Liberty

The stock trades higher (or at least flat) because the new capital derisks the future. Reflexivity at work. As for not saying that you're going to raise capital before you actually raise it, that's just common sense and something that every company does. Otherwise, you just increase your cost of capital... And clearly they think that it's either enough to get them to a place where internally generated capital will be enough, or that there'll be enough progress in the meantime that the next capital raise will be even less dilutive. Of course, they could be wrong about one or both things, but there's no shortage of people being wrong about this company in all directions, so it wouldn't be a first. Then you don't answer the question directly or say it will be dictated by market availability and company needs or come up with some other BS non answer like every other corporate executive does. You don't make an outright lie. Or he changed his mind since then because the facts changed? It's very possible he had no plans for it at the time, but since then the stock went up like a zillion percents and China and part of the rest of the world shut down and who knows when that'll end, maybe the risk/reward of raising capital changed a bit.

I meant it as in it "lowers risk", not "fully eliminates risk". And I'm not saying they're running the cap table the way I would do it, obviously they've always been very aggressive and always cut it close. But things are certainly less risky with $2bn extra on the balance sheet than without it. And a lot of what they're spending is within their control -- they didn't have to go at that speed, they could've milked the Model S for a few more years before even embarking on the 3, and they could've elongated the 3 ramp up by a few years, and waited some more for the Y and to design the Semi and build other factories and so on... But clearly speed is a very high priority for them, and so far it has benefits too -- hard to find an EV that's even as good as the 2012 Model S, so their pace is hard to keep up for others.

The stock trades higher (or at least flat) because the new capital derisks the future. Reflexivity at work. As for not saying that you're going to raise capital before you actually raise it, that's just common sense and something that every company does. Otherwise, you just increase your cost of capital... And clearly they think that it's either enough to get them to a place where internally generated capital will be enough, or that there'll be enough progress in the meantime that the next capital raise will be even less dilutive. Of course, they could be wrong about one or both things, but there's no shortage of people being wrong about this company in all directions, so it wouldn't be a first.

I would have expected him to contribute approximately $69.420.420. But seriously, the fact that Larry Ellison, whose net fortune is about $69b (no pun intended this time), contributes the full $1m, I hope you agree that that is just for the headlines? Sure. That's how finance works.

Harris acquisition: https://www.harriscomputer.com/en/news/?data-ipsquote-timestamp=1581310800&article=harris-healthcare-group-acquires-doc-tor-com Pearnick writes: "19 employees (16+3)" h/t @pearnick

Finally. Smart move. The dude owns what % of the company? What amount would've made a difference?

Capex is more than one thing. More capex on new build probably gets good returns. But when capex on the TWC acquisition integration falls, that's good, and you don't want that to drag on for longer than it has to, or have higher costs, because the return on that probably doesn't go up with spend.

There you go. Building up expertise and showing interest. Wow color me totally wrong on that. Pretty nuts, but I guess if they see enough demand in cars + storage/home then there is enough volume to warrant this. Given the way they have treated their other products it does not seem likely they will be manufacturing for anyone other than Tesla/Elon products. In my uninformed view, it's just another option for them, which could potentially be something big and valuable, or simply as a hedge. Taking a step back, EVs are a nascent industry and there are lots of stuff still to be figured out. As such, it's not clear to me where margin will accrue in the value chain. Will it be the hardware (range? speed?), software (auto updates? farts?), self driving, brand, charging network, manufacturing, battery tech, etc.? I have no clue. So they've simply decided to do it all - an incredibly audacious strategy but it seems to be paying off. If they think their competitive advantage is engineering, then it certainly makes sense to spend some money looking into battery tech. Maybe they'll come up with a better mouse trap, maybe not. At worst, it'll serve as a hedge in case battery manufacturing tech becomes concentrated in a couple of global giants who will have everyone over a barrel. It's also similar to Apple's strategy of trying to control as much as possible all the core technologies on which they depend. They don't want to somehow end up in a position where a supplier has life & death control over them (not necessarily through malice, but maybe through incompetence... Apple is no doubt moving away from Intel on the Mac platform in good part because Intel has had so much trouble delivering on its roadmap these past years... It has taken them a while to build in the silicon design expertise, starting with the acquisition of PA Semi, but they've been able to do it on the mobile side and will no doubt eventually leverage that on the Mac side). Tesla is probably looking ahead and thinking that if they're going to reach their goals, it's going to put a lot of stress on battery production ramp and they'd like to see the pace of innovation stay high, and they don't want some partner to not be able to keep up. It's probably why the Gigafactory is a partnership with Panasonic (they couldn't do it alone at the time), and maybe why at some point in the future, future gigafactories won't be partnerships at all. But who knows, I'm just guessing by going with what I'd look at as options if I was in their place ¯\_(ツ)_/¯ Financial people think about these things from a financial perspective, but operators have to think about the kind of problems they're faced with, and problems with suppliers are up there (and have been especially problematic for Tesla).

Well done!

I thought this piece by Alex Danco was really interesting: https://alexdanco.com/2020/02/07/debt-is-coming/ Hopefully others here enjoy it.

There you go. Building up expertise and showing interest.

They are more vertically integrated than any automaker I can think of. In part because as a startup, suppliers didn't want to work with them for a long time, or at least, didn't want to put their "A" teams on the job, so they had to learn to do a lot internally. Wouldn't be so out of character to make cells. In fact, buying Maxwell Tech might mean that they could want to go a different direction than most of the industry eventually... But that's a low probability scenario for a long while, IMO.

