TSLA - Tesla Motors

[SHDL]

People like my friend who love the car so much that they buy the stock and think the two are linked together like a double helix are stubbornly propping up the stock price and fighting against shorts with the passion of the converted.

 

Yes, that's almost certainly a big part of the story here.  I think the unusual strength and persistence of this effect is attributable to the fact that these people tend to have a lot of money to spare.

[A Dhandho Investor]

I always thought TSLA was overhyped, but after riding in one this past weeekend, I must say that they are head and shoulders better than any other car I've ridden in.  They've thought of everything (e.g. the sunroof gets darker automatically when it's brighter out).

 

My friend who owned the car told me that the base price for the car doesn't include self driving and that you have to pay a lot extra for (I believe he said it was $12k), which costs them nothing to add to the vehicle, just a software upgrade. It's a nice business model, but not nice enough to convince me to own the company.

 

When I price the stock out like any other car company, the price is still outrageous, but I can see why it's so hard to short.  People like my friend who love the car so much that they buy the stock and think the two are linked together like a double helix are stubbornly propping up the stock price and fighting against shorts with the passion of the converted.

 

I assume that you did not yet drive other EV's like the E-Tron or the I-Pace? It seems a lot of people believe that Tesla is so far ahead of the competition because of the different driving experience between EV's and ICE. Once that you drive another EV, it appears Tesla is not that far ahead anymore (e.g. the Ipace has been nominated car of the year in Europe). If you then take into account factors like service waiting time, reliability, insurance cost, Tesla's become even less desirable.

 

The fact that fanboys are propping up the stock is a gift for shorts - a lot of believers will lose their confidence once it is clear that Tesla will not even meet the below end of its guidance for 2019, it completely winds down the energy division, announce that they will stop the development of the Semi, it becomes clear that the Shanghai factory is a scam, etc.

 

 

[Liberty]

I wish other automakers actually made a bigger effort with volume production. Having good EVs isn't enough... You also have to sell lots of them to make a difference. I understand that they're less profitable than their current ICE lineups, but that's the whole point of making the transition; if you try to do it with a foot on the brake all along, you leave a lot of room to competitors like Tesla who don't have a legacy business to keep iterating much faster than you are, and by the time you finally get there (if ever -- a lot of these just seem to want a halo car that they can brag about but they never really make that many of them or lower prices fast enough over time because they don't reach proper scale), Tesla might have fixed its biggest problems (who knows?) and improved on its strengths.

 

https://insideevs.com/news/348911/april-2019-jaguar-i-pace-sales/

 

[Jurgis]

I wish other automakers actually made a bigger effort with volume production. Having good EVs isn't enough... You also have to sell lots of them to make a difference.

 

Hear, hear!

 

People (and I) may be concerned of buying a Tesla and company going BK on us. But there's as much concern IMO on traditional automakers giving half assed support (or pretty much none in reality) to their electric models that they produce, sell in hundreds (not hundred Ks), and then discontinue. I might not buy Tesla, but I won't buy a poor cousin EV from traditional automaker either.

[Liberty]

I wish other automakers actually made a bigger effort with volume production. Having good EVs isn't enough... You also have to sell lots of them to make a difference.

 

Hear, hear!

 

People (and I) may be concerned of buying a Tesla and company going BK on us. But there's as much concern IMO on traditional automakers giving half assed support (or pretty much none in reality) to their electric models that they produce, sell in hundreds (not hundred Ks), and then discontinue. I might not buy Tesla, but I won't buy a poor cousin EV from traditional automaker either.

 

Yeah, if Tesla didn't exist, the pace of overall progress in the rest of the industry would be even slower... And Tesla has been at it for over 10 years now and the rest have barely made a dent. They'd drag their feet for decades without real competition to light a fire under them and show consumers that it is possible to make great EVs that aren't huge compromises and look and drive like golf carts.

[Castanza]

I wish other automakers actually made a bigger effort with volume production. Having good EVs isn't enough... You also have to sell lots of them to make a difference.

 

Hear, hear!

 

People (and I) may be concerned of buying a Tesla and company going BK on us. But there's as much concern IMO on traditional automakers giving half assed support (or pretty much none in reality) to their electric models that they produce, sell in hundreds (not hundred Ks), and then discontinue. I might not buy Tesla, but I won't buy a poor cousin EV from traditional automaker either.

 

I can agree with this perspective. Tesla really does have a superior product and the rest of the industry is content to half-ass their innovation. But this still won't make me an investor.

