TSLA Market Action: 2018 Investor Roundtable

[phil0909]

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.

I dunno, this seems like a pretty weak argument. The renegotiation info is apparently factual, having been acknowledged by Tesla. The inferred cash flow crunch is forward looking, and subject to exactly the same uncertainty and interpretation as future production or product availability.

 

[Boomer19]

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?

to be fair to the moderates on each side of the stock, i think we agree there’s a distinguishable difference between forward looking statements, blatant dishonesty, long/short opinions of factual numbers, and intentionally omitting facts/misleading to support $1000 share price or bankruptcy narrative (both crazy). we’re getting all of it currently. and constantly have to sift through the bs on both sides, moreso now than i’ve ever seen. and with each iteration/milestone of tesla, it amplifies.

 

[brian45011]

Some of the content is disturbing to read. Unless the witnesses cited lie or their words were misrepresented, it should have been clear to anyone with an engineering background that production would not meet the goals.

The brief puts a gloss on why " on track" is frequently used when discussing Tesla Time. This filing is for a Motion to Dismiss hearing on 8/24/18 (likely to be delayed multiple times if the Hoerbiger litigation is any indication of the urgency in Californian federal courts).

If the motion is not granted (likely, since most judges are reluctant to grant summary judgments without giving the parties some leeway to develop their factual basis of the controversy), the continuing litigation will divert executive time into un-productive activities, and discover battles will incur large legal bills--which are charged to SG&A, partially explaining why operating leverage has been difficult to achieve. Tesla "self-insures" product liability risk but buys Directors & Officers Liability coverage--but the limits and retentions have not been disclosed.

 

[FirebirdAlpha]

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.

It's a little different when you have capitally intense projects, significant supplier dependencies, and months of forecasting.

That lawsuit can be resolved pretty easily... When did Tesla's industrial equipment suppliers say that they would be ready?

 

[ZachShahan]

Hi Zach, Great piece, thanks for doing that! I was just wondering about the very last sentence of it.
I dont understand that last bit at all. I also think it is too bad to conclude such a great and objective piece with these last words, as that is what sticks after done reading it. Just my two cents.

Hmm, thanks. I wanted to give credit to this thread for some of the tips. See that isn't clear. Will modify to clarify. Or I could drop it, but felt like I owed a h/t.

 

[WarpedOne]

You are ignoring the history of what happened. ...

Nope, I am remembering the history of what happened. Yes, there was that rise and there was also a drastic fall.
There was also a multitude of "they just have to do this then comes" moments since '13. They did it and heaven never came.
No, they will not go bankrupt. No demand will not be a problem, yes, tesla will see $$$ of profits and will grow.

But forget about the opposition going away and forget about shorting going away.
Both will only get bigger and stronger and wider and more desperate and "morally low"

We are appalled at current 'journalism' yet we haven't seen anything yet. "Then they fight you" is just beginning.

The penalty box describes normal stocks, TSLA is no normal stock as Tesla is no normal company.
What to do? Accumulate and do not listen, do not watch, do not expect.

Tesla is and will be wildly successful but TSLA will have problems reflecting this.

 

[ZachShahan]

There is a lot of research that would indicate otherwise.

I've not read them all, but enough to know that advertising media bias exists as a real thing.

I imagine it exists to some degree at some level. I've met a lot of people covering Tesla and have never gotten a sense of anything like this. Furthermore, journalists should be insulated from that side of the business and I think typically are. That's not to say it doesn't happen in certain places and with certain people. More likely, though, I think people would be inclined to be favorable to advertisers they know, but not necessarily attack their competitors.

 

[ZachShahan]

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​

Right. And I can imagine that being common. But I think that's very different than attacking certain companies because they don't advertise. I think the latter is much less likely and quite rare.

 

[Tslynk67]

Well, production ramps, the M3 is getting rave review, more and ore people are taking to social media with photos of their new car and how much they love it, and the stock price tumbles.

I give up

On the other hand, I'm long, I can wait... it's just a bit annoying, that all, a bit fo green makes my day.

 

[ZachShahan]

To put it another way: to win on claims about the future, the plaintiffs have to claim that Tesla executives knowingly misled them. The Tesla executives are going to say "We thought what we were saying was true, but *we were big idiots*." Since Musk has already said "We were big idiots" about the overly-automated production line, this is going to be pretty convincing to any court.

Which reminds me of one of the best features of Musk. He's actually *unusually* good at recognizing when he's made a mistake and reversing course quickly. It is a rare and extremely valuable talent for a CEO.

Totally agree with you here. And with the comments above that he also — uncharacteristic of a major CEO — made it clear routinely that the ramp could run into problems, one supply problem is all that's needed to stop production, "production hell," etc. Seems he made it very clear to investors that they had aggressive targets but couldn't guarantee hitting them in any specific quarter or month.

Outside of this thread I've had a little chat with someone very critical of Tesla who thinks everything is going wrong and about to collapse. Is otherwise a very smart, thoughtful person, imho. He writes the following:

"When his lawyers got together with Tesla's lawyers, Tesla's lawyers admitted that Musk lied - knowingly told a falsehood - on August 2, 2017 about how the Model 3 ramp was going. It's not an accusation, this is acknowledged by Tesla's lawyers, and the lawsuit is backed by testimony from ex-Tesla employees. (11 current and/or former employees, if memory serves)

"The lawyers' defence is that Musk knowingly stated a big and meaningful lie but (on page 20) that it didn't matter because he lied about Topic A in the course of answering a question about Topic B. It's an unbelievably weak defence. That's what Tesla's lawyers -- the best lawyers money can buy -- came up with."​

My understanding is that he's misreading the intro where the argument claims Tesla "tacitly" conceded.

