TSLA Market Action: 2018 Investor Roundtable

[ggr]

Also, this makes sure the proceeds will flow to Tesla directly, so Q4 profits won't be hurt by the $20m SEC fine.

The cash flow won't change, but the SEC fine is an expense, while the investment is capital, so the GAAP profit will still go down by $20M. It's really just Elon's way of apologizing to Tesla for dragging them into it.

 

[Krugerrand]

I fully understand the transaction. You don’t seem to think independently from management. Have you ONCE criticized the management for the numerous mistakes made in the last year? This isn’t about the level of dilution; it’s the principle: Elon f’ed up, and Tesla should have fined him, instead of enriching him at the expense of existing shareholders. I’m not going to get into this with blind-faith followers.

Yes, he has criticized management before. I have too, I’ve just kept it to myself and not posted it on the Internet. Not really relevant, though.

You’re making a mountain out of a mole hill. Yes, you are.

 

[Krugerrand]

0,042%. Less than one in two thousandths.

Horrors!

 

[ggr]

I'm just going to start marking any "neural net computer technical details" comments in this thread as "disagree" until the posters get the picture...

Please don't do this. It's on the moderator's list of "bad behavior". Fortunately the moderators have very little bandwidth at the moment.

 

[WentOffGrid]

Stay calm... this is only a test of the MMD, just 4 minutes early.

 

[mongo]

It's basically a big FU to the SEC for fining Tesla instead of just fining Elon. I love it.

Yah, the settlement sadi Elon couldn't get reimbursed, but didn't make the same condition for Tesla. Love it!

864,855 not 846,855

Thanks! I was wondering where the extra acre or two went from he last time I ran the numbers. (had to read your post 4 time to even see the difference).

It reduces the per-share value of future cash flows, ceteris paribus.


This isn't investment income; it's pure dilution for existing shareholders that value the stock at more than current price: i.e. all investors.

It's clear to me at this point that no one stands up to Elon at Tesla, and this, in my opinion, is by far the most significant risk to investors.

It's pure income to Tesla (but not to shareholders).

Elon can do whatever he wants at the open market, subject to the law, but what I suggested is that Tesla should have fined him $20m, instead of issuing shares to him at these insanely discounted prices, which dilutes existing shareholders... for a tweet that should have never been sent.

Tesla was fined for not having communication controls in place, that is their bad (aligns with the stand up against Elon point of yours).

Spoiler: Non-MA mini-rant

Redacted out of respect to @ggr
If you don't think a post is appropriate, click the report button.

 

[Wooloomooloo]

In that case, why is Tesla issuing shares to Elon, which dilutes existing shareholders, instead of fining him for the second $20 million?

With this arrangement, Tesla will show $20m higher than otherwise SG&A and higher share count, both of which hurt investors... makes no sense.

My maths here could be wonky, it's early... but $20m buys you about 73k shares. There are about 170m shares out there... so that's about 0.4%? So per share, that's going to hit your price by less than a cent.

I think the PR impact of this is going to be far great than this 'dilution' of shares, no?

 

[schonelucht]

What do you find problematic here?

He has played/joked/been completely based outside of the reality with the 3 to 6 months thing before. There is now way of knowing how serious this post is. Especially when it is so laughable that he pretends not knowing about the gaps in his service coverings.

 

[JRP3]

Yah, the settlement sadi Elon couldn't get reimbursed, but didn't make the same condition for Tesla.

I thought Tesla couldn't be directly reimbursed either, but there is no prohibition for Elon buying more stock and indirectly reimbursing Tesla.

 

[avoigt]

Actually, this happens already: when a Model S/X is sold in China, the cell was made in Japan, shipped to Nevada, assembled into a battery pack, mated in Fremont and the shipped back over the Pacific to China.

Shipping 2170 cells would be pretty cost efficient, as they are dense and can be packed tightly.

Also, the primary short term goal would be to avoid the 40% tariffs, shipping a full car costs maybe $1,500, cell shipments would be significantly cheaper.