 

Can anyone think of any companies in the past which have been expected to go bankrupt like Tesla that beat the odds and managed to become successful profitable companies?

[Liberty]

I wish other automakers actually made a bigger effort with volume production. Having good EVs isn't enough... You also have to sell lots of them to make a difference.

 

Hear, hear!

 

People (and I) may be concerned of buying a Tesla and company going BK on us. But there's as much concern IMO on traditional automakers giving half assed support (or pretty much none in reality) to their electric models that they produce, sell in hundreds (not hundred Ks), and then discontinue. I might not buy Tesla, but I won't buy a poor cousin EV from traditional automaker either.

 

I can agree with this perspective. Tesla really does have a superior product and the rest of the industry is content to half-ass their innovation. But this still won't make me an investor.

 

Can anyone think of any companies in the past which have been expected to go bankrupt like Tesla that beat the odds and managed to become successful profitable companies?

 

I'm not making an investment case. I just want to see EVs to replace ICEs as fast as possible.

[SHDL]

Can anyone think of any companies in the past which have been expected to go bankrupt like Tesla that beat the odds and managed to become successful profitable companies?

 

Apple, around 1997.  There was some discussion about the similarities a while ago on this thread. 

[CorpRaider]

Apple, Tesla 2008, Amazon 2001, Adobe, Fairfax, all the utilities in the 1970s, etc...

 

I said I was going to buy some TSLA when it came down to a 2x GM's EV/REV multiple, so....

[Castanza]

Saw this posted on Yahoo Finance comment section. Seems quite speculative but much more detailed than the typical comments on there. Anyone have any insights or opinions on the below thesis?

 

"Has Musk already had a "margin call" on some of his borrowing-against his TSLA shares? In October of last year, as Tesla's stock broke down to new lows, Musk started shopping for some super-jumbo mortgages on the mansions he owns. He was able to borrow around $50 million against those homes in December. Was he doing that borrowing to pay off some of his loans collateralized with TSLA shares?

 

For the first time in years, Musk had a small reduction (relatively speaking) in the number of shares he's using as collateral for his borrowing. We only get an update on the shares being used as collateral once a year (in a small footnote in the proxy materials for the annual meeting); little additional information is available to the public-shareholders about this borrowing -- even though, about 40% of Musk's TSLA-holdings are pledged as collateral for his borrowing, and the company specifically names this borrowing as a risk-factor that could -- if Musk defaults on the loans -- negatively affect the share-price.

 

In 2018 Musk had 13,774,897 shares pledged as collateral in these loans; in 2019 we now see he has 13,394,056 shares pledged as collateral -- that's a reduction of about 380,000 shares he's using as collateral.

 

The stock price recovered after it hit its lows in October; if the investment banks (who know all the terms of this borrowing, even while the public-shareholder is "in the dark") knew Musk was shopping for mortgages -- and there would be a pay-off on the loans Musk had likely gone into technical default on -- they would have been able to trade on this information -- they'd even "control it" if they were a lender in the mortgage deals as they could alter the terms giving Musk time on when payments would be due.

 

Musk is wealthy on-paper, due to the large number of TSLA shares that have been given to him as part of his compensation package, but has little in the way of liquid assets. I think it's likely at least some of the money he's borrowed recently was used to pay off a tranche of debt he's taken out using TSLA shares as collateral."

[boilermaker75]

Apple, Tesla 2008, Amazon 2001, Adobe, Fairfax, all the utilities in the 1970s, etc...

 

I said I was going to buy some TSLA when it came down to a 2x GM's EV/REV multiple, so....

 

SpaceX, their first three launches failed. The fourth launch was done with the rest of their monies and it was successful. If it had not been a success, they probably would have gone bankrupt.

 

Edit: And I believe the rest of their monies was actually the rest of Musk's PayPal monies.The guy has balls.

[SHDL]

Saw this posted on Yahoo Finance comment section. Seems quite speculative but much more detailed than the typical comments on there. Anyone have any insights or opinions on the below thesis?

 

"Has Musk already had a "margin call" on some of his borrowing-against his TSLA shares? In October of last year, as Tesla's stock broke down to new lows, Musk started shopping for some super-jumbo mortgages on the mansions he owns. He was able to borrow around $50 million against those homes in December. Was he doing that borrowing to pay off some of his loans collateralized with TSLA shares?

