TSLA Market Action: 2018 Investor Roundtable

[MikeC]

Seeing talk of a Jefferies upgrade on Twitter: $360 to $450.

 

[avoigt]

Do you belief in causality? Tell me why the SP jumped $15 BEFORE Elon's tweet.

Thanks.

In my opinion its not important if I believe in causality or not. And I do believe it does not help anybody if I give you my explanation why the SP jumped that day. Short term price movements are irrational in most cases and usually influenced by many factors.

To give you my short answer, I am not really interested in short term price movements as they do not help me to achieve my investment goals. For that reason I try to avoid short term price movement explanations.

No offense against you or your post but lets put the discussion why the SP did rise that day to bed.

 

[Artful Dodger]

One thing we haven't discussed recently is the appointment of new board members, this must be due soon, no?

I think the SEC settlement specifies 90 days to appoint 2 independant board members.

 

[Tslynk67]

I'm hearing on Twitter that Jefferies have upgraded to BUY with $450 PT, but I can't find a link

 

[Fact Checking]

Nothing, This is another B.S. story by Dana Hull. Notice that the story itself doesn't say a 50/50 split cash/shares, that's been added by 3rd parties reporting on her story.

Normally I would agree, because Dana Hull is a known FUDster, but this article is different:

• There are two authors, not just Dana,
• The source is specified as: "Tesla Inc. has notified holders of bonds due in March that if they elect to convert the debt, they’ll be paid with a 50-50 mix of cash and stock, according to a copy of the settlement notice seen by Bloomberg News. The notice, dated Nov. 30, relates to the $920 million convertible bond due at the beginning of March. The equity-conversion price is $359.88 per share, a level Tesla’s stock closed above on Thursday for the first time since Aug. 8."
• This is strong documentary source, better than a human source, and the "seen by Bloomberg News" wording suggests that Bloomberg editors almost certainly saw the copy of the document and found it genuine. I can say many bad things about Dana Hull's past conduct, but document forgery, if caught, would be career ending - and I don't see her taking that risk.
• The timing is accurate, Tesla had until December 1 to notify note holders about the style of conversion settlement. Note holders have about two months to request share conversion or face value cash conversion (they'll likely wait until the last minute), IIRC.
• 50%/50% cash/stock is a show of cash strength and minimal dilution of 0.7% - and leaves Tesla with up to $460m more cash to expand. Corporate value of Tesla increases by half a billion.
• The article is generally positive, with very little genuine FUD that I can see. There is even some positive spin in it, and voluntary positive characterization of Tesla. It will likely be seen as a positive development by the market.
• Tesla declined to comment. Note that Tesla consciously didn't deny the story. In fact if the story was inaccurate Tesla would have every incentive to correct it or at least state that it's inaccurate.

So I think this is 90% certain genuine.

I also expect mainstream business press journalists to become gradually positive towards Tesla now that it's earning money - and this article might be Dana Hull's turning point.

 

[anthonyj]

Today, the bears will capitulate. $420 is within spitting distance

 

[Ellec]

We are close to the squeeze of the century Elon spoke of in the past. Pushing towards ATH with a second profitable quarter in a row approaching. The short interest is trapped and frozen in the headlights, a disorderly unwind is likely with cascades of margin calls, covering and new momos going long.

Or it might drop back to $350 for another 6 months...

Not advice.

 

[Artful Dodger]

Normally I would agree, because Dana Hull is a known FUDster, but this article is different:

• There are two authors, not just Dana,
• The source is specified as: "Tesla Inc. has notified holders of bonds due in March that if they elect to convert the debt, they’ll be paid with a 50-50 mix of cash and stock, according to a copy of the settlement notice seen by Bloomberg News. The notice, dated Nov. 30, relates to the $920 million convertible bond due at the beginning of March. The equity-conversion price is $359.88 per share, a level Tesla’s stock closed above on Thursday for the first time since Aug. 8."
• This is a strong documentary sosurce, and the "seen by Bloomberg News" wording suggests that Bloomberg editors almost certainly saw the copy of the document. I can say many bad things about Dana Hull's past conduct, but document forgery, if caught, would be career ending - and I don't see her taking that risk.
• The timing is accurate, Tesla had until December 1 to notify note holders about the style of conversion settlement. Note holders have about two months to request share conversion or face value cash conversion (they'll likely wait until the last minute), IIRC.
• 50%/50% cash/stock is a show of cash strength and minimal dilution of 0.7% - and leaves Tesla with up to $460m more cash to expand. Corporate value of Tesla increases by half a billion.
• The article is generally positive, with very little genuine FUD that I can see. It is almost certainly seen as a positive development by the market.
• Tesla declined to comment. Note that Tesla consciously didn't deny the story. In fact if the story was inaccurate Tesla would have every incentive to correct it or at least state that it's inaccurate.

