:06 (Mon), Period of Report: 2018-07-02 (Mon)

Key takeaways:

• Out of these 11 data points, the three earliest ones were filed on the 4th and 5th
  
• The exact timestamp within the day varies: early trading hours: 3x 6am, 2x 9am, one report was filed intraday at 15:21, and after-hours time range, 5x 16:25-17:19.
• The last two reports were filed at 9:00am and 9:04am, so maybe this time it will be before the market opens as well.
• Monday indeed seems to be the preferred filing day (6x), but there's two Tuesdays the 3rd and one Wednesday the 3rd.
• Never was a delivery report filed on the 1st in this data set. This might have to do with having an extra day to collect the end of quarter delivery data and maybe a day to sign off on the language of the report, which varies from report to report and often includes other guidance as well.

October 2018 is similar to January 2018, where the first day of the month was a Monday too. Then they filed on the third day, i.e. on a Wednesday, after the market closed, at 17:10 - but this might been delayed by New Years Eve.

So my guess for the Q3 delivery report is still the 2nd of October, Tuesday, at around 9am, before the market opens.

 

[MP3Mike]

I also observe that the Supercharger roll-out has all but stopped for the moment, so I would assume they've stopped most discretionary capex expenditure.

Really? In the last 2 months: 8 have started construction, 10 have gotten permits, and ~30 new locations have opened. I don't call that all but stopped.

Overall there are 38 under construction, and 117 with permits. (And that is just what we know of.)

 

[Reciprocity]

I agree that the entire energy generation, storage and usage strategy by Elon is cost effective and sustainable. What i still have doubts is the solar panel part. solar panel is really commodity now and tesla does not have the scale to be cost competitive. In the picture you described, there is no point to use tsla solar panel, any competitive solar panel on the market now can fit in the picture. GF2 is under used for sure and I am not opportunistic about it any time soon. On another thought, why they not consider move some of the battery production and some m3 production line there? freemont has no space anyway.

I am using the exact same Panasonic HIT panels that Tesla will be making in partnership with Panasonic. I am guessing that Tesla will have their own inverters and will add smart grid capabilities which will make them a bit more appealing. Tesla can use whatever panels they choose when they partner with customers on megacharging.

Tesla also needs to make solar roof there ,which requires solar cells, which I am assuming are somewhat non-standard, or at least different enough that they cannot just source them from anywhere.

I had to use good panels, because I only had so much space on my roof that faced south. This really only left Sunpower and Panasonic. Easy decision based on price alone, but I was included to Panasonic already for obvious reasons.

 

[ggr]

So here's the filing records going back to 2015/Q4:

2015/Q4: Filing Date: 2016-01-04 (Mon), Accepted: 2016-01-04 06:05:35 (Mon), Period of Report: 2016-01-03 (Sun)
2016/Q1: Filing Date: 2016-04-04 (Mon), Accepted: 2016-04-04 16:57:12 (Mon), Period of Report: 2016-04-04 (Mon)
2016/Q2: Filing Date: 2016-07-05 (Tue), Accepted: 2016-07-05 06:17:10 (Mon), Period of Report: 2016-07-03 (Sun)
2016/Q3: Filing Date: 2016-10-03 (Sun), Accepted: 2016-10-03 16:47:46 (Sun), Period of Report: 2016-10-02 (Sat)
2016/Q4: Filing Date: 2017-01-03 (Tue), Accepted: 2017-01-03 16:25:20 (Tue), Period of Report: 2017-01-03 (Tue)
2017/Q1: Filing Date: 2017-04-03 (Sun), Accepted: 2017-04-03 06:02:22 (Sun), Period of Report: 2017-04-02 (Sat)
2017/Q2: Filing Date: 2017-07-03 (Mon), Accepted: 2017-07-03 15:21:19 (Mon), Period of Report: 2017-07-03 (Mon)
2017/Q3: Filing Date: 2017-10-02 (Mon), Accepted: 2017-10-02 17:19:16 (Mon), Period of Report: 2017-10-02 (Mon)
2017/Q4: Filing Date: 2018-01-03 (Wed), Accepted: 2018-01-03 17:10:27 (Wed), Period of Report: 2018-01-03 (Wed)
2018/Q1: Filing Date: 2018-04-03 (Tue), Accepted: 2018-04-03 09:00:33 (Tue), Period of Report: 2018-04-03 (Tue)
2018/Q2: Filing Date: 2018-07-02 (Mon), Accepted: 2018-07-02 09:04:06 (Mon), Period of Report: 2018-07-02 (Mon)