 

For the first time in years, Musk had a small reduction (relatively speaking) in the number of shares he's using as collateral for his borrowing. We only get an update on the shares being used as collateral once a year (in a small footnote in the proxy materials for the annual meeting); little additional information is available to the public-shareholders about this borrowing -- even though, about 40% of Musk's TSLA-holdings are pledged as collateral for his borrowing, and the company specifically names this borrowing as a risk-factor that could -- if Musk defaults on the loans -- negatively affect the share-price.

 

In 2018 Musk had 13,774,897 shares pledged as collateral in these loans; in 2019 we now see he has 13,394,056 shares pledged as collateral -- that's a reduction of about 380,000 shares he's using as collateral.

 

The stock price recovered after it hit its lows in October; if the investment banks (who know all the terms of this borrowing, even while the public-shareholder is "in the dark") knew Musk was shopping for mortgages -- and there would be a pay-off on the loans Musk had likely gone into technical default on -- they would have been able to trade on this information -- they'd even "control it" if they were a lender in the mortgage deals as they could alter the terms giving Musk time on when payments would be due.

 

Musk is wealthy on-paper, due to the large number of TSLA shares that have been given to him as part of his compensation package, but has little in the way of liquid assets. I think it's likely at least some of the money he's borrowed recently was used to pay off a tranche of debt he's taken out using TSLA shares as collateral."

 

IIRC the word on the street was that the margin calls were set to occur at around 200-250.  I was expecting the price drop to accelerate somewhat once we get there (due to forced selling), and it does feel a bit like that is happening.  I can’t prove it though.

[benhacker]

The sheen is off.  This run today feels like the last transfer to bag holders.

 

There is plenty of information there for all to see, and while the delay in the media digging critically in on the story that is Tesla, I think it is now coming.  NYT now running stories on inventory build up.  LAT ran the article first, and continues to dig on Tesla/Musk.  The short selling "cabal" is getting some 'air time' as well.

 

I don't think Musk's actions which have attracted so much media and government attention will prove wise.  But perhaps he had no outs.

 

Will be upping my short tomorrow.  Signing off from here on Tesla talk for a while.  Hope everyone (including myself) keep an open mind on potential outcomes.

 

Final thing to note, Tesla delivery associate perpetuated (or attempted) what I would consider a highlight unethical if not illegal act on my friend who is waiting for delivery - lying about the status of his car ("it's in transit" --- hahah --- Elon says shortage of carriers to help back up these lies, but there is no shortage, his lies are getting weak), repeatedly changing the VIN# while not articulating why or alerting him to it.  When confronted about it, delivery specialist is non-responsive.  Although, he was clear to strongly suggest full payment to my friend....  It's a testament to the "brand" that he (my friend) hasn't asked for a refund.  If they continue delays, I think he may cancel.

 

The company is either next-level incompetent, or worse.

 

My friend had this to say while contemplating them as just being totally overwhelmed with bad logistics and inventory management (as an excuse for what they are doing to him):

 

"Have to admit, if this is the truth, any company that is currently that broken kinda deserves to be shorted."

 

The thing is, I think this (incompetence and bad planning causing the chaos) is the charitable explanation.

 

--

 

1) Extreme valuation

2) Bad accounting

3) Promotional management

4) Dishonest management

5) Extreme, Director/VP level employee exodus

6) Government investigations

7) Terrible manufacturing controls

8) Terrible financial controls

9) Bad governance / captured board

10) Uneven disclosure via different channels

11) Unclear demand environment w/ increasing competition

12) Extreme valuation

13) Liquid borrow at low rate

14) Expiring tax credits

15) Negative news cycle underway

16) Whistleblower lawsuits

17) Mechanic liens

18) Nearly everyone you talk to who isn't short, thinks you are crazy for shorting (my clients hate this short)

19) Dumb, oblivious, disbelieving, or non-economic longs (some are all of the above)

20) High beta name, well into technical breakdown (triple top failed, and >20% off ATHs) in a market taking a breather, but near all time highs

21) ... because I probably forgot one

 

Wanted to check in with a question(s):

 

Curious if any negative folks / shorts / haters, etc have a materially changed opinion in the last year or so?

 

Curious if any positive folks about the company / Musk, etc have a materially changed opinion in the last year or so?

 

For those long or at least open to the idea of getting long - what price would you be interested in stepping in (don't need to explain why)?

 

To share my view, my opinion hasn't dramatically changed - probably a little bit more negative than before, but broadly feel the same about Musk and the company's financial prospects.

 

Same directional position as before on the stock.

[SHDL]

This has been an interesting ride for me...