Am I missing something about Tesla lawyers agreeing that Elon lied or does it seem like he's just jumping to conclusions?

https://lh3.googleusercontent.com/-gbbjkJc5ReU/W1dzcDk9GwI/AAAAAAAADMM/KDHZ3St7TGQQT8_ZOofQDMz0KofthkLNQCL0BGAYYCw/h513/Wochos+lawsuit.jpggbbjkJc5ReU/W1dzcDk9GwI/AAAAAAAADMM/KDHZ3St7TGQQT8_ZOofQDMz0KofthkLNQCL0BGAYYCw/h513/Wochos+lawsuit.jpg

 

[davecolene0606]

Are you saying Tesla Energy is a farce?

Ahhhh nope

It’s just being ignored for its value... again

Even here

Fire Away!

 

[adaptabl]

Well, production ramps, the M3 is getting rave review, more and ore people are taking to social media with photos of their new car and how much they love it, and the stock price tumbles.

I give up

On the other hand, I'm long, I can wait... it's just a bit annoying, that all, a bit fo green makes my day.

You have to make money or at least a viable plan to make money. Investors are questioning Tesla's ability to do this. There is a tremendous debt load that is making this difficult in addition to all the production problems Tesla is having.

They make a great car but can they make a profit on those cars?

 

[shortburn]

I dunno, this seems like a pretty weak argument. The renegotiation info is apparently factual, having been acknowledged by Tesla. The inferred cash flow crunch is forward looking, and subject to exactly the same uncertainty and interpretation as future production or product availability.

That's a nice twist, not expecting that, esp like the "I dunno" touch. I don't mean to be mean but...we need to hold to a certain standard. I don't want to engage in a whataboutism argument but I will this once. I think through updates to the story we can say that full story was not told, esp from Tesla's side:
Tesla says it did not ask suppliers for cash back
Tesla explains why it asked some suppliers for retroactive discounts
hence, dishonest (btw the cnbc one is from freakin Lora Koraaddsfdjsfory).
Additionally, I saw literally dozens of headlines yesterday saying Tesla is desperate and in need of cash from suppliers and not in a forward-looking way but as in a cash now or imminently insolvent way. Your interpretation of the article(s) being forward looking is inherently different from an actual forward looking statement. Of course multiple interpretations are possible but there is definitely a heavy anti-Tesla and anti-Musk bias in media.

 

[EinSV]

Right. And I can imagine that being common. But I think that's very different than attacking certain companies because they don't advertise. I think the latter is much less likely and quite rare.

If Tesla spent the same portion of its budget on advertising as GM and Toyota and their dealers, there is zero doubt in my mind that they would get more favorable coverage from a broad range of publications/media outlets.

 

[theschnell]

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....!

Yeah, I work for a small company in a niche market, and we had a small publication serving that niche market make the same proposal. Anecdotal obviously but it clearly happens.

 

[ZachShahan]

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...

Agreed. The problem ended up being battery production in Nevada, not vehicle assembly in Fremont. And I imagine they had a stockpile of batteries for initial vehicles before realizing they had a major problem. Maybe. Either way, I find any claims that's a lie to be disingenuous/inaccurate.

 

[ZachShahan]

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?

Good points. I think there's a mixture. But I think the growing production, rave reviews, and statements from Elon refuting false claims about the company have many of them scared of what's around the corner. That said, for ones who think Elon is just lying all the time, I can't say I understand them since I find such claims very hard to buy. The guy is quite transparent and anyone following him for years should be able to see he's nothing like Don the Con Trump.

 

[ChrisA]

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've stated on this forum before (but admittedly forgot where) that the single most important variable for stock price appreciation is operating margin expansion -- particularly margin expansion that beats consensus forecast. In this respect, I don't think Tesla is different than any other stock and I'm not surprised that it has not moved much this year thus far.

Over the years I've found the best risk/reward opportunities are the situations where a very compelling case can be made that operating margins are set to expand. If the projected expansion is significant and will take place for years to come, all the better. For whatever reason, the Street -- and in particular the Sell Side -- tends to low ball projected operating margin expansion even when all the relevant variables tend to point to margin expansion. Stocks rise on the ensuing surprise that margins and consequently earnings are going to be better than expected. Management talking about margin expansion can move a stock up a bit, but the big moves almost always happens only after a company has demonstrated operating margin improvement. I find that I constantly need to remind myself of this point when investing. One would think the stock margin would be clever enough to anticipate margin expansion when it is likely. But almost always, companies need to demonstrate margin expansion before seeing significant appreciation (some special situations are notable exceptions where stock prices move on other news like an early stage biotech company receiving FDA approval and/or showing strong clinical data).

In short, the milestones you mention above are important milestones for the company, but they are not important milestones for stock price appreciation -- at least I've never consider them to be so. If Tesla reports greatly improved profitability in the third quarter and the stock does not move, then it will be a special case. Otherwise, I don't see a lack of appreciation YTD as unusual.

 

[ggies07]

Ahhhh nope

It’s just being ignored for its value... again

Even here

Fire Away!

ah yes, while slow it is going...just like the damn production line.

Do you guys remember this?

JB (CTO and Co-Founder of Tesla) gave a presentation at the HIVE* (Housing, Innovation, Vision & Economics) conference in Los Angeles, California on September 28th 2016.

Well, Tesla's plan is slowly coming to fruition, like everything else....slowly, but surely....

Using customer batteries as a power source saved Vt. utility $500K - Granite Geek

 

[ZachShahan]

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?

Honest mistakes.
Obviously.
This is clear if you actually listen to Musk.