TSLA Market Action: 2018 Investor Roundtable

[ZachF]

Sorry, but in this central paragraph of the SEC lawyers' filing they are uncritically regurgitating short seller talking points and are whitewashing and obscuring the fact that short sellers, by definition, are profiting at the expense of Tesla shareholders:

"15. In 2018, stock analysts and investors increasingly began to question whether Tesla could meet its previously announced production targets and begin to earn sufficient cash in order to sustain its operations and pay its existing debt load. By August 2018, more than $13 billion worth of Tesla shares were being “shorted,” meaning they were sold by investors who did not own them at the time of the sale. Investors who sell stock short typically believe the price of the stock will fall and hope to buy the stock at the lower price to cover their short positions and earn a profit. If the price of the stock rises, short sellers who then exit their short positions by purchasing the stock at the higher price will incur losses."

https://cdn.pacermonitor.com/pdfser..._Exchange_v_Musk__nysdce-18-08865__0001.0.pdf​

This attempt to protect short selling anti-investors goes against the primary purpose, role and mission of the SEC to protect investors.

This sick legal attack against one of the most innovative U.S. companies needs to become a permanent blemish on their record, a career limiting choice. After Elon's lawyers are finished with them their legal careers should be left vaporized in a molten crater, as a warning sign for future would-be attackers, glowing in the dark for centuries.

I'm not willing to cut the SEC any slack here, this lawsuit against Elon Musk is beyond reckless, it's a mockery of justice.

Let's face it, the SEC became a joke when they did absolutely nothing when the largest financial fraud in US history happened 10 years ago.

They're owned by the big finance firms.

 

[ZachF]

I am highly skeptical of that article. Its only substance is:
'
About two weeks later, facing strong opposition from shareholders, Musk withdrew the plan to go private.

A senior Panasonic executive described Musk's announcement, which could have triggered a class-action lawsuit if the plan had been pursued, as "unimaginable."

In early September, the Panasonic executive was stunned to watch the CEO, appearing on a webcast, taking a deep drag on what was apparently marijuana.
'

So one unnamed senior Panasonic executive found Elon Musk's go-private plan 'unimaginable' and was "stunned" when Elon Musk did (not) inhale (the legal substance) marijuana.

The rest is just a rehash of the usual anti-Tesla arguments, with no specifics regarding Panasonic.

Big deal.

Remember, this is a Japanese CEO... "Unimaginable" when spoken in the context of Japanese language may mean something completely different than implied, like the Chinese for "Interesting".

 

[mongo]

Remember, this is a Japanese CEO... "Unimaginable" when spoken in the context of Japanese language may mean something completely different than implied, like the Chinese for "Interesting".

Hai

 

[ZachF]

That's fine in principle when the interests of investors and anti-investors align as users of securities exchanges, but that's not what the SEC lawyers were doing in their filing: in the section I cited they were explicitly siding with short sellers, against the interests of shareholders.

In case there is a conflict of interest between investors and anti-investors, which conflict of interest is a mathematical fact when it comes to changes in the price of stock, investors must take precedence.

In fact even the SEC knows that, and mechanisms like short-selling circuit breakers and outright short selling bans demonstrate that the interests of investors take precedence over the interests of anti-investors. It's certainly not an accident that the first ever short selling transaction recorded in history, hundreds of years ago in the Netherlands, was performed by a fraudster, after which incident short selling was largely banned.

A modern short seller is certainly free to put ethical concerns aside and become the parasitic freeloading barnacle, eye worm, tapeworm, round worm, chigoe flea and human botfly in one person, and go and sell Tesla short and attempt to disrupt investor discussion forums just to earn money - but that doesn't put them on equal footing with Tesla investors in the eye of the law - and I believe Elon's lawyers are going to demonstrate that forcefully, even if SEC lawyers were shortsighted enough to disregard that principle.

Short selling is an important part of a functioning market an price discovery.

Malicious short selling, where they try to use reflexivity to induce a self-fulfilling prophecy, and often use cronyist methods to achieve it, is something that is very bad for the market as a whole.

 

[dondy]

I am highly skeptical of that article. Its only substance is:
'
About two weeks later, facing strong opposition from shareholders, Musk withdrew the plan to go private.

A senior Panasonic executive described Musk's announcement, which could have triggered a class-action lawsuit if the plan had been pursued, as "unimaginable."

In early September, the Panasonic executive was stunned to watch the CEO, appearing on a webcast, taking a deep drag on what was apparently marijuana.
'

So one unnamed senior Panasonic executive found Elon Musk's go-private plan 'unimaginable' and was "stunned" when Elon Musk did (not) inhale (the legal substance) marijuana.

