TSLA - Tesla Motors

[Guest roark33]

TSLA is a great example of price driving sentiment, at $800 every Tesla bull looked like a genius and the shorts looks like idiots. 

 

Count No Man Happy Until the End Is Known.

 

[DTEJD1997]

Ouch!

 

 

Sheriff: Tesla not an ‘essential business,’ factory must obey coronavirus shutdown order

 

https://electrek.co/2020/03/17/sheriff-tesla-not-an-essential-business-factory-must-obey-coronavirus-shutdown-order/

 

TSLA is too big to have to follow the laws, kind of of like UBER.

 

Elon Musk should tell that Sheriff what is what and get him under control.

 

The one thing I don't get is that TSLA stock is going down, I thought it couldn't do that and it should be trading for $2,000?  Why is it $380?  That is unpossible!

[Castanza]

@Dalal

 

Genuinely asking (not being a dick), as a Tesla bull are you buying here?

[ERICOPOLY]

GM shareholders are having a worse year.

[Castanza]

GM shareholders are having a worse year.

 

Watching the $F dividend gang sweat is some great entertainment right now.

[Dalal.Holdings]

Record Q1 numbers. How are the “big boy” traditional auto companies weathering this crisis?

 

Who’s gonna go to a dealership to buy a car in a pandemic?

 

How is Boeing doing vs Spacex? Any more software glitches on their rockets/planes?

 

Don’t bet against a guy who lands rockets.

 

https://www.cnbc.com/2020/04/02/tesla-tsla-1q-2020-production-and-delivery-numbers.html

[A Dhandho Investor]

Hey Dalal, you do know that crises like this one are bad for frauds like Tesla?

 

I find it a little concerning that they did not do the split Model 3 / model Y deliveries, no discussion on new net orders and no outlook for 2020, but who am I

[Dalal.Holdings]

Hey Dalal, you do know that crises like this one are bad for frauds like Tesla?

 

I find it a little concerning that they did not do the split Model 3 / model Y deliveries, no discussion on new net orders and no outlook for 2020, but who am I

 

As always, impeccable analysis. Investigative journalism at its finest.

[Dalal.Holdings]

TSLA: the great short opportunity of the last 3 years that has substantially outperformed its competitors and the S&P 500--even during a recession and global pandemic.

 

Now THAT'S Funny!

 

 

 

[Liberty]

Pretty slick video showing the Chinese plant:

 

[alpha]

Pretty slick video showing the Chinese plant:

 

 

Pretty impressive how quickly that plant went from dirt to production.

[Dalal.Holdings]

The best startups might be considered slightly less extreme kinds of cults. The biggest difference is that cults tend to be fanatically wrong about something important. People at a successful startup are fanatically right about something those outside it have missed. You’re not going to learn those kinds of secrets from consultants, and you don’t need to worry if your company doesn’t make sense to conventional professionals. Better to be called a cult—or even a mafia.

 

—Peter Thiel

[mloub]

Super impressive. Their China expansion is an interesting move.

 

But I have to say, everytime I try to wrap my head around their statements, I walk away more confused than when I started.

 

For example, the Shanghai Factory, which depending on how you look at it, increased their production capacity anywhere from 30-50%. They started building it in March, 2019 and it was producing it's first vehicles by January, 2020 - so presumably the bulk of the capex was done by then.

 

But the company reported Capex for 2019 of $1.3B - significantly less than the capex of $2.1B in 2018, when they were not building a new factory - and less than their D&A for 2019 of $2.1B.

 

Stranger still, their long-lived assets by geographic area for 2019 were reported at $890m for International Assets (basically unchanged from $860m in 2018). (Page 125 of the 2019 Financial statements).

 

I'm clearly missing something very obvious, but my questions about this to Tesla IR were ignored. I'm not big enough to register on their radar screen, I guess. Anyone else have any ideas what is happening here? Some accounting wizardry rules that I am unaware of?

 

M.