I saw ‘1917’ (2019). What a remarkable accomplishment. One of the best war films ever, in my opinion. It breathes. Some of those sets and environments and set pieces are unreal, yet so real. Worth seeing in theater imo. A+

There's confusion between the cells and the packs and how the packs are managed. All these are different levels, and companies like Panasonic make the cells, not the packs or the software that manages the packs. Tesla likely has the scale and know-how at this point that if they wanted to make their own cells, they could. I don't know if they will, but I wouldn't be surprised, considering how vertically integrated they've been in other ways. Or maybe they'll do something on that front with their Maxwell Technologies acquisition.. I do not think that Tesla has any expertise or IP to build cells at this point as this is an entirely different process and technology than building packs. Perhaps they could create the technology ( or a better one ) but that would take time and billions of $ most likely, at least going to scale. I don’t think any car manufacturer will go down this route, but of course I could be wrong. Depends what you mean by expertise. Have they done it at scale? No. Have they been studying it closely for years (in good part to pick which technologies to bet on and to get manufactured) and watching Panasonic do it inside their own factory and likely been hiring people from that industry? There's a lot of learning and expertise that has been building there... They might never decide to do it, but if they did, it wouldn't be the hardest thing that they've done...

Good threads with highlights from Visa's investor day (only happens every three years):

So you think they've done all they've done but they couldn't buy/build their way to making battery cells? I tend to think they could if they wanted to. But they might not want/need to.

More acquisitions: https://www.bibliocommons.com/news/2020/2/10/bibliocommons-acquired-by-volaris-group https://www.industrios.com/news/read/ShoplogixAcquiresIndustriOSSoftware,Inc. As Pearnick says: "Constellation is pushing capital deeper into their business units: CSU > Vela > FOG > Shoplogix > IndustriOS" h/t @pearnick

https://ofdollarsanddata.com/how-will-coronavirus-affect-your-portfolio/

There's confusion between the cells and the packs and how the packs are managed. All these are different levels, and companies like Panasonic make the cells, not the packs or the software that manages the packs. Tesla likely has the scale and know-how at this point that if they wanted to make their own cells, they could. I don't know if they will, but I wouldn't be surprised, considering how vertically integrated they've been in other ways. Or maybe they'll do something on that front with their Maxwell Technologies acquisition..

Up almost 69% after hours... https://www.cnbc.com/2020/02/10/sprint-stock-up-40percent-after-report-that-us-district-judge-is-set-to-rule-in-favor-of-its-deal-with-t-mobile.html

I've heard good things about the show 'Vikings'. I haven't seen it yet, but I'm curious if anyone here has seen it and can share their opinion of it. Thanks.

A lot of that investment is just scaling up production, it's not fundamental research. Either they invest that money, or someone else does, but the batteries don't magically appear just because there are fewer companies. This isn't software. If these other companies are serious about making EVs in volume in the coming years, they have to invest ahead of the curve as these have long lead times. But the "duplicative R&D" can lead to real progress, and I'm glad to see some investments finally starting to happen more seriously. We're early enough in the industry that lots of approaches should be tried. At maturity, I'm sure it'll consolidate more naturally. Tesla's battery tech is mostly in the packaging and cooling and software, not in the cells. They get lower costs because they make so many of them (Gigafactory, etc), not because they have very different cells than others. Licensing that wouldn't make that much difference, afaik, and I'm not sure they're quite ready to license the rest of the stack when they clearly have an advantage there. The value capture in a car doesn't happen in that part of the stack and they couldn't charge enough to compensate for cannibalized sales, I think. Doesn't mean they'd never do this kind of work. They did it in the past for Daimler and Toyota on a small scale, but I actually wouldn't be surprised if the contracts weren't renewed by Toyota and Daimler because they either didn't care enough about EVs at the time and/or because they don't want a future core technology to be controlled by a competitors and them not going up those learning curves themselves. Also, the Model 3 ramp was a bet-the-company move and they had enough trouble producing enough drivetrains and packs for themselves internally, I don't think they wanted to be distracted by that. Sure they want to accelerate the advancement of EVs generally, but they have to take care of their own house first and survive and let others do some of the lifting too. They've opened patents and had a huge influence already on the whole industry, and they'll keep things progressing faster if they keep being successful and growing at hypergrowth than if they become some tier 2 supplier to other boring companies that have much less ambitious and much slower plans for EVs.

What do you mean waste? Isn't that how competition works? Do television makers waste money because they all build factories to produce LCD and OLED screens and try to have better technologies than the competition? Do CPU and GPU makers waste money investing in their chips and fabbing process improvements and such? I'm not saying they'll all get good returns on this, but good returns are scarce around the world, because they are driven down by competition... But it's that competition that keeps things moving and that creates a lot of consumer surplus, so I'm all for it.

https://www.cnbc.com/2020/02/10/teslas-competitors-play-catch-up-on-electric-batteries.html

Enjoyed this interview with Bill Janeway: https://podcasts.apple.com/co/podcast/william-janeway-on-whats-needed-for-the-innovation-economy/id730188152?i=1000418387289 There's another one here that I haven't listened to yet: https://podcasts.apple.com/fr/podcast/an-interview-with-bill-janeway-masters-in-business-audio/id730188152?i=1000371825929