Once the Shanghai cell lines are up and running they could substitute.

Edit: correction by @Artful Dodger.

Elon presented a while ago that he finds it crazy that Batteries are shipped a few times around the globe before they been put into usage. So, he is not fond of the model you outlined.

IMO we should not expect any kind of shortcut from Tesla to get the GF in China started. They will try their best to get it build quickly and I learned China is a good place for that. Also I predict that Tesla will continue to set expectations on a level that they can potentially beat to take pressure away and given the SP the option to rise with surprise.

That worked well with Red and Netflix. When I heard Netflix putting at the last ER the guidance low and the market sell off started I did stay calm assuming that they set it by purpose low to surprise . Tesla should do the same.

 

[Fact Checking]

This isn't investment income;

Indeed, it will probably be accounted as "paid-in capital" on the balance sheet and will improve cash flow.

There was $240m/$237 in paid-in capital increase in Q1 and Q2, mostly through employee stock programs I believe.

This isn't investment income; it's pure dilution for existing shareholders that value the stock at more than current price: i.e. all investors.

What you are missing is that as per the SEC settlement Elon was not allowed to simply pay Tesla's fine. This is the best he could do under the circumstances to at least fix the cash effects.

The dilution from these 70K shares is minimal: there's almost 1 million new shares issued to employees every quarter.

Furthermore, the current Discounted Cash Flow model shows negative expected future cash flow to stockholders:

Tesla Inc - TSLA DCF and Reverse DCF Model​

So technically Elon did shareholders a favor by taking on -$17 of losses per share (about -$1m currently), and by increasing total shareholder value by $20m.

Of course both you and me disagree about expected future cash flows, but we probably both agree that for the foreseeable future Tesla is not going to pay dividends, all internal cash flow will be turned into future shareholder value.

It's clear to me at this point that no one stands up to Elon at Tesla, and this, in my opinion, is by far the most significant risk to investors

Conjecture, hyperbole.

You are making a mountain out of a molehill.

 

[Fact Checking]

The cash flow won't change, but the SEC fine is an expense, while the investment is capital, so the GAAP profit will still go down by $20M. It's really just Elon's way of apologizing to Tesla for dragging them into it.

Yeah, you are right - there would be an increase of +$20m of 'paid-in capital' on the balance sheet, and +$20m cash flow registered - but also +$20m in SG&A expenses, which reduces GAAP income by $20m in Q4.

Also note that if I'm reading the SEC settlement correctly then neither Elon nor others are allowed to simply pay Tesla's fine - but equity investment will at least compensate Tesla for the cash shortfall.

 

[aznt1217]

I'll save you the read. Business Insider is reporting Gilbert Passin left the company. Executive Exodus continues to ensue-- by yours truly Linette Lopez

Gilbert was instrumental to get Tesla up and running, but I think Tesla has enough of a strong bench and an 8 year stint at a high pace is no easy feat.

 

[KarenRei]

-2,3%? Seriously?

Is there some news I missed?

Ah, I see above. Well, that's the profit-taking trigger I was waiting for. You'd think that executive departures would have stopped phasing people by now, but just like bad Goldman valuations, they always seem to work.

 

[shrspeedblade]

I need to start watching the Macro more, when I saw that $7 dump of Tesla shares right off it was WTF!, my blood pressure spiked, and I muttered yet more eloquent profanities about short sellers. What idiot dumps a whole bunch of stock when they just announced the China land purchase and Elon's buying 20M shares?

Then I looked at the Dow/Nasdaq.

 

[Tslynk67]

We've another executive departure making the headlines, I think this isn't helping things much:

 

[Nocturnal]

Haha just discovered this page:

tesla bears club

There are some real losers out there.

Do NOT do a google search for Tesla Bears with safe search off.

 

[Ulmo]

I always flinch when I look at how close to the ocean it is there, remembering that this is a major risk area for A) typhoons, B) tsunamis, and C) is reclaimed land in a major earthquake zone :Þ

They better protect the heck out of the plant....

