TSLA Market Action: 2018 Investor Roundtable

[brian45011]

"More conservative" is not an accurate description; "More churn" is an accurate description. And yes, high-churn portfolio managers are common.

Got it! Portfolio managers' compensation is based on the churn they generate and not on their total return on assets under management.
Thanks!

 

[brian45011]

A better positive and more entertaining plan is to put a human driver and an AI driver through a "destruction derby" style game .

Or

 

[copyhacker]

Exactly. So why won't Musk just say "if we need to raise equity to pay off the $920 million (and the other $1.07 billion of debt & lease payments due in the next 12 months), we will". His continuing denial of that reality is the thing that all the professional/semi-pro investors are finding weird.

Headline: 'Musk Breaks Promise of No Capital Raise, Admits Tesla "Need To Raise Equity" To Stop Bleeding'

 

[defc0n]

Spiegel Bottom number 2 Short-seller Mark Spiegel says Tesla stock is worth 'zero'

Apologies if already posted. I've not been able to read any posts today.

Damn you beat me to it.

 

[bdy0627]

Moody's reiterating today: “We continue to expect that Tesla will need to raise new capital approximating $2 billion — in the form of equity, convertible notes, or debt — in order cover a cash burn during 2018, and to refund a total of $1.3 billion of convertible debt that matures in late 2018 and early 2019.”

Interesting. This is turning into quite the showdown. Moody's is saying Tesla will need to raise capital yet this year, Tesla is saying no we won't, Moody's is saying yes you will.

 

[brian45011]

Nothing's due in Feburary. Maybe you mean March?

How will Tesla redeem those notes (cash vs shares) during the 3 months beginning December 1, 2018?

 

[tander]

Tesla has adopted fusion. Look up in the sky. See that yellow thing? (Don't stare at it!) That's the only fusion reactor which will ever be economically viable.

As a tsla investor I'd like to agree, but if we ever figure out fusion it could make solar power look as antiquated as solar makes coal or oil look now. Just imagine in 30? years the people in the Mr.fusion forum making fun of the people from Tesla still littering the earth with those archaic solar panel installations In reality Tesla would probably get into fusion when it makes sense. Why bother harvesting from the sun and having to deal with those silly old batteries when you can have fusion 24/7? Why nuclear fusion is gaining steam – again

 

[CuriousSunbird]

Interesting. This is turning into quite the showdown. Moody's is saying Tesla will need to raise capital yet this year, Tesla is saying no we won't, Moody's is saying yes you will.

And Barclays, Jeffries, Morgan Stanley, UBS and Goldman are lining up behind Moody's. As are most people who can read balance sheets and cashflow statements.

There is a $2bn hole in the financials. If Musk has some secret plan to fill it, he should tell us. Even if they manage to eke out a positive cashflow in Q3 and/or Q4, there's no way it will be big enough to fill the hole.

He seems to be saying they will cut back capex spending to only what's absolutely and immediately needed, which is a start - forget about the 10,000 per week, or the semi, or the Y or the Roadster or any of that stuff for at least a year - that may get him $3-400 million. He may have another 2-300 million of ZEVs squirreled away. As for the rest, if he was counting on a high stock price to bail him out on the convertibles, I think he may have blown that last night.

 

[CuriousSunbird]

How will Tesla redeem those notes (cash vs shares) during the 3 months beginning December 1, 2018?

If the stock price is above $360 I think they will be very happy to redeem in stock. If below, they will have to redeem in cash.

 

[Curt Renz]

CNBC Fast Money (Grasso: Buy Tesla) - after today's close: "Fast Money" final trades: PYPL, HD and more

 

[Zaxxon]

And Barclays, Jeffries, Morgan Stanley, UBS and Goldman are lining up behind Moody's.

"Folks who benefit from Tesla having to raise capital say Tesla must raise capital."

News at 11.

 

[Wnuk]

"Folks who benefit from Tesla having to raise capital say Tesla must raise capital."

News at 11.

Exactly

 

[MikeC]

Another update from Gene Munster:

www.loupventures.com/category/tesla/

“The bigger story. As Model 3s hit the road, everyday drivers will become Tesla evangelists. Bo is an engineer by trade, more the technical type than a salesman, but the way he talks about the car and his experience with Tesla is a compelling pitch. This is common among Tesla owners, and we anticipate that Model 3 sales ramp, word of mouth will be a powerful demand driver. Bo mentioned several of his friends that own Mercedes or BMWs that have recently put in Model 3 reservations since seeing the car.

Bo’s visit couldn’t have come at a better time. Just as we were disappointed with Tesla’s latest turn of events, driving a Model 3 refocused us on what matters most, a product that delights consumers backed by an inspiring mission.”

 

[Paracelsus]

This is the best I’ve read today, you should publish this somewhere where it has more visibility.

