TSLA Market Action: 2018 Investor Roundtable

[TradingInvest]

There was some short covering in 2013, but, almost certainly not a squeeze.

The stock went up from $40-50 to $180 over about 4-5 months. At the low point of the short position about a 12 million net drop in shares shorted from about 30 million shares short. Tesla trading volume was VERY high for many days in that 4-5 month period. I'm quite confident there were individual days that volume hit 12 million shares or higher. The short position fell over many weeks to that low point. That 12 million net drop in shares short, at the lowest point, just does not come anywhere near to indicating a short squeeze. Even at the low point, 18 million shares short (out of about 110 million total shares, including those owned by insiders) was still a way off on the far end of the bell curve number of shares short compared to the rest of the market. Let alone an implosion of net short positions, i.e., a squeeze, Tesla never left the extremely heavily shorted category at any point.

Tesla's share price exploded because the Model S launch was something of a binary event like a startup biotech with everything the company has going riding on FDA approval or denial on its first drug... Tesla was either going to succeed in bringing its core product into company transforming production or be on the rocks, just like such a biotech on their key drug. When it worked, the share price went up several fold, as can happen with such biotechs.

The 2013 rally was price discovery, not a real short squeeze.

 

[Causalien]

Many of us think that people who short a security do not think it has value. Events like Enron, Penn Central and many others reinforce that view. Factually professional short-sellers deal in negative sentiment and or securities they think to be intrinsically overvalued.

TSLA now and AAPL earlier were anomalies because they have ignored two short-seller cardinal rules:
Do not short if:
1. the company has a very high growth rate;
2. the company has highly satisfied customers.
If one of those applies shorting is unusually risky. if both apply it is analogous to motorcycle autocross racing without a helmet. i.e. you might survive but you have higher probability of serious injury or death.

With so many good shorting candidates why tempt fate?

Shorts, like longs, probably falls into very different schools. For example. My school says:

1. Do not short cult stocks
2. Do not short sector leaders

I temporarily forgot the rest, but they deal with conservative book management.
For both of our schools of thoughts, the shorts violate the cardinal rules when shorting Tesla. Which means that they probably did not go through any kind of short training at all.

It takes a lot of research to figure out whether or not a stock is "cult" status and it takes significantly more to figure out if a previous "cult" stock has fallen into just a commodity stock.

For momentum stocks, Tesla has been a good one but is becoming less so. Best approximation is maybe a 10x the current price so for a risky play (in that 1% of your portfolio for gambling), it is becoming less and less of a good pick and I am valuing Tesla more and more as a conservative part of my portfolio. As a conservative stock, it sucks.

I strongly recommend that most of you start seeking out the next big thing as the current business cycle comes to an end. The new champions for a new decade will be born within the carnage of the coming recession. Just like the last decade, this is about the time I start looking for the next big thing.

 

[Esme Es Mejor]

Does anyone sill think that short squeeze Elon talked about is coming soon?

I thought he was joking then, and I still do. A joke with a lot of truth behind it, but a joke.

Like when he referred to 350kW charging as a child’s toy. It didn’t mean Superchargers were about to surpass it, but he clearly knew that Megachargers were coming for the Semi.

In this case, I don’t think he means a literal short squeeze is coming. But I think he can see what’s coming in Q3 & Q4 (and beyond), and sees what’s in store for the shorts. A tsunami of hurt, if you will.

 

[Zythryn]

It behooves us not to feel obligated to use the word of the day before it is obligatory. Thursday doesn't count! ;-)

"Behooves" must be Fridays word of the day. So GGR is done until Saturday

 

[Johann Koeber]

I have a feeling that some people here believe that after reaching 5,000 M3 per week Tesla will generate a profit and never look back.

My opinion is that yes, Q3 and Q4 will (hopefully) show a positive cash flow and a profit. This is a company priority right now.