I wonder how high they would have to build the factory floor to make it unlikely to be inundated during extreme events. I would count it as a cost of doing business.

They could build a multi-floor factory, where the ground floor has an excellent foundation (so it stays put), and the columns and diagonals are engineered to withstand a tsunami, and there are no walls for the ground floor so tsunami water could rush through not affecting the upper floors, up to the height of expected tsunamis over the next centuries, so the water and debri would flow underneath. That could simply be the parking lot and factory output storage area; they need somewhere to park all the factory workers and the cars they make, so that would be perfect. The columns would have to be strong enough to handle structures and debri that get swept up with the water; that could be a lot, but it's so close to the water line that maybe not much stuff would collect by the time it reaches that plot of land.

What was the result of the latest events? Satellite imagery doesn't show any damage. Nearby buildings look in good shape, with good vegetation. The recent tsunamis didn't seem to hurt this area much; that already tells me it might have better natural protection than we are afraid of.

 

[avoigt]

With all do respect to Munroe, just because he "does not understand" a design or engineering decision it does not mean it was a bad one.

NHTSA Crash Test results (from nhtsa.gov):

Overall Front Star Rating: Bolt 4 star / M3 5 star due to front passenger score of Bolt
Combined Side Barrier and Pole Ratings: Bolt 4 star / M3 5 star due to rear passenger score of Bolt

Some highlights from the side crash tests (for some reason the NHTSA did not post the detailed report on the Bolt front crash test):

- after the side barrier impact the Model 3 got 69mm "thinner" measured at the B pillar, i.e. the chassis gave in so much. The Bolt got 124mm thinner.
- after the pole side crash the Model 3 lost 4mm in width. The Bolt lost 45.

The Bolt also got a 50% worse score for rollover resistance - roughly the typical score for non-Tesla cars, despite also having the battery pack underneath the car.

All this does not make the Bolt unsafe. Not at all. But it does show the Model 3 chassis has superior stiffness, so I am not quite sure all those extra bits here and there were pointless.

Munro claimed the 3 is too stiff. I had a hard time to understand what he talked about. This and his claim the car is too heavy shows where he is coming from and that he need to learn about the EV business. The issue with Munro is he believes there is nothing he needs to learn but can apply what he learned throughout all the tear down he did with ICE cars.

BMW did make the same mistake when the invested the i3 and i8. The thought the car needs to be light.

The point is if you put a lot of effort in recuperation to regain energy, work on a strong cw value and assure that the rolling resistance is low beside others weight is not a factor that weights in the efficiency as strongly as before. This is why Elon as a Physics has understood that business better than an mechanical Engineer who worked decades in the auto industry. .

Given the ICE Engineers learned to reduce weight on all costs to create fuel efficiency they concluded the same applies with an EV where batteries have an still a range issue.

The best of all worlds if you can do both but a physician understands more easy that a heavy car that car restore the energy of motion in a sufficient way does not need to be low weight. Weight is an issue if you start and stop often with headwind and uphill. Going downhill if the car is efficient the disadvantage can turn into an advantage because you store more energy in a heavy car.

An EV may look like an ICE but it is a fully different thing. This is something the media and most people really do not comprehend. Its an apple to oranges comparison.

 

[Ulmo]

You thought he should buy it on the open market? That would be inviting the SEC to re-investigate for stock manipulation. Its not like they need the commission of a crime, just something that spun the right way almost looks off.

[edited to add: in essence, this is a money raise and very vanilla. The other would "look" like an attempt at insider trading since $TSLA is currently undervalued.]

I read it as an immediate payment back to Tesla for actions of his own, which while not something he did wrong, fits in with the settlement that seeks to cause a punishment, to which Elon is reimbursing the company. Also, the shares bought will be in Elon's self interest. That's not manipulation; it is a carefully executed plan, WITH AN 8K FILED! I'd like to see all the short sellers file 8K's before every trade they do.