TSLA Market Action: 2018 Investor Roundtable

[neroden]

Wow...We finally agree on something. That's progress. But there must be something we are missing. There must be some way revenue gets booked now and the associated losses get deferred into Q4 or when the car is resold. That is the only logical reason I can see. So as a short term fix for increased revenue it could work. My guess is Deepak will let Q4 absorb the losses when revenue will be higher.

Does not happen, that's not how accounting works. If the cars are carried on the books above market value, the writedowns of the assets to market value have to be immediate and Deepak does his accounting honestly.

If they're carried on the books below market value, and they immediately resell them, I guess they could book the actual profit immediately, but that's real profit, no associated loss. (We could figure this out if we could guess what they're carried on the books at.)

The most likely thing I can think of is that they're pushing to replace leases with actual sales, or to replace direct leases with third-party-financed leases. Maybe the old direct leases can't be packaged and resold due to lack of standardization, but new leases can be? That can be a thing.

 

[Foghat]

View attachment 332282

These numbers are scary for the auto industry. Tesla monthly year over year are off the chart, while the rest of industry down. BMW -13%...

It is painfully obvious Tesla is making a big move on the establishment. This is the pivot point in the industry and they are frantic.

The traditional media onslaught is the signal.

Elon needs to keep using the internet podcasts, product shows, and his own social media presence to get the word out and fight the good fight against the legacy hangers on.

Joe Rogan will get more views then all legacy media combined and there isn’t a thing they can do about it either.

Add: and if they think they can kill the demand, they are delusional. The younger generation is begging for a Tesla. They don’t listen to their grandpas CNBC or Bloomberg, they’ve watched many Elon YouTube clips for years now and know what it’s all about. All those that fight it just don’t get it or haven’t done their homework. This is bigger then numbers on a spreadsheet.

 

[beachbum77]

Does not happen, that's not how accounting works. If the cars are carried on the books above market value, the writedowns of the assets to market value have to be immediate and Deepak does his accounting honestly.

If they're carried on the books below market value, and they immediately resell them, I guess they could book the actual profit immediately, but that's real profit, no associated loss. (We could figure this out if we could guess what they're carried on the books at.)

The most likely thing I can think of is that they're pushing to replace leases with actual sales, or to replace direct leases with third-party-financed leases. Maybe the old direct leases can't be packaged and resold due to lack of standardization, but new leases can be? That can be a thing.

Here is the Electrek article. Tesla lifts restriction on ending Model S/X leases early if you get a new car by the end of the quarter

I just read it again and there is not enough detail to tell all the nuances of the program. But it is definitely geared to Q3.

You might have something with the conversion to an outside lease based on the new accounting rules. But wouldn't it be treated the same way as a sale with immediate revenue recognition?

 

[22522]

Does not happen, that's not how accounting works. If the cars are carried on the books above market value, the writedowns of the assets to market value have to be immediate and Deepak does his accounting honestly.

If they're carried on the books below market value, and they immediately resell them, I guess they could book the actual profit immediately, but that's real profit, no associated loss. (We could figure this out if we could guess what they're carried on the books at.)

The most likely thing I can think of is that they're pushing to replace leases with actual sales, or to replace direct leases with third-party-financed leases. Maybe the old direct leases can't be packaged and resold due to lack of standardization, but new leases can be? That can be a thing.

I understand cash buyers are served first. If Tesla is carrying the debt, does retiring leases reduce debt?

 

[AlMc]

I broke down today. Sorry TMCers. I actually blocked two people in one day. I have only ever blocked one person before this in all my time on TMC. I am either getting grumpier or wiser in my old age. But it feels good.

 

[TrendTrader007]

I blocked these 2 dudes mike something and beach whatever
I was tired of seeing drivel

 

[neroden]

Here is the Electrek article. Tesla lifts restriction on ending Model S/X leases early if you get a new car by the end of the quarter

I just read it again and there is not enough detail to tell all the nuances of the program. But it is definitely geared to Q3.

You might have something with the conversion to an outside lease based on the new accounting rules. But wouldn't it be treated the same way as a sale with immediate revenue recognition?

Exactly. If they replace direct leases (revenue recognition drawn out over time) with either sales or third-party leases (Tesla gets the cash up front, treated as a sale), they replace revenue reportable in the *future* with revenue reportable *today*.

And they also replace future cash flow with present cash flow.

 

[beachbum77]

Exactly. If they replace direct leases (revenue recognition drawn out over time) with either sales or third-party leases (Tesla gets the cash up front, treated as a sale), they replace revenue reportable in the *future* with revenue reportable *today*.

And they also replace future cash flow with present cash flow.

I believe the old lease units would be carried at their current book value until sold. As long as the sale is in Q4 or later there is no ill effect on the bottom line in Q3. So Tesla ends up with a new car sale or lease, immediate revenue and gross profit recogniition, and they push any loss forward beyond Q3.

Now the question is how do they tell the outside leases, if they do not qualify? Or did Deepak find a way to include them too?

 

[jw934]

I'm still trying to figure out under what circumstances Tesla would make a profit by getting the leased cars returned early.

