TSLA Market Action: 2018 Investor Roundtable

[neroden]

I believe that that machine at Fremont was producing a few hundred cars a week in July of last year. Of course something else could have been slowing them down (like the battery pack problem, which was revealed). They were very very bursty in the early production, go fast, pause for retooling, repeat...

 

[30seconds]

I gave up on the hope of profitability changing anything.

The longs are moving the goal posts just like the shorts are. And they are also totally oblivious of the deed.

There was "after they start M3 production the SP will rise". Nope, it didn't.
There was "after the people start experiencing the M3, the SP will rise". Nope, it didn't.
There was "after they hit 2k/w production, the SP will rise". Nope, it didn't.
And the latest - "after they hit 5k/w, the SP will rise". Nope, it didn't.
And it won't when they hit 10k/w, it wont when they hit their forth consecutive profitable quarter, and it won't when they announce the fifth GF.

The problem is - the market in general does not want TSLA to succeed.
Tesla's big success means big failure of too much of other parts of the market, to many participants loose.

Forget about the short squeeze, the shorts will not run out of the money to cover, forget about the margin calls.
This war will not end soon, there will be a lot of blood to come.
Be free to be naive, I refuse to continue being naive.

Tesla is not too big to fail, it is too big to succeed.

I think these are all fair points. However once a company becomes cash flow positive then a rather significant risk of external financing has been removed. Then it becomes a calculation of growth that can be self-financed vs. speeding that with external financing.

The overall financials of the company will look very very different in Q3 & Q4 of this year vs. Q4 of 17 or Q1 of 18. Trying to finance a 3-4x increase in unit growth (100k --> 400k) is very significant w/ regards to execution risk. But from here the financing multiples become smaller. Think that S+X+3 going to S+X+3+Y will be more like a 2x increase in unit growth and will require much less external financing as the total $$ provided by S+X+3 sales is rather large.

 

[avoigt]

This abstract has a decent summary of the problem:

Recent studies have shown that consumers' product choices are significantly influenced by media coverage and recommendations in various media outlets. Unlike advertising, consumers perceive these sources as neutral and more credible because they usually presume that editorial content and product coverage in newspapers and magazines are independent and free from advertisers' influence. In this article, the authors show how advertising activities of firms may influence media coverage to the firms' advantage. They analyze a recent (2002–2003) large data set comprising 291 fashion companies based in Italy and their advertising and product coverage data published in newspapers and magazines of 123 publishers from Italy, France, Germany, the United Kingdom, and the United States. Controlling for firm heterogeneity, endogeneity, and the simultaneity of advertising and coverage, the authors find that, overall, (1) there is evidence of a strong positive influence of advertising on coverage, (2) publishers that depend more on a specific industry for their advertising revenues are prone to a higher degree of influence from their corporate advertisers than others, (3) peer pressures from competing publishers affect coverage decisions, (4) larger and more innovative companies are at an advantage for obtaining coverage for their products, and (5) the effects of corporate advertising influence exist in both Europe and the United States. These findings raise concerns about the independence of editorial content and coverage of magazines. An Error Occurred Setting Your User Cookie​

True, I received yesterday an offer from an editor to publish an interview with me about my company IF we pay for ads. They did not even try to hide that demand or use a soft language. Its not a small media outlet too.

Thats how independent and neutral they are....!

 

[phil0909]

I personally don't think journalists treat Tesla differently because it doesn't advertise. And I think that's an unfortunate reading of the situation.

That said, I do think many people tasked with covering Tesla are out of their depths. They don't have time to learn everything we've read and are more easily duped by "experts" in arenas they don't understand.

Well, I laid out my case here, so I won't spend time doing so again: Tesla Shorts Are Scared, Exposed, & Desperate — Memo To Media: Don't Be Duped | CleanTechnica

That piece has gotten some nice traction, largely via Google & Google News, so let's hope some of the people covering Tesla are more considerate and investigate more.

Interesting article, Zach. But I must disagree with the headline and premise. I am of course not authorized to speak on behalf of all shorts, but my strong impression is exactly the opposite - most shorts honestly believe that it is Tesla, Inc that is rapidly approaching desperation, due to a combination of business challenges regarding production, cost overruns, poor reservation conversion rates, dwindling demand, negative working capital, and adverse cash flow.

Obviously the shorts could be mistaken, and have often been wrong in the past. But with respect to their attitude, all I see are indications of optimism and, frankly, excitement about their short positions coming soon to fruition. Where exactly are you seeing any signs of scared desperation? The only evidence I see in your article is Elon's "warning" that Tesla is about to profit. You should know that that doesn't scare most shorts in the slightest - they firmly believe that Musk is either lying or, at best, being his usual, overly optimistic self. What am I missing? Who is scared?

 

[ggies07]

I don't doubt that at all. Especially regarding AP2.

However, if you add up circumstantial evidence regarding Elon's past firings, it also suggests that Doug Fields may have said something similar to Elon about hitting 5K by the end of June. Doug was subsequently placed on leave, while Elon assumed all of his duties in addition to his own, a tent was built and made somewhat functional in 3 weeks, and with a 24/7 effort, the goal was met. And Doug subsequently disappeared.