But after having proven it is possible to show a profit, Elon will once again go into ludicrous growth mode and invest all the profits in

- installing the second M3 line
- expanding GF, Tesla Energy, Roof
- expanding SCs and SuCs (is that the acronyms we agreed upon?)
- GF3 in China
- new models (Y, Semi, Roadster, ...)
---- plenty projects more to come

So basically I am questioning whether it is Tesla's goal to remain profitable in all the quarters ahead, or if they choose to accelerate growth. Would be perfect if they would balance these two goals.

I am thinking of the criteria to be included in the S&P500. This would really make Tesla a 'real company' and be excellent for the stock price (and for access to the capital markets).

 

[SteveG3]

Video just out on their rating and Elon’s response.

this is YouTube... might be a good idea to watch and put constructive comments before the bash Tesla comments pile up at the top

 

[SteveG3]

Video just out on their rating and Elon’s response.

this is YouTube... might be a good idea to watch and put constructive comments before the bash Tesla comments pile up at the top

CR's Jake Fisher: If braking distance matches class after the fix, score would be raised to high enough to recommend.

Fisher spoke with Elon for about an hour last night.

 

[Menifeer]

I have a feeling that some people here believe that after reaching 5,000 M3 per week Tesla will generate a profit and never look back.

My opinion is that yes, Q3 and Q4 will (hopefully) show a positive cash flow and a profit. This is a company priority right now.

But after having proven it is possible to show a profit, Elon will once again go into ludicrous growth mode and invest all the profits in

- installing the second M3 line
- expanding GF, Tesla Energy, Roof
- expanding SCs and SuCs (is that the acronyms we agreed upon?)
- GF3 in China
- new models (Y, Semi, Roadster, ...)
---- plenty projects more to come

So basically I am questioning whether it is Tesla's goal to remain profitable in all the quarters ahead, or if they choose to accelerate growth. Would be perfect if they would balance these two goals.

I am thinking of the criteria to be included in the S&P500. This would really make Tesla a 'real company' and be excellent for the stock price (and for access to the capital markets).

Agreed. Tesla profitability will be an illusion for a very long time. Reasons to spend the could-have-been profits will always emerge..

 

[brian45011]

I assume the question is rhetorical

I had suspected the same thing, based on the fact that Doug Field has been (automatic) selling 1000 shares in the middle of every month this year for Jan-Mar, and then starting April after PPS dipped consistently under $300, no sells. Last sell was Kimball at exactly $300 at the beginning of April. I suspect that

1) Doug (and potentially other execs) has a $300 floor below which he/they would not do automatic sell
2) that floor may have gone up recently, since in 1H of May we were above $300 and there were no sells.

The only officers that have to file a form 4 for 10b5 plans are the named executive officers

Our named executive officers for fiscal 2017 were:
Name Position

Elon Musk Chief Executive Officer and Chairman
Deepak Ahuja Chief Financial Officer
Jeffrey B. Straubel Chief Technology Officer
Doug Field Senior Vice President, Engineering
Jason Wheeler Former Chief Financial Officer
Jon McNeill Former President, Global Sales and Service
Mr. Wheeler’s and Mr. McNeill’s employment with Tesla ended in March 2017 and February 2018, respectively.

It is unclear whether Doug Field is still a named executive officer since he is on leave of absence.

 

[madodel]

CNBC is reporting that Trump is considering 25% tariff on imported cars. I've heard many of the Japanese brands and Mercedes, VW and Audi have US factories, do BMW, and the Koreans? Not sure if/how this would affect Tesla.

 

[wipster]

Agreed. Tesla profitability will be an illusion for a very long time. Reasons to spend the could-have-been profits will always emerge..

I don't know that I agree with your conclusion here if I'm reading it correctly. A growing company such as Tesla has got to invest in order to become profitable and stay profitable. You have to design something and build something in order to sell something and that takes building factories that take machinery, etc. and all of that costs money. It's not that they can't be profitable it's just that profit has to be invested in the future. Hopefully as time goes on they're going to get better at this every time they do it, leading to true long-term profitability... heck Elon has to get paid sometime!