As of June 30, 2018, Tesla still had a $674,255,000 current and 584,857,000 long term Resale value guarantees for a total of $1,259,112,000. These will be gone by Q2 2019. Perhaps the leased cars are brought back and resold without the guarentee, but that does not make sense to me.

 

[UnknownSoldier]

Elon going on Joe Rogan tomorrow. Any predictions on if he'll say something to crash our stock prices some more?

 

[scaesare]

What do you think? could delivery problems prevent Q3 profitability?
Tesla’s growing pains are starting to be felt by Model 3 buyers as delivery delays pile up

No.

Completely anecdotal, but when I got my S in early '13 here in Northern VA, it was a long while before I saw another, and then few and far between to the next.

I saw my first 3 here several months ago, and the rate that I see new ones is ramping up fast. I see a couple a day now. Two 3's showed up at work in the last month. It took 3 years for another S to show up after mine.

I think they are delivering hot and heavy...

 

[EngRyan]

I would agree with your brother's decision. It is nearly impossible to duplicate a factory paint job so you want to avoid repainting a door, hood, or fender at all costs. In reading some of the posts and the linked pics I think some people have gone way overboard on tiny issues. To call it nit-picking is an understatement. But Tesla started it by trying to deliver cars with too many issues that led to the infamous "checklists" for M3.

Hah, I was the guy with the 3 page checklist while my brother and his wife did the paperwork. Good excuse for me to climb all over and play with his brand new 3.

I believe the old lease units would be carried at their current book value until sold. As long as the sale is in Q4 or later there is no ill effect on the bottom line in Q3. So Tesla ends up with a new car sale or lease, immediate revenue and gross profit recogniition, and they push any loss forward beyond Q3.

Now the question is how do they tell the outside leases, if they do not qualify? Or did Deepak find a way to include them too?

Wouldn't they easily just say it is only valid if you have a lease through Tesla, otherwise it's just an outright sale as far as they are concerned, cash or outside lease.

Random idea, what if they take these used vehicles and put them into their loaner fleet? Does that change the accounting? With the amount of model 3s being delivered, even with the same warranty rate as S & X, they are going to need a lot more loaners. Using used loaners is more cost effective than taking the depreciation hit using new vehicles I'd imagine. Just an idea, no real accounting background to speak of haha

 

[Opus BC fan]

I have almost no dry powder left. I plan to buy a few shares tomorrow on the MMD.
In other news- As it looks right now, my P3D is going to be delivered about 3 weeks from the day it was ordered.

 

[Zaxxon]

Elon going on Joe Rogan tomorrow. Any predictions on if he'll say something to crash our stock prices some more?

Rogan's podcasts are like three hours long-the odds that Elon will say something that folks looking for a negative headline can grasp onto asymptotically approach 100%.

But it'll be well worth it; Rogan also lets his guests talk freely, and he doesn't seem to me to generally push any agendas. We should get perhaps the deepest unfiltered look at Elon that we've ever seen.

 

[tivoboy]

Did anyone notice the call buying activity at the end of the day?

I did see some very odd buying of Jan 19 420$ calls. WTF?

 

[EngRyan]

Rogan's podcasts are like three hours long-the odds that Elon will say something that folks looking for a negative headline can grasp onto asymptotically approach 100%.

But it'll be well worth it; Rogan also lets his guests talk freely, and he doesn't seem to me to generally push any agendas. We should get perhaps the deepest unfiltered look at Elon that we've ever seen.

We should get together for a viewing party. Take a drink every time Elon says something that will be used as FUD. Could be a fun night.

 

[Zaxxon]

We should get together for a viewing party. Take a drink every time Elon says something that will be used as FUD. Could be a fun night.

Anytime he makes a timetable estimate, take a drink. If he guarantees it, finish the drink.

 

[CorneliusXX]

Clearly not. The number of people with direct leases is small enough that this is a pretty limited offer, and can't really be considered a serious attempt to get rid of inventory.

Targeting something specifically at leaseholders indicates something else. There is some reason why Tesla wants to close out the old leases. Haven't quite figured that out. One of the accounting experts may be able to figure it out. I only have wild speculations and none of them make sense to me.

If I had to guess, I would assume it is to do with the ability to securitise the lease. It is possible that older leases did not have the correct assignability language or there is some other condition prohibiting the securitisation.

I've always thought having non-securitised leases on the balance sheet seemed like an odd position given the ready access to cheap cash that securitisation allows and the simplicity of the process.

 

[UnknownSoldier]

We should get together for a viewing party. Take a drink every time Elon says something that will be used as FUD. Could be a fun night.

Anytime he makes a timetable estimate, take a drink. If he guarantees it, finish the drink.

I don't actually want to die of alcohol poisoning, guys!

 

[beachbum77]

I did see some very odd buying of Jan 19 420$ calls. WTF?

310 contracts @ $3 per share for a $420 call is not as much a surprise as the 1,545 contracts traded @ $13.20 per share for $200 puts. That is about $93,000 vs $2.039 million. Open contracts are 7,300 vs. 32,300. Q4 numbers will not even be out by then. Someone thinks they know something...