 

During last summer/fall I thought that there was an elevated chance of a near term liquidity event but at the same time I thought there could be a lot of upside if they do very well with the M3.  I therefore just bought a few OTM puts.

 

Then they did surprisingly well with the M3, at least for a quarter, and it was clear that my puts wouldn’t work, so I sold them. At this point it seemed to me like the M3 could keep them alive for a few years during which they could work on improving their business. I even thought I might go long at some point if there was enough evidence of such improvement.

 

And then during the last few months it became apparent that their cars weren’t selling as well as expected and that the optimistic scenario above was therefore unlikely to materialize. So I started a short position, and added a bit more after the recent capital raise. I will probably hold on to this for a bit longer than I otherwise might because I think it should work well as a macro hedge.

 

Not sure if there is anything to be learned from this experience, but it was at least a lot of fun and it probably kept me from doing other dumb trades when I was bored.

[CorpRaider]

My only strong conclusions are that there is a ton of irrationality on both sides of this stock and that I have a lot more respect for Andrew Left/Citron than basically any other career/reputed short seller; except for the hot/fierce indian-american lady in that netflix documentary "dirty money."

 

I would love to buy a model 3, $39,500 seems pretty reasonable, but it seems like such a PITA to get one right now.  Also wonder what the dynamics would be if China factory actually comes online soon and gets around tarrifs/transport costs.  I could also see there being a lot of capital available in China is he's moving ops/building an ecosystem and knowhow there. 

 

Executive turnover is very troubling.  Promotional antics around products and execution sound a lot like Edison and even Tesla, TBH.  Maybe he needs to find his westinghouse/j.p. morgan.

 

 

 

 

[walt373]

Here are a couple things I've learned over the past year.

 

1. CRCL ("can't raise can't leave") theory was debunked. We might never know why they didn't raise at $350 but I think they could have if they really wanted to. I'm guessing Tesla overestimated their TAM and Q1 sales falling off a cliff really caught them by surprise. My theory is that Musk thought they had more time and was trying to get the converts in the money by squeezing shorts, and a raise would have put that at risk. The mistake was making a conclusion (can't raise) based on the assumption that Musk wouldn't put the company at risk by not raising if he could. He had already demonstrated the extent of his hubris and irrationality before, so in hindsight this was an unsafe assumption. Short stock and high strike puts worked well. OTM bankruptcy puts got killed.

 

2. If you have 70% q/q revenue growth and negative working capital, your FCF will look amazing. And vice versa when your sales drop. Bears saw the big spike in sales coming but didn't make the connection to FCF, still projecting high cash burn in Q3. Knowing this, shorts could have spared a few months of pain and pressed the short in Q1.

[A Dhandho Investor]

Wanted to check in with a question(s):

 

Curious if any negative folks / shorts / haters, etc have a materially changed opinion in the last year or so?

 

Curious if any positive folks about the company / Musk, etc have a materially changed opinion in the last year or so?

 

For those long or at least open to the idea of getting long - what price would you be interested in stepping in (don't need to explain why)?

 

To share my view, my opinion hasn't dramatically changed - probably a little bit more negative than before, but broadly feel the same about Musk and the company's financial prospects.

 

Same directional position as before on the stock.

 

I am still so short my balls can touch the ground. Was thinking about taking some money of the table next week when reading that the Marina Del Ray delivery center was again open 7/7 and running at a monthly sales pace of about 500 Model 3's in May.

 

Historically it has accounted for about 2,5% of US deliveries, so would result in about 20k US Model 3 deliveries in May. However, word is out that Tesla has consolidated all its LA deliveries through Marina Del Ray, so it should account for a bigger percentage of US sales going forward. Let's assume the percentage increased to 4%, which would lead to about 14k US Model 3 deliveries in May.

 

Overall, I don't see them do more than 75k deliveries in Q2 versus Musk his 90-100k guidance...

[A Dhandho Investor]

My only strong conclusions are that there is a ton of irrationality on both sides of this stock and that I have a lot more respect for Andrew Left/Citron than basically any other career/reputed short seller; except for the hot/fierce indian-american lady in that netflix documentary "dirty money."

 

I would love to buy a model 3, $39,500 seems pretty reasonable, but it seems like such a PITA to get one right now.  Also wonder what the dynamics would be if China factory actually comes online soon and gets around tarrifs/transport costs.  I could also see there being a lot of capital available in China is he's moving ops/building an ecosystem and knowhow there. 