I'm pointing this out not to defend Elon's ridiculous grasp of time/magnitude, but to show that other examples could be used very effectively in his defense. Someone's view of "zero chance" is ultimately just an opinion, not a fact.

I actually agree with this. If you want something done right, do it yourself. Now, where's my 35k model 3!?!

 

[neroden]

The desperation seems to show in publishing more and more blatantly dishonest hit pieces. Someone who isn't desparate wouldn't resort to distorting hit pieces, they'd just let the facts prove them right. I mean, there's been some serious grasping at straws lately, taking perfectly ordinary things (a delivery logistics lot, renegotiation with suppliers) as signs of the apocalypse.

I should reiterate that I think we'll see ever-increased FUD until next *February* at which point Tesla's situation will be undeniable.

The only ways Tesla can fail at this point are (a) failing to actually ramp up production as they need to in Q3/Q4, or (b) being sabotaged. I do think production remains a worry.


I should reiterate that I have no problem with bearish valuation arguments which admit that Tesla will survive (my own stock purchases have been at low prices because of this downside possibility, for instance if all stock market P/Es drop); it's the lunatic "Musk is a fraud/Tesla will go bankrupt" people who I have a problem with.

 

[jelloslug]

Plus they hit the 5000/ week target within 6 months of the December target. So they may have gotten the exact timing wrong, but have already demonstrated that they can meet the guidance. Plus all of the repeated communications regarding "production hell" and that S-curves are hard to predict, etc..

Exactly. If Tesla was still making 800 Model 3s a month, there could be something there. They are making thousands and thousands a month though so this is not the case.

 

[StockCynic]

I believe that that machine at Fremont was producing a few hundred cars a week in July of last year. Of course something else could have been slowing them down (like the battery pack problem, which was revealed). They were very very bursty in the early production, go fast, pause for retooling, repeat...

They delivered 260 Model 3's in Q3 of 2017. A reasonable person might assume that if you were producing "a few hundred per week" in July 2017 that you would probably be delivering more than 260 over the course of the July - Sep 2017....

 

[neroden]

When did Tesla report the battery production bottleneck? When did they report the paint shop problem? How about the conveyor belt problem? (Would you be surprised if the machine was working but the conveyor belts weren't?)

Maybe they should have reported some of these problems earlier; that's pretty much the only way to win this sort of lawsuit. A claim that they knew about the conveyor belt system failure and didn't report it, that's a claim which might get somewhere.

 

[phil0909]

The desperation seems to show in publishing more and more blatantly dishonest hit pieces.

You're fooling yourself when you attribute differences in opinion to dishonesty. Sometimes people can see the same facts and interpret them differently, reach different conclusions.

This mistake applies to shorts as well as longs - Tesla has said some factually false things - self driving features in 3 months possible, 6 months definitely; coast-to-coast self driving by year end, zero doubt "and I mean zero" about 10k weekly production of Model 3 in 2018. Blatantly dishonest? Or honest mistakes?

 

[SO16]

I gave up on the hope of profitability changing anything.

The longs are moving the goal posts just like the shorts are. And they are also totally oblivious of the deed.

There was "after they start M3 production the SP will rise". Nope, it didn't.
There was "after the people start experiencing the M3, the SP will rise". Nope, it didn't.
There was "after they hit 2k/w production, the SP will rise". Nope, it didn't.
And the latest - "after they hit 5k/w, the SP will rise". Nope, it didn't.
And it won't when they hit 10k/w, it wont when they hit their forth consecutive profitable quarter, and it won't when they announce the fifth GF.

The problem is - the market in general does not want TSLA to succeed.
Tesla's big success means big failure of too much of other parts of the market, to many participants loose.

Forget about the short squeeze, the shorts will not run out of the money to cover, forget about the margin calls.
This war will not end soon, there will be a lot of blood to come.
Be free to be naive, I refuse to continue being naive.

Tesla is not too big to fail, it is too big to succeed.

Pretty big difference here. The longs just keep getting the stock price wrong.

The shorts keep getting everything else wrong. (Including the stock price.)

 

[davecolene0606]

Once again...

Tesla Energy.


Fire Away!

 

[NicoV]

When did Tesla report the battery production bottleneck? When did they report the paint shop problem? How about the conveyor belt problem? (Would you be surprised if the machine was working but the conveyor belts weren't?)

Maybe they should have reported some of these problems earlier; that's pretty much the only way to win this sort of lawsuit. A claim that they knew about the conveyor belt system failure and didn't report it, that's a claim which might get somewhere.

IIRC, Elon mentioned on a CC that the parts delivery (conveyor belt) system was problematic, and on the next CC he said they threw it out. So in those 3 months they went from ‘hoping to fix it’ to ‘not fixable, over to plan B’. None of that is lying.

 

[AlMc]

Sure looks like Tesla is admitting to materially false statements right before a big debt raise...