The rest is just a rehash of the usual anti-Tesla arguments, with no specifics regarding Panasonic.

Big deal.

It's written by Nikkey staff writer, so obviously it is a negative "hit piece", because he would get criticized too much otherwise, if not by americans then by Toyota fanboys, but it is written by a Japanese writer so instead of fantasies painted as "opinions" he is spinning facts.
More of it such "communications" have very specific and simple structure. The real message is always at the end

Tesla's performance, and Musk's behavior, through the rest of the year will determine the future of the partnership, a senior Panasonic executive said.

The message is obviously not for Musk, and not for you. It is a warning that if Musk goes, Panasonic goes.

 

[SO16]

Z, a lot of emotions have crossed my mind the past 24 hours. I was extremely upset with Elon about putting us through $420 when profits are just around the corner. The DOJ’s investigation made me even angrier at him. Like you, I’ve also expressed with friends I no longer want this guy as ceo. But after having read about what the SEC wanted from him, putting his SpaceX company in jeopardy is completely vindictive and out of character.

There are those who spend a lifetime building up their legacy, while others spend days and nights trying to tear it down, all for what? To me, someone at the SEC is trying to make a name for themselves. This case could have been easily resolved by the SEC in a dozen different ways. A large fine, $10-20 million, etc and double it again if Elon screws up in the future. But barring one of this century’s greatest inventor from ever being an officier again is taking his livilihood from him. I have to stand behind Elon on this, I’ll be flying to New York to make my voice heard when this goes to trial (I’m sure along with large crowds of adoring fans) to make sure those bastards at the SEC understand they’ve bullied the wrong guy.

I do admit that Elon’s made an @ss out of himself the last couple months. But I think he still has a lot, and I mean a lot of fans/supporters who will stick their necks out for him, and that includes me. I dont know the reason, perhaps in some ways I wish I can be as brave when standing up against the establishment, but I’m not. Elon is the guy to do that, he’s capable, he’s made mistakes, it’s hurting shareholders, but I’m betting that 3 months from now when profits are flowing into Tesla it’ll be much easier to forgive. For now, I don’t blame you for being upset, he screwed up massively and put himself as well as all of us in this situation. But there’s just no way in hell im signing that document if it puts my SpaceX on the hook. I’m in this fight till the very end, the SEC bullies only emboldened my support. For now, I hope you get some rest and continue to update us on your thoughts. You’re one of the good guys around here.

I consider getting away from burning fossil fuels as one of the most important goals in human history at this time. Pumping all that crap into the air is not good. How anyone can defend that is beyond my comprehension. Elon is one of the few fighting this process and it won’t be easy. If people care at all about the future for their kids, people like Elon should be helped. This is war.

 

[brian45011]

Curious as to why this constant haemorrhaging, who’s selling?
I can imagine a lot of shorts covering right now.

Conventional investing wisdom is to go to the sidelines in times of uncertainty to preserve capital. Once more clarity is achieved the capital can be redeployed. IMO, it is unfortunate that Elon rejected the relatively mild censure of SEC's quick settlement offer. As long as the litigation festers, there will be a sustained pall over all aspects of Tesla's operations, particularly relationships with creditors and vendors/suppliers, but also with potential new customers. Access to conventional sources of new capital to fund the Semi, Roadster II, Model Y, S/X refreshes, pick-up, tunnel sleds, etc. will be restrained until the matter is resolved. There is also the risk that as long as the SEC pursues discovery it will share it with the DOJ; and, ultimately, civil litigators will obtain it through FOIA requests and other channels.

Investment advisers and fund manager have to be unemotional. At a minimum they owe their clients and investors a Duty of Due Care.
https://www.hedgeco.net/whitepapers...anagers-and-How-to-Avoid-Them-White-Paper.pdf The consensus here seems to be that the SEC's action is utterly merit-less and easily defended, but large institutional holders may have a more cautious approach to managing risks while maximizing returns on their assets under management.

Yesterday was the last trading day of the third quarter. Over 35 million shares were trading in after-market Thursday through the after-market Friday. All the 13Fs will not be available until November 15 to see which institutions increased or decreased holdings. The share price has a recent history of relatively large moves in the first trading days of new quarters as "window dressings" are re-positioned. The imminent release of production, delivery, and in-transit information early next week escalates the volatility in both shares and options. Short-term traders will inevitably try to exploit moves in either direction.