Thank you very much for your kind words & support, @mulder1231. I have been extremely impressed with the efforts of members on this board to fight the FUD storm with such energy and enthusiasm. It is very motivating. I would jump at the chance to help the cause by publishing articles as you suggest, but I honestly don't know where to start. If anyone could point me in such a direction with a bit of 'child guidance' to help me get started, I would be sincerely appreciative and would gladly join the 'FUD-fighters' in a similar effort. As I am psuedo-retired I can find plenty of time for a very sincere effort. Thank you to everyone else on this board who routinely help bring awareness of the amazing things Tesla is achieving through their informative articles (@ValueAnalyst, @Papafox, etc), and to those who have taken up the Twitter challenge (@vinvin218, @Reciprocity, etc). You are helping support the effort to move our world in a better direction, and your efforts are commendable!

 

[brian45011]

If the stock price is above $360 I think they will be very happy to redeem in stock. If below, they will have to redeem in cash.

Read carefully the provisions in the prospectus about the Free Conversion Date. Tesla must tell note holders by 12/1/18 any combination of cash and shares that will be paid for redemptions during the following three months. Tesla has the option to designate the initial conversion value of 2.7788 shares per $1,000 note during that 3 month period, but is in no way limited to that ratio. Much depends on the share price and other circumstances existent in late November. Whatever Tesla decides, it must be used for all redemptions submitted during those three months.

What would you suggest if the share price is between $359.87 and $512.66. (The hedge writers, not Tesla, are exposed in that interval above $359.87.)

What would you suggest if the share price is about where it closed today ~$285? Doesn't the decision depend of whether Tesla wants to issue shares to redeem that $920 million or is comfortable using cash on 3/1/19? Using shares should not be considered a capital raise since the additional equity would only liquidate an existing liability. If Tesla is is comfortable using cash, they would probably chose all shares at a ratio considerably higher than the share price in late November.

Once Tesla designates the cash and/or share ratio for the 3 months, the holders then have a decision to make. Some may need to un-wind prior arbitrage positions since the shares have traded above $359.87 on several occasions since the notes were issued in 2014.

Finally, once Tesla announces before 12/1/18 the way redemptions will be handled in the ensuing 3 months, do you think anyone will try to game the share price during those 3 months?

 

[CuriousSunbird]

Read carefully the provisions in the prospectus about the Free Conversion Date. Tesla can tell note holders by 12/1/18 any combination of cash and shares that will be paid for redemptions during the following three months. Tesla has the option to designate the initial conversion value of 2.7788 shares per $1,000 note during that 3 month period, but is in no way limited to that ratio. Much depends on the share price and other circumstances existent in late November. Whatever Tesla decides, it must be used for all redemptions submitted during those three months.

What would you suggest if the share price is between $359.87 and $512.66. (The hedge writers, not Tesla, are exposed in that interval above $359.87.)

What would you suggest if the share price is about where it closed today ~$285? Doesn't the decision depend of whether Tesla wants to issue shares to redeem that $920 million or is comfortable using cash on 3/1/19? Using shares should not be considered a capital raise since the additional equity would only liquidate an existing liability. If Tesla is is comfortable using cash, they would probably chose all shares at a ratio considerably higher than the share price in late November.

Once Tesla designates the cash and/or share ratio for the 3 months, the holders then have a decision to make. Some may need to un-wind prior arbitrage positions since the shares have traded above $359.87 on several occasions since the notes were issued in 2014

I think you're misreading it. First the holders decide whether to convert. If they decide not to convert, they get cash. A rational holder would make this choice if the stock was below $360. If they do elect to convert (presumably because the stock is above $360, then Tesla has the option of cash, stock or combination settlement. Given Tesla's cash position, I would be surprised if they chose other than stock settlement.

 

[CuriousSunbird]

Read carefully the provisions in the prospectus about the Free Conversion Date. Tesla must tell note holders by 12/1/18 any combination of cash and shares that will be paid for redemptions during the following three months. Tesla has the option to designate the initial conversion value of 2.7788 shares per $1,000 note during that 3 month period, but is in no way limited to that ratio. Much depends on the share price and other circumstances existent in late November. Whatever Tesla decides, it must be used for all redemptions submitted during those three months.

What would you suggest if the share price is between $359.87 and $512.66. (The hedge writers, not Tesla, are exposed in that interval above $359.87.)

What would you suggest if the share price is about where it closed today ~$285? Doesn't the decision depend of whether Tesla wants to issue shares to redeem that $920 million or is comfortable using cash on 3/1/19? Using shares should not be considered a capital raise since the additional equity would only liquidate an existing liability. If Tesla is is comfortable using cash, they would probably chose all shares at a ratio considerably higher than the share price in late November.

Once Tesla designates the cash and/or share ratio for the 3 months, the holders then have a decision to make. Some may need to un-wind prior arbitrage positions since the shares have traded above $359.87 on several occasions since the notes were issued in 2014.

Finally, once Tesla announces before 12/1/18 the way redemptions will be handled in the ensuing 3 months, do you think anyone will try to game the share price during those 3 months?

And I would disagree that settling in shares wouldn't constitute a capital raise. Raising capital by extinguishing a liability is a good thing as it reduces leverage and liquidity risk while increasing working capital.