Pay for a copy of the proceeding. It is not exactly what you think/or implying.

 

[ggies07]

Once again...

Tesla Energy.


Fire Away!

Are you saying Tesla Energy is a farce?

 

[shortburn]

You're fooling yourself when you attribute differences in opinion to dishonesty. Sometimes people can see the same facts and interpret them differently, reach different conclusions.

This mistake applies to shorts as well as longs - Tesla has said some factually false things - self driving features in 3 months possible, 6 months definitely; coast-to-coast self driving by year end, zero doubt "and I mean zero" about 10k weekly production of Model 3 in 2018. Blatantly dishonest? Or honest mistakes?

I have to call this out has a bad comparison. Those Tesla statements brought up in your post are forward-looking statements vs WSJ story on the leaked "current" renegotiation w/ suppliers.

 

[Tslynk67]

"Musk attended a meeting with CFO Jason Wheeler, in late April or early May of 2016...where he was directly informed by FE1, Director of Manufacturing at Tesla’s Fremont plant, that “there was zero chance that the plant would be able to produce 5,000 M3/week by the end of 2017.”


I have no doubt that events similar to what is reported above occurred in many critical areas, including AP2 deliverables.

I agree, but Elon doesn't accept that - he's like Jobs used to be in that respect, doesn't want to hear excuses, just do it.

Is he right to be like that, I think it's both yes and no, because I think being so bloody-minded and sometime making ridiculous deadlines actually gets stuff done that would otherwise take forever or never happen.

 

[larmor]

I gave up on the hope of profitability changing anything.

The longs are moving the goal posts just like the shorts are. And they are also totally oblivious of the deed.

There was "after they start M3 production the SP will rise". Nope, it didn't.
There was "after the people start experiencing the M3, the SP will rise". Nope, it didn't.
There was "after they hit 2k/w production, the SP will rise". Nope, it didn't.
And the latest - "after they hit 5k/w, the SP will rise". Nope, it didn't.
And it won't when they hit 10k/w, it wont when they hit their forth consecutive profitable quarter, and it won't when they announce the fifth GF.

The problem is - the market in general does not want TSLA to succeed.
Tesla's big success means big failure of too much of other parts of the market, to many participants loose.

Forget about the short squeeze, the shorts will not run out of the money to cover, forget about the margin calls.
This war will not end soon, there will be a lot of blood to come.
Be free to be naive, I refuse to continue being naive.

Tesla is not too big to fail, it is too big to succeed.

The only problem with the market's thesis is that future customers are just kids now and can't drive right now. Agreed that alot of industries are closely watching tesla's progress. If they can change the paradigm of energy storage, distribution, and conversion to transportation, then many industries are going to be worried...

 

[Tslynk67]

Also that persons opinion of “zero chance” may have assumed “with reasonable effort”. When Elon takes the lead, he authorises “unreasonable effort (example: use a tent as (temporary) production hall), which changes the odds.
In my personal experience I’ve always been positively surprised that when a project goes so FUBAR that senior management takes over the daily management of the project (by definition, that ‘s when the sugar has hit the fan) almost anything becomes possible purely because the senior management has the authority to take drastic decisions.

I've delivered several "impossible" software projects on time and under budget, simply because I refused to accept it couldn't be done and enabled the team to be creative and work without interference and restriction.

And believe me, the buzz from the achievement of those guys is intense.

 

[Cosmacelf]

I gave up on the hope of profitability changing anything.

The longs are moving the goal posts just like the shorts are. And they are also totally oblivious of the deed.

There was "after they start M3 production the SP will rise". Nope, it didn't.
There was "after the people start experiencing the M3, the SP will rise". Nope, it didn't.
There was "after they hit 2k/w production, the SP will rise". Nope, it didn't.
And the latest - "after they hit 5k/w, the SP will rise". Nope, it didn't.
And it won't when they hit 10k/w, it wont when they hit their forth consecutive profitable quarter, and it won't when they announce the fifth GF.

The problem is - the market in general does not want TSLA to succeed.
Tesla's big success means big failure of too much of other parts of the market, to many participants loose.

Forget about the short squeeze, the shorts will not run out of the money to cover, forget about the margin calls.
This war will not end soon, there will be a lot of blood to come.
Be free to be naive, I refuse to continue being naive.

Tesla is not too big to fail, it is too big to succeed.

You are ignoring the history of what happened. The share price did rise quite dramatically in anticipation of volume production of Model 3 mid last year. The long’s anticipated share rise did happen, and on schedule. HOWEVER, unexpected by everyone, including Elon, was the battery pack line snafu causing a 6+ month delay in Model 3 production. This tanked (relatively) the stock, and now TSLA is in the penalty box. Soft numbers like production numbers are no longer going to move the stock. The market has been burned once, and now it will demand solid numbers in the quarterly reports. This won’t happen until Q3 comes out early November, and even then, it’ll just be a taste of what the truly exceptional Q4 report will look like in early February.

The penalty box is a real thing. When companies screw up significantly, it takes really, really good news to pull the stock back up to pre screw up levels.