At the risk of reasoning by analogy, the next few trading days will be similar to the period before a hurricane makes landfall. Thrill seekers, surfers, and the curious rushing to the larger waves and higher tides pass a long line of more conservative coastal residents heading temporarily inland; when the former arrive they find some residents have decided to shelter in place.

Whatever decision you make, own it and not blame someone else later in hindsight.

 

[Unpilot]

There's a couple of Tesla growth wildcards that I can see:

• Once Tesla moves past the growing pains, when exactly is the first big ICE automotive player going to declare bankruptcy?
• If Tesla is going to be with the strongest free capital position by that time then they'll be able to buy out those factories, hire the workers before skills erode, and speed up the EV transition and growth.
• So IMO it's a race against the clock: can Tesla grow fast enough in the next 2-3 years before the ICE dominoes start falling? Or will the ICE industry be able to perform an amazing turnaround?
  
• Other than that, the EV transition will IMO still happen much faster than the construction time of the first Gigafactory suggests, as building more Gigafactories literally only requires capital and work at this point, there's very few R&D vagaries left.
• If Tesla's Shanghai Gigafactory works out as planned, and if a Gigafactory indeed only takes 2 years to start generating cash then growth should be exponential with a rough doubling of production capacity every 2 years in the most aggressive scenario (and ~40% YoY revenue growth) - and production growth probably still won't be able to keep up with growing EV demand.

Overall I believe there's a significant chance, if the ICE industry continues to make unforced errors, that the EV transition is going to be the most disruptive and most immediate step in the Fourth Industrial Revolution of humanity.

But, please keep in mind that these are all pie-in-the-sky possibilities at the moment, there's still a lot of front-loaded uncertainties and risk factors IMO: Tesla needs to execute, execute and execute, and Elon also needs to win a lawsuit.

This I believe is were the people that doubt Tesla fail to realize the true nature of innovation that is at the heart of EM and Tesla.
Tesla is a at the cusp of innovating not only how cars are powered...but how they are built. The continued increasing speed and efficient methods are...well to turn a phrase badly..continuing and most likely increasing.

So when people look at the company and it's timeline they tend to miss the big picture....a lot of the hard work in this first generation is behind Tesla. The can replicate what the have done MUCH faster.

The real kicker is what they are working of for Gen 2...and 3...and probably on the back of a napkin gen 4.
So while the legacy's and their surrogate's ( financial press and other FUD machines) Talk about how they will roll out Tesla killers they are really talking about their Gen .5 cars. As if Tesla STOPPED doing what is their lifeblood INNOVATING!

It is mindbogglingly crazy to watch any of the talking heads describing Tesla because they are talking about a company that in reality does not exist.

They can't see true innovation because most people never do until they day they say "yeah we always do that"

 

[Intl Professor]

I think the SEC would say it is protecting all market participants by enforcing the rules. Doesn't matter if you're long or short, put option holder or call option holder. Rules are rules.

Unless, of course, their application is arbitrary and capricious. Pretty close to what SEC says of Elon. I suspect that will be his lawyers' response.

 

[gringotuanis]

Difficult to say. Employees may also feel less likely to be screwed over by a CEO who doesn't compromise on his integrity.

Doesn't compromise integrity can sometimss be code for not being humble. Musk did screw up with the tweet, if the settlement was as light as it sounds like it was (slap on the wrist), it seems he should have accepted it if simply to benefit the shareholders and Tesla. Don't know what the lawyers are advising him, and my hope is that there is some other reason they turned it down. Like it opens them up to more litigation or something. Overall, my worst fear is that Musk was simply too arrogant to accept the deal and in his childish behavior he is screwing the shareholders yet again, just like the $420 tweet when I thought he surely would not send that without having a real deal.... I would love to see the exact settlement offer or have the lawyers for Musk comment on this to get clarity as to why it was rejected. Do they think they can just defeat the case easily, etc.....this overhang is very bad for me and I have several call options. Dscl long tsla via stock and short term and long term options.

 

[JRP3]

Enough is enough. Musk's refusal to settle is bewildering, and hurts many people.
I hope he gets kicked out of the CEO role, even if that hurts me even more financially.
Tesla will do fine with him as a Chief Product guy, and with his ownership stake, he could get done whatever needs to get done anyhow, without being CEO.

*I haven't been able to read last two days because of travelling, but what I've seen, makes me think that it's only extremists left on this thread, moderates are gone. So I'm unlikely to be responding to avalanche of criticism and explanations 'how weak I am', that I'm likely to get.

Interesting that after your extreme and obviously emotional post you say only extremists are left on the board Most of this board is well thought out and seems to have a better understanding of these events than you do. We see the SEC has a weak case and are trying to imply a violation where there was none, hence we agree with Musk's desire to fight this.