Key takeaways:

• Out of these 11 data points, the three earliest ones were filed on the 4th and 5th
  
• The exact timestamp within the day varies: early trading hours: 3x 6am, 2x 9am, one report was filed intraday at 15:21, and after-hours time range, 5x 16:25-17:19.
• The last two reports were filed at 9:00am and 9:04am, so maybe this time it will be before the market opens as well.
• Monday indeed seems to be the preferred filing day (6x), but there's two Tuesdays the 3rd and one Wednesday the 3rd.
• Never was a delivery report filed on the 1st in this data set. This might have to do with having an extra day to collect the end of quarter delivery data and maybe a day to sign off on the language of the report, which varies from report to report and often includes other guidance as well.

October 2018 is similar to January 2018, where the first day of the month was a Monday too. Then they filed on the third day, i.e. on a Wednesday, after the market closed, at 17:10 - but this might been delayed by New Years Eve.

So my guess for the Q3 delivery report is still the 2nd of October, Tuesday, at around 9am, before the market opens.

You are amazing. I tried to look up this information but had other chores to do before I found it. Where was it?

 

[Fact Checking]

You are amazing. I tried to look up this information but had other chores to do before I found it. Where was it?

It's on the SEC's EDGAR system, if you search Tesla's 8-K filings:

EDGAR Search Results

... then the individual reports are links like this:

EDGAR Filing Documents for 0001564590-18-016465

Where you'll see the filing timestamps.

 

[ValueAnalyst]

View attachment 337374

 

[KarenRei]

What's this "broker" thing? I do all my trades, well just buying actually, on an app. Seems a bit last century...

Haven't had any success here with online trading apps. Can't use most of the ones that people in America used. Tried to use a German service that supposedly allowed people from outside Germany to use it, but the address confirmation system didn't work with mine, and they never responded to my emails. The only option I've found that works here is via my bank's financial division. Very suboptimal (expensive, slow, etc), but functional.

What do you use in Brussels?

 

[AudubonB]

Touché, "passed" was a pour word choice on my part. Each Tesla I saw was headed in a different direction than I, so technically I did not actually pass any Tesla yesterday, although saw many during my ICE age travel.

Bingo - another situation in which British English excels. Over there, “pass” (mostly) means encountering a vehicle traveling in the opposite direction. They use “overtake” to indicate what happens when a faster vehicle moves from behind a slower one to in front of It.

As I was going to St. Ives
I met a man with seven wives.

Each wife had seven cats,
Each cat had seven rats.

How many were going to St. Ives?

Unfortunately, this classic uses neither “pass” nor “overtake”. And anyone for whom British English is native may correct me as needed.

 

[sundaymorning]

This might be already posted but it’s looking like deliveries are going well, thanks to all the owners and Tesla community.

Tesla's volunteer-boosted Model 3 delivery weekend is a wake-up call for legacy auto

What other manufacture can generate this type of support?

 

[Artful Dodger]

What do they get from a share buyback? A higher stock price...that will happen anyway.

If Tesla had $330M in cash handy, they could have bought 860,000 shares on Tuesday out from under those that would harm them. And put a body slam on those blighters.

 

[ValueAnalyst]

If Tesla had $330M in cash handy, they could have bought 860,000 shares on Tuesday out from under those that would harm them. And put a body slam on those blighters.

View attachment 337388

Such a move would have *slaughtered* the shorts. Absolute dominance.

 

[TradingInvest]

"it" = buybacks

I suggested $250M quarterly buybacks, which represent only 0.5% of outstanding shares, so no material impact on forward volatility in the next two quarters, after which TSLA will be added to S&P 500 and volatility will sharply drop anyway.

The time do buybacks is now with near record short interest, low share price, upcoming positive catalysts, and GAAP/FCF+ future.

It would be great if Tesla initiate a share buyback program, even if they just buy $10m per quarter, it will send a strong signal. If they buy $20m in 2018, $200m in 2019, $500m in 2020... all the long term models need to incorporate this factor.

Right now many shorts think in the best case Tesla can turn into a $100B company, so their risk is manageable. If the share price remain low, Tesla continue to buyback more shares, when 80% of the shares are bought back and canceled in the next 10 years, per share price could reach $30k without short squeeze, and there will be no chance for them to cover because the remaining shares are not for sale. This scenario seems crazy, it's not that crazy.