 

[rocketlow49]

If they are profiting too much, they aren't investing enough. Profitability and investing into the future is a fine balance, right now the balance should be in the latter.

 

[MikeC]

A new note from Gene Munster today:

Tesla | Loup Ventures

• According to Bloomberg, of the 54 projects they have tracked since Tesla’s inception, Musk has been late on 21 (or 40%).
• These continual misses fuel an inaccurate narrative that the company can’t execute and may not survive.
• In our view, Musk misses expectations because he publicly sets the same targets for all four of the company’s stakeholders: customers, investors, employees, and suppliers.
• Most public companies have the luxury of sending different messages to each of their stakeholders.
• Our rule of thumb to translate Musk’s targets into reality is to add 3-9 months.
• We continue to expect the Model 3 to mark a pivotal moment in the world’s adoption of EVs.

 

[sundaymorning]

I have a feeling that some people here believe that after reaching 5,000 M3 per week Tesla will generate a profit and never look back.

My opinion is that yes, Q3 and Q4 will (hopefully) show a positive cash flow and a profit. This is a company priority right now.

But after having proven it is possible to show a profit, Elon will once again go into ludicrous growth mode and invest all the profits in

- installing the second M3 line
- expanding GF, Tesla Energy, Roof
- expanding SCs and SuCs (is that the acronyms we agreed upon?)
- GF3 in China
- new models (Y, Semi, Roadster, ...)
---- plenty projects more to come

So basically I am questioning whether it is Tesla's goal to remain profitable in all the quarters ahead, or if they choose to accelerate growth. Would be perfect if they would balance these two goals.

I am thinking of the criteria to be included in the S&P500. This would really make Tesla a 'real company' and be excellent for the stock price (and for access to the capital markets).

Expanding production to 10k will give us the wealth we need to balance growth, that growth will feel a lot better than the growing pains we’re going through right now.

 

[EinSV]

A new note from Gene Munster today:

Tesla | Loup Ventures

• According to Bloomberg, of the 54 projects they have tracked since Tesla’s inception, Musk has been late on 21 (or 40%).
• These continual misses fuel an inaccurate narrative that the company can’t execute and may not survive.
• In our view, Musk misses expectations because he publicly sets the same targets for all four of the company’s stakeholders: customers, investors, employees, and suppliers.
• Most public companies have the luxury of sending different messages to each of their stakeholders.
• Our rule of thumb to translate Musk’s targets into reality is to add 3-9 months.
• We continue to expect the Model 3 to mark a pivotal moment in the world’s adoption of EVs.

Munster also had a comment today on Consumer Reports' Model 3 review.

I thought his perspective on CR's take on the Model 3 touchscreen controls was interesting, especially given his background as a top-notch Apple analyst:

Consumer Reports on iPhone. Consumer Reports has been skeptical of other groundbreaking, mass market products before. When reviewing the original iPhone, for example, they mentioned characteristics that went on to be trivial. CR logged complaints about the inability to remove the battery, a headphone jack that required an adapter for non-Apple headphones, and said entering calendar appointments was not as easy as it was on a Blackberry. Complaints about the Model 3’s complex controls and the lack of buttons remind us of Steve Ballmer’s infamous take on the iPhone’s prospects because it did not have a keyboard. Perspective on Consumer Reports’ Model 3 Review | Loup Ventures​

 

[Causalien]

I have a feeling that some people here believe that after reaching 5,000 M3 per week Tesla will generate a profit and never look back.

My opinion is that yes, Q3 and Q4 will (hopefully) show a positive cash flow and a profit. This is a company priority right now.