So I think this is 90% certain genuine.

I also expect mainstream business press journalists to become gradually positive towards Tesla now that it's earning money - and this article might be Dana Hull's turning point.

Imma take your word for it because you've offered good support for your conclusions. I did read the other author's twitter feed, and she mentions nothing about a 50/50 split, only that there would be some paid in cash, some in shares.

I do not trust D.H. She has demonstrated her willingness to distort circumstances to fit her stories, always in pursuit of creating sensational headlines. I find her irresponsible.

 

[Alphacrux]

Thats wrong, they are paying cash: 50% cash, 50% stock - and only if the note holders are asking for stock conversion.

This gives Tesla up to $460m more cash to spend on China Gigafactory, the Model Y expansion and the Semi - i.e. faster growth, without new debt.

Model 3 demand is much higher than expected, so investing into growth is a good move - and 50%/50% is a good balance.

The only people who should be unhappy about this are the $TSLA shorts.

Don’t forget investment into the Tesla Pickup. Successful introduction of the Tesla Pickup will be like launch of the BFR, I mean, Starship now, and will be the death knell of the traditional auto companies in the US.

 

[Fact Checking]

Imma take your word for it because you've offered good support for your conclusions. I did read the other author's twitter feed, and she mentions nothing about a 50/50 split, only that there would be some paid in cash, some in shares.

I do not trust D.H. She has demonstrated her willingness to distort circumstances to fit her stories, always in pursuit of creating sensational headlines. I find her irresponsible.

Yeah, agreed and it's all true.

Note that Dana could easily have spun this story negatively as well but didn't. Tesla can certainly use all the support they can get, even if it comes from an imperfect source like D.H.

 

[yngwie_2012]

Jefferies Upgrades Tesla (TSLA) to Buy

Today, the bears will capitulate. $420 is within spitting distance

 

[ggr]

50%/50% cash/stock is a show of cash strength and minimal dilution of 0.7% - and leaves Tesla with up to $460m more cash to expand. Corporate value of Tesla increases by half a billion.

It might not imply any dilution. If their hedges took the form of call options (or something equivalent), they can exercise the calls at ~$360 with cash and then deliver the higher valued shares to the bondholders. So to Tesla, it's all cash at $360ish plus some cash they spent to buy the hedge already, but to the bondholders it's half shares. No new shares issued, no dilution. To the hedge writers... well, they got paid already.

 

[Artful Dodger]

The short interest is trapped and frozen in the headlights, a disorderly unwind is likely with cascades of margin calls, covering and new momos going long.

With yesterday's close above $360 for the first time recently, its guaranteed there was a fresh round of margin calls yesterday, and there may be some forced covering by Brokers upon Opening today.

A disorderly retreat yes, but maybe not a complete rout just yet. Let's watch and see what develops. I expect this pattern to continue over successive sessions as TSLA closes at new highs: 365, 370, 375...

Each step up this mighty ziggurat which is TSLA will each cause more shorts to capitulate and fall.

Glad to be here for the end of the beginning. Popcorn ready, let's rumble.

CH3ERS!

EDIT: New Pre-market High: $371.89

 

[Buckminster]

Boring company Robotaxi
New thread - sounds a big deal to me.

 

[BioSehnsucht]

OT

Sister company Tesla has a reputation for knowing how to build powerful electric motors. The limiting factor would IMHO be the tolerance of passengers for zero-G on the way down. Kidding aside, I understand that they are repurposing the hole through which the TBM got extracted with an elevator. Cheaper and more throughput would be ramps.