 

Executive turnover is very troubling.  Promotional antics around products and execution sound a lot like Edison and even Tesla, TBH.  Maybe he needs to find his westinghouse/j.p. morgan.

 

Of all people, you chose Andrew Left... He was able to move the market around the announcement of the Q3 results when suddenly turning bullish on the stock, but he just got played by Elon like all other institutional longs. I really invite you to read his latest fluff piece: https://citronresearch.com/wp-content/uploads/2019/03/Citron-Expects-Tesla-Rebound-to-320.pdf

 

Great research, huh? In the end, he managed to lose money on both sides of the trade and after writing that last piece he declined to do a podcast with Mark Spiegel, apparently indicating that "Elon is the worst communicator ever".

 

Then I have more respect for guys like Mark Spiegel, who stood by their ground when calling Elon for what he is, a gigantic fraud.

[Ahab]

 

Lengthy post summarizing the Enron saga. It is remarkable how many similarities there are between Enron then and Tesla now. Among them: this company is changing the world (is not like stodgy old economy businesses), analysts heaping on aggressive revenue, profit, and stock price estimates, frequent wars of words between shortsellers and management, shorts introducing new information that only slowly trickles into the adoring mainstream press, lack of skepticism due to the brilliant and visionary nature of management, disillusionment with an increasingly erratic CEO, margin loans of management, aggressive insider selling, aggressive promises about new business lines (shiny object syndrome), murky & opaque accounting, unwillingness to do capital raises for fear of collapsing the stock, using customer deposits as de facto loans, rapidly growing businesses that incinerate rather than produce cash, stated goals of management to be the largest company in the world, dismissive of reporters and analysts that dare to ask questions.

 

[DTEJD1997]

hey all:

 

Looks like TSLA is going to get VERY interesting now.

 

As I type, TSLA is at $197/share.  I've heard many reports discuss how Mr. Musk will face a margin call at about $225/share.  We seem to be substantially below that now.  Does anybody know if Musk is having his position liquidated?

 

There are also some "reputable" analysts who are downgrading TSLA price target.  One of them has put it at $10/share in a bearish case.

 

CITI has also now moved TSLA to the sell column with a price target of $191.

 

Perhaps most important of all...TSLA's bonds are now distressed.  I've heard that they are selling in the 80's.

 

I've got a funny feeling that if there is another bad quarter, bad news story, crazy act by Musk, or some other bad news, the stock will go down substantially.

[5xEBITDA]

 

 

Perhaps most important of all...TSLA's bonds are now distressed.  I've heard that they are selling in the 80's.

 

 

No, they are very far from distressed. I'd hardly even call them stressed. They're trading ~700bps wide of their treasury reference which is arguably too tight still given the credit profile of TSLA. I know tons of stuff trading at 700bps where the underlying credit is miles better than TSLA.

[sleepydragon]

hey all:

 

Looks like TSLA is going to get VERY interesting now.

 

As I type, TSLA is at $197/share.  I've heard many reports discuss how Mr. Musk will face a margin call at about $225/share.  We seem to be substantially below that now.  Does anybody know if Musk is having his position liquidated?

 

There are also some "reputable" analysts who are downgrading TSLA price target.  One of them has put it at $10/share in a bearish case.

 

CITI has also now moved TSLA to the sell column with a price target of $191.

 

Perhaps most important of all...TSLA's bonds are now distressed.  I've heard that they are selling in the 80's.

 

I've got a funny feeling that if there is another bad quarter, bad news story, crazy act by Musk, or some other bad news, the stock will go down substantially.

 

Did you the Form 4 he filed a couple days ago? He exercised 175k options. These options won't expire till 2022, but he had to exercise them now. why? I think he need the stocks to meet his margin calls.

 

 

 

[Ahab]

I'm firmly betting on zero at this point through a range of puts and call spreads. Maybe they get taken out-sub 50, but I doubt it. It'll take $15 billion or more to make creditors whole so the stock is probably a donut...

[aws]

It's remarkable to me how fat the tails are in the options pricing curves.  I can't remember another case of such a large company, especially where the debt to market cap is this low, is being priced as though bankruptcy is a real possibility.  You can make a 2% return by shorting Jan 2020 $10 puts - a 95% fall in just 8 months is needed for those to be in the money.  Seems a little crazy, but I don't know enough about the company to want to take either side of that bet.

[SHDL]

Looks like TSLA is going to get VERY interesting now.

 

I’m probably not the only one who feels like this is a Fist of the North Star moment where the damage is done and the stock is “already dead.”