 

[SW2Fiddler]

The insight from the lady was very interesting indeed.

But Lutz, jeeze, a total stream of BS. One clear example of his FUD is he says that other automakers produce a car, send it to a dealer who then have 60 days to pay On the other hand, Tesla who don't have dealers, need to wait until the car is paid for the customer. Which in principle is correct, but as they're built to order, I would imagine the time to payment is a lot less than 60 days, at least in the US.

Bob, Bob, Bob... I had to pay Tesla for my car before it was even put on the truck to Texas. Just like yer Dealers intended, yea writ into state law.

There needs to be a mega-mix of fuddy-duddy FUD Bites where they demonstrate they are 180 degrees dead wrong. Exhibit B the #PoorJimChanos definition of “what we call Distributed Solar, large installations where the power is then distributed...” TermsOfEndearmentVolition

- Bonus footage at the end of that one where PJC indirectly praises the Tesla (Amazon (Dell)) sales model as “genius” vs. the dealership-as-the-car-customer model...

Set it to a soundtrack of those jaunty Waller pipe organ jazz recordings.

 

[JRP3]

Doesn't compromise integrity can sometimss be code for not being humble. Musk did screw up with the tweet, if the settlement was as light as it sounds like it was (slap on the wrist), it seems he should have accepted it if simply to benefit the shareholders and Tesla.

If you haven't seen it you need to watch this video, specifically the comments from former SEC Sr. Counsel as to why the SEC case is so weak

 

[kbM3]

I love your posts. You are one of my favs. I did finally find something with which I disagree . It really took a long time though

• Other than that, the EV transition will IMO still happen much faster than the construction time of the first Gigafactory suggests, as building more Gigafactories literally only requires capital and work at this point, there's very few R&D vagaries left.

According to Elon, GF1 is Alien Dreadnought v0.5. He’s looking to get to 3.0. If you think Tesla will not be doing big changes in future production lines, you don’t know Elon.

 

[Tslynk67]

43k down the drain today. Biggest loss in one day so far.

I'm always annoyed when it drops like this and I don't have any dry powder to buy some more.

Ugh, you guys and your bloody calls, puts and LEAPS

I realise SP needs to get to around $1950 before I become a millionaire, but on the other hand it needs to drop below $185 before "lose" money, and then only if I panic and sell. Needs to drop to $50 and have me sell in order to lose $48k

So I won't get rich quick, but I won't lose any money either.

Just sayin'

 

[Vitold]

I love your posts. You are one of my favs. I did finally find something with which I disagree . It really took a long time though



According to Elon, GF1 is Alien Dreadnought v0.5. He’s looking to get to 3.0. If you think Tesla will not be doing big changes in future production lines, you don’t know Elon.

It looks like Chinesse are going to be financing factory 2.0

 

[lklundin]

I love your posts. You are one of my favs. I did finally find something with which I disagree . It really took a long time though



According to Elon, GF1 is Alien Dreadnought v0.5. He’s looking to get to 3.0. If you think Tesla will not be doing big changes in future production lines, you don’t know Elon.

Sure. I think it is still fair to say that GF1 is a proof that the concept works. With that in place optimizations are to be expected.

One wildcard is that the lithium-ion battery is quite far from reaching any fundamental physical boundaries (unlike the ICE), so advances in chemistry and materials may provide additional, significant advantages. As long as a future design can still be rolled up into a cylindrical battery cell, I would expect GF1 to be adatable to such advances, so I see them as potential benefits to Tesla, not as risks - unlike some media reports.

It is for example quite possible that Tesla/Panasonic will arrive at a cell free of Cobalt (driven by market forces and the political ramifications of its origin). I fully expect such an improvement to be implementable without any problematic changes to GF1.

 

[Fact Checking]

According to Elon, GF1 is Alien Dreadnought v0.5. He’s looking to get to 3.0. If you think Tesla will not be doing big changes in future production lines, you don’t know Elon.

I agree 100%, and in fact I'm counting on Elon doing just that!

When I wrote "no R&D vagaries" I meant the following:

• Elon won't take a "bet the farm" risk ever again, like the fourth Falcon 1 launch attempt or the Model 3 introduced at a 500k/year capacity.
• Elon & co are going to iterate the Dreadnought like they iterated the Falcon 9: with comparatively small, low risk steps, without risking the mission in any way.
• Finally, he won't go to Wall Street for financing, but is going to use the considerable internal cash generation capability of Tesla (4-7 billion dollars in 2019 alone) to grow, combined with local non-recourse Gigafactory financing.