Ramps have advantages and disadvantages. Elevators can be built with very little surface real-estate, which in most areas is quite valuable. Ramps of sufficient length will take up far more area (not just surface area but area near enough the surface to require purchasing the surface area above). You would need to go down probably dozens of feet before going under other properties, and even then might require some form of right-of-way purchase/license to do so. So far TBC seems to be sticking to public right of ways that they have received permission to do so, and private properties they own. At some point realistically a large tunnel network will require some boilerplate method of getting the rights to tunnel at some 'safe' depth below private property simply because public right of ways are not enough just to fit the merging/exit tunnels etc, and how that interacts with mineral rights may be interesting... and perhaps once that is established ramps may be preferable in some areas when real-estate is available to do so.

A single vehicle width wide ramp might require 100's of linear feet of real-estate which instead could supply dozens of bi-directional elevators (well, operating either up or down at a given time, but any could be operating in either direction).

Of course, elevators have more to potentially go wrong (not much can go wrong with a ramp), and their own expenses separate from real-estate. Even most suburban areas may favor elevators vs ramps, though in rural areas there's probably no reason not to use ramps.

 

[Thekiwi]

$371

 

[Artful Dodger]

Don’t forget investment into the Tesla Pickup. Successful introduction of the Tesla Pickup will be like launch of the BFR, I mean, Starship now, and will be the death knell of the traditional auto companies in the US.

Yes! And add in the 25K car, which Elon said is 4-5 yrs away. Also remember that on Oct 29th Baillie Gifford offered to fund Tesla's development and growth.

Cheers!

 

[Fact Checking]

It might not imply any dilution. If their hedges took the form of call options (or something equivalent), they can exercise the calls at ~$360 with cash and then deliver the higher valued shares to the bondholders. So to Tesla, it's all cash at $360ish plus some cash they spent to buy the hedge already, but to the bondholders it's half shares. No new shares issued, no dilution. To the hedge writers... well, they got paid already.

I believe the hedges were specified as generating cash. Call options also default to cash settlement.

Under the construct you outline, why would Tesla ever pay the conversions in 50% cash? The hedges cover 100% of the notes, they might as well utilize it - and communicate it well in advance that the conversion is non-dilutive as the shares come from the open market.

Furthermore, Tesla already registered 2.5 million new $TSLA shares back in 2014 when the notes were sold.

So I think the most probable interpretation is that Tesla will use up to 1.2m of those new shares, plus $460m in cash, plus half of the hedge income. Note that they can probably keep the hedge income even if they settle in new shares.

I.e. the hedges will probably generate about $25m of cash for Tesla, for every $10 Tesla exceeds $360 - up to a $560 limit or so, IIRC?

If they settle half in shares then Tesla can keep half of that cash.

If $TSLA reaches about $544 by March then the 50% hedge income will entirely pay for the $460m principal debt (!), AFAICS. "Debt crunch" turns into "Zero debt". Take that shorties!

Quite clever, if my interpretation is accurate.

 

[Artful Dodger]

I believe the hedges were specified as generating cash. Call options also default to cash settlement.

Under the construct you outline, why would Tesla ever pay the conversions in 50% cash? The hedges cover 100% of the notes, they might as well utilize it - and communicate it well in advance that the conversion is non-dilutive as the shares come from the open market.

Furthermore, Tesla already registered 2.5 million new $TSLA shares back in 2014 when the notes were sold.

So I think the most probable interpretation is that Tesla will use up to 1.2m of those new shares, plus $460m in cash, plus half of the hedge income. Note that they can probably keep the hedge income even if they settle in new shares.

I.e. the hedges will probably generate about $25m of cash for Tesla, for every $10 Tesla exceeds $360 - up to a $560 limit or so, IIRC?

If they settle half in shares then Tesla can keep half of that cash.

If $TSLA reaches about $544 by March then the 50% hedge income will entirely pay for the $460m principal debt (!), AFAICS.

Quite clever, if my interpretation is accurate.

Help me to understand here: does this explain why the Underwriter might be motivated to act to keep the SP under $360?

 

[Fact Checking]

Help me to understand here: does this explain why the Underwriter might be motivated to act to keep the SP under $360?

I think the underwriter of the hedges was probably smart enough to buy 25,000 call options during one of the dips to under $250, for a couple of million dollars, to properly hedge this billion dollar risk.

If not they are certainly sweating bullets now...