But after having proven it is possible to show a profit, Elon will once again go into ludicrous growth mode and invest all the profits in

- installing the second M3 line
- expanding GF, Tesla Energy, Roof
- expanding SCs and SuCs (is that the acronyms we agreed upon?)
- GF3 in China
- new models (Y, Semi, Roadster, ...)
---- plenty projects more to come

So basically I am questioning whether it is Tesla's goal to remain profitable in all the quarters ahead, or if they choose to accelerate growth. Would be perfect if they would balance these two goals.

I am thinking of the criteria to be included in the S&P500. This would really make Tesla a 'real company' and be excellent for the stock price (and for access to the capital markets).

Ya.

I really want them to slow down the expansion. Model Y, semi and roadster 2020 isn't that important right now. The risk of announcing Model Y and not having as much preorder (or cannibalizing model 3) will be too big.

It'll be a safer bet if they have 1 year of positive cash flow before showing Model Y as the impact then of lesser preorder vs model 3 will not be as great.

 

[Waiting4M3]

The only officers that have to file a form 4 for 10b5 plans are the named executive officers

Our named executive officers for fiscal 2017 were:
Name Position
[snip]
Doug Field Senior Vice President, Engineering
[snip]

It is unclear whether Doug Field is still a named executive officer since he is on leave of absence.

Doug should definitely be in April, he was still on the May Q1ER conf call. So we know for sure he didn't sell any stocks in April.

I suspect he would still have to file form 4 even if he's on leave. If he can avoid filing form 4 when he goes on "leave", then what's to keep any executive of any company to go on a vacation, call it a "leave", and do some inside trading without having to report it?

 

[tsunamiofhurt]

In this case, I don’t think he means a literal short squeeze is coming. But I think he can see what’s coming in Q3 & Q4 (and beyond), and sees what’s in store for the shorts. A tsunami of hurt, if you will.

Oh, I will.

 

[Mkorpal]

I have a feeling that some people here believe that after reaching 5,000 M3 per week Tesla will generate a profit and never look back.

My opinion is that yes, Q3 and Q4 will (hopefully) show a positive cash flow and a profit. This is a company priority right now.

But after having proven it is possible to show a profit, Elon will once again go into ludicrous growth mode and invest all the profits in

- installing the second M3 line
- expanding GF, Tesla Energy, Roof
- expanding SCs and SuCs (is that the acronyms we agreed upon?)
- GF3 in China
- new models (Y, Semi, Roadster, ...)
---- plenty projects more to come

So basically I am questioning whether it is Tesla's goal to remain profitable in all the quarters ahead, or if they choose to accelerate growth. Would be perfect if they would balance these two goals.

I am thinking of the criteria to be included in the S&P500. This would really make Tesla a 'real company' and be excellent for the stock price (and for access to the capital markets).

I think the idea they have is that a couple of quarters of strong profits will create situations of very favorable capital raises. The depressed stock price and reduced credit rating probably make raising cash this year unattractive. Profits will reverse that (not to mention infuse more cash into the company).

As for S&P, that would require a couple very big quarters to realize. If they go back into huge growth in 2019 and go back to being "unprofitable," I doubt it would happen.

 

[defc0n]

Munster also had a comment today on Consumer Reports' Model 3 review.

I thought his perspective on CR's take on the Model 3 touchscreen controls was interesting, especially given his background as a top-notch Apple analyst:

Consumer Reports on iPhone. Consumer Reports has been skeptical of other groundbreaking, mass market products before. When reviewing the original iPhone, for example, they mentioned characteristics that went on to be trivial. CR logged complaints about the inability to remove the battery, a headphone jack that required an adapter for non-Apple headphones, and said entering calendar appointments was not as easy as it was on a Blackberry. Complaints about the Model 3’s complex controls and the lack of buttons remind us of Steve Ballmer’s infamous take on the iPhone’s prospects because it did not have a keyboard. Perspective on Consumer Reports’ Model 3 Review | Loup Ventures​

Consumer reports wants a faster horse?