 

[CuriousSunbird]

Read carefully the provisions in the prospectus about the Free Conversion Date. Tesla must tell note holders by 12/1/18 any combination of cash and shares that will be paid for redemptions during the following three months. Tesla has the option to designate the initial conversion value of 2.7788 shares per $1,000 note during that 3 month period, but is in no way limited to that ratio. Much depends on the share price and other circumstances existent in late November. Whatever Tesla decides, it must be used for all redemptions submitted during those three months.

What would you suggest if the share price is between $359.87 and $512.66. (The hedge writers, not Tesla, are exposed in that interval above $359.87.)

What would you suggest if the share price is about where it closed today ~$285? Doesn't the decision depend of whether Tesla wants to issue shares to redeem that $920 million or is comfortable using cash on 3/1/19? Using shares should not be considered a capital raise since the additional equity would only liquidate an existing liability. If Tesla is is comfortable using cash, they would probably chose all shares at a ratio considerably higher than the share price in late November.

Once Tesla designates the cash and/or share ratio for the 3 months, the holders then have a decision to make. Some may need to un-wind prior arbitrage positions since the shares have traded above $359.87 on several occasions since the notes were issued in 2014.

Finally, once Tesla announces before 12/1/18 the way redemptions will be handled in the ensuing 3 months, do you think anyone will try to game the share price during those 3 months?

But it is good to meet someone on this site who actually reads some of the documents. I was beginning to wonder whether such a person existed.

 

[tander]

Another update from Gene Munster:

www.loupventures.com/category/tesla/

“The bigger story. As Model 3s hit the road, everyday drivers will become Tesla evangelists. Bo is an engineer by trade, more the technical type than a salesman, but the way he talks about the car and his experience with Tesla is a compelling pitch. This is common among Tesla owners, and we anticipate that Model 3 sales ramp, word of mouth will be a powerful demand driver. Bo mentioned several of his friends that own Mercedes or BMWs that have recently put in Model 3 reservations since seeing the car.

Bo’s visit couldn’t have come at a better time. Just as we were disappointed with Tesla’s latest turn of events, driving a Model 3 refocused us on what matters most, a product that delights consumers backed by an inspiring mission.”

My Grandma (married in 1949 to give you and idea of age) hasn't gotten a new car in 15 years, so obviously she's not interested in the latest cars, nor does she do email, computers etc so I did not expect her to be interested in the m3. My m3 reservation came due last week (which I'd originally done for my Grandpa thinking that self-driving would be here, oops) I told her about it and asked what she thought, she was kind of intimidated by the technology (most of her knowledge about it comes from nightly news...autopilot deaths, fires, etc.) and thought maybe she would just get a Camry. I was going to sort of push/sell the idea to her, but it occurred to me that in maybe 6 months there's going to be 100k more m3 drivers on the road and talking about them, maybe 300k more in a year, and I think the news and word of mouth cycle will likely have gone positive. So I'm going to defer it, and maybe wait till she asks me about it again or maybe just buy it and let her borrow it. Really hoping that with self-driving on the horizon she will be among the first of our elders that don't have to give up driving until they can't even get into the car, which I could argue has verifiable benefits to health for a generation where cars were a huge deal. So let the word of mouth begin, would love to see just as many gray haired folks in m3's as software developers, maybe we can even get ARPA to give an Autopilot discount or something

 

[brian45011]

I think you're misreading it. First the holders decide whether to convert. If they decide not to convert, they get cash. A rational holder would make this choice if the stock was below $360. If they do elect to convert (presumably because the stock is above $360, then Tesla has the option of cash, stock or combination settlement. Given Tesla's cash position, I would be surprised if they chose other than stock settlement.

Where in the prospectus does it say holders have to give notice prior to 12/1/18 of desire to convert during the Free Conversion Period????

"Conversions on or After the Applicable Free Conversion Date
On or after the applicable Free Conversion Date, a holder may convert all or a portion of its notes at any time prior to the close of business on the second scheduled trading day immediately preceding the applicable maturity date....

All conversions of 2019 notes occurring on or after December 1, 2018 (the applicable Free Conversion Date for the 2019 notes) will be settled using the same relative proportion of cash and/or shares of our common stock as all other conversions occurring on or after December 1, 2018. We will inform holders of the settlement method we elect for any conversions occurring on or after December 1, 2018 no later than December 1, 2018. If we do not timely elect a settlement method, we will no longer have the right to elect cash settlement or physical settlement and we will be deemed to have elected combination settlement in respect of our conversion obligation, as described below, and the specified dollar amount (as defined below) per $1,000 principal amount of notes will be equal to $1,000. If we elect combination settlement but we do not timely notify converting holders of the specified dollar amount per $1,000 principal amount of 2019 notes, such specified dollar amount will be deemed to be $1,000....

if the relevant conversion date occurs on or after the applicable Free Conversion Date, the 20 consecutive VWAP trading day period beginning on, and including, the 22nd scheduled trading day immediately preceding the applicable maturity date (if such scheduled trading day is not a VWAP trading day, the immediately following VWAP trading day)."

There are 20 trading days in February 2019: 1, 4-8, 11-15, 18-22, and 25-28, so I think (if Tesla does not timely elect a settlement method) the share price for shares during the Free Conversion Period would be the VWAP between January 30 and February 26 [unless Presidents' Day is not a trading day.]