I.e. there won't be "R&D vagaries" that turn into an existential threat, like the speed of the Model 3 ramp-up turned into an existential threat.

This is what I meant - R&D won't stop - it will probably even accelerate.

 

[Paracelsus]

Let's face it, the SEC became a joke when they did absolutely nothing when the largest financial fraud in US history happened 10 years ago.

They're owned by the big finance firms.

This.......on steroids. A $10B bet against Tesla is placed by the largest institutions. This bet that Tesla cannot produce will fail very visibly at the end of Q3......if not on Monday with an announcement of delivery numbers. Big Money calls the SEC for a lifeline that will allow them to pass their bets into the hands of smaller Short positions IN FULL by creating a mechanism (the lawsuit announcement) that dumps the share price enough for them to do so. The Short position on Monday morning will still be similar to what it was last week...........but it will be held by 'smaller hands' (not the President's smaller hands). And then Big Money will be buying like crazy to ride the price back up and crush the people that they handed their bag of 'stuff' to. This is really no different than 10 years ago, with the exception that 10 years ago GS torched Lehman Brothers (their competition). Next week they will torch their own followers. Greed has no shame. But it is a shame that Greed collects followers. And this next week may find many of those followers feeling a sense of shame.

The SEC announcement was literally made at the very last moment for it to have successfully bailed anyone out of a bad short bet before Oct 1st. That is why I see the SEC lawsuit itself as a dangerous bet. IMO the SEC will eventually do everything it can for this NOT to go to court, because like many others here I do not think that was the intention of filing the suit. But who wouldn't fully expect that Elon will do everything in his power to actually take this to court for the pain that it caused himself, his company, his employees, and every Long investor that he stood by and tried to protect when he finally decided not to go private. Protecting the banks that act recklessly appears to have only taught them they can continue to expect protection at the highest levels. Friday's price action adds fuel to Elon's case. A reversal next week that includes any gains by Big Money that held a Short Position as late as last week will only add further support.

 

[Tslynk67]

Conventional investing wisdom is to go to the sidelines in times of uncertainty to preserve capital. Once more clarity is achieved the capital can be redeployed. IMO, it is unfortunate that Elon rejected the relatively mild censure of SEC's quick settlement offer. As long as the litigation festers, there will be a sustained pall over all aspects of Tesla's operations, particularly relationships with creditors and vendors/suppliers, but also with potential new customers. Access to conventional sources of new capital to fund the Semi, Roadster II, Model Y, S/X refreshes, pick-up, tunnel sleds, etc. will be restrained until the matter is resolved. There is also the risk that as long as the SEC pursues discovery it will share it with the DOJ; and, ultimately, civil litigators will obtain it through FOIA requests and other channels.

Investment advisers and fund manager have to be unemotional. At a minimum they owe their clients and investors a Duty of Due Care.
https://www.hedgeco.net/whitepapers...anagers-and-How-to-Avoid-Them-White-Paper.pdf The consensus here seems to be that the SEC's action is utterly merit-less and easily defended, but large institutional holders may have a more cautious approach to managing risks while maximizing returns on their assets under management.

Yesterday was the last trading day of the third quarter. Over 35 million shares were trading in after-market Thursday through the after-market Friday. All the 13Fs will not be available until November 15 to see which institutions increased or decreased holdings. The share price has a recent history of relatively large moves in the first trading days of new quarters as "window dressings" are re-positioned. The imminent release of production, delivery, and in-transit information early next week escalates the volatility in both shares and options. Short-term traders will inevitably try to exploit moves in either direction.

At the risk of reasoning by analogy, the next few trading days will be similar to the period before a hurricane makes landfall. Thrill seekers, surfers, and the curious rushing to the larger waves and higher tides pass a long line of more conservative coastal residents heading temporarily inland; when the former arrive they find some residents have decided to shelter in place.

Whatever decision you make, own it and not blame someone else later in hindsight.

I'm delighted Elon refused the settlement as their case is weaker than American beer and he's done nothing wrong in my eyes.

And I don't see why it should have affected Tesla so much as it's a charge against Musk, not the company - hence they can neither make demands that Tesla change their board structure.

From what I can gather, the selling panic was a) shorts piling in, triggering stop-loss orders, b) fear of Musk leaving Tesla - which isn't going to happen.

If we ever got to the situation where Tesla needed to rain capital, but couldn't because of the charge, then I would expect Elon to go on gardening leave for a few months. But hopefully, ongoing profits will be enough to avoid this.