 

 

 

 

 

[benhacker]

they don't own the factory in common sense, they own the output / profits of the factory after the Chinese authorities make charge their minimum taxes.  The factory is in a sense an option for TSLA.  I actually think it was a pretty savvy way to expand production and also provides a nice story, while not costing Tesla much upfront.

 

Have to say I was way wrong on stock performance here.  Really pretty nutty.  I still think it doesn't make sense, but the price is what it is after a lot of very bad news.

 

I still don't get how bulls on Musk can ignore so much damning evidence but they seem to have been very right to have done so!

[mloub]

Well, there is this.... https://twitter.com/SquawkCNBC/status/1187705064049270785

 

I mean, Tesla says they own the factory, they talk about it as though they own it, and if they don't own it who does? Who is carrying it on their balance sheet if Tesla isn't? And if Tesla has been able to pass off the cash costs of building this factory, why not disclose that more openly - and the underlying arrangement that allowed that to happen.

 

EDIT: Tesla does report an almost $1Bn loan in China that they say was taken out to finance the construction of the factory, but where is the related asset or capex to show how that loan was used (pg. 103 of 2019 FS 10-K). Very confusing.

 

M.

 

 

 

[mloub]

they don't own the factory in common sense, they own the output / profits of the factory after the Chinese authorities make charge their minimum taxes.  The factory is in a sense an option for TSLA.  I actually think it was a pretty savvy way to expand production and also provides a nice story, while not costing Tesla much upfront.

 

Have to say I was way wrong on stock performance here.  Really pretty nutty.  I still think it doesn't make sense, but the price is what it is after a lot of very bad news.

 

I still don't get how bulls on Musk can ignore so much damning evidence but they seem to have been very right to have done so!

 

So let's say they don't own the factory, just the rights to its output. How much did they need to spend to get those rights, and where in their cash-flow statement is that reflected? Certainly doesn't seem to be reflected in capex, which is running at almost 60% of D&A.

[benhacker]

You should read my comments in this thread if you haven’t. I won’t be answering your questions... for somewhat obvious reasons. Don’t recognize your name, so didn’t want my silence to lead you to think I’m a dumb bull.

 

I’m a bear, and my comment above was as bullish as I get on TSLA...

 

Too many questions which don’t have answers.

[mloub]

Sorry benhacker, I didn't mean to take a challenging tone. I definitely could see that you are questioning what is happening here too. And I've always been a fan of your posts.

 

My questions were meant generally to anyone who had an insight into what was happening here. I'm pretty sure that I am missing something.

 

How are others understanding this weird glitch in the statements? I know Tesla was helped by the Chinese Government. The Shanghai local Gov't gave Tesla the land for the factory and the central Govt allowed them to operate without a local partner - a first. And in return Tesla had certain minimum capex and tax comitments. Nowhere in the footnotes is there mention of someone building the Factory for Tesla, and supplying all the tooling and machinery. And if that is in fact the case, that someone built the factory for Tesla and Tesla just operates it and takes the profits, not disclosing it would be a big deal, imho. So there must be some other plausible explanation.

 

M.

 

Edit: I've heard some hypothesize that Tesla has become so efficient at building capacity that they built the facotry, and covered their maintenance capex all within the $1.3b Capex for 2019. While that is metaphysically possible, it just strikes me as such an incredible leap, there has to be a better explanation.

 

[A Dhandho Investor]

Normally I would let my friend Dalal chime in, but based on his statements in this thread I don't think he reads the 10K.

 

Gigafactory Shanghai—Lease and Land Use Rights:

We have a lease arrangement with the local government of Shanghai for land use rights at Gigafactory Shanghai. Under the terms of the arrangement, we are required to meet a cumulative capital expenditure target and an annual tax revenue target starting at the end of 2023, which we believe will be attainable even if our actual vehicle production at Gigafactory Shanghai were far lower than the volumes we are forecasting.

 

Gigafactory Shanghai: We own the building and the land use rights with an initial term of 50 years. The land use rights are treated as operating lease right-of-use assets

 

Operating Lease Arrangement in Shanghai, China

We have an operating lease arrangement for an initial term of 50 years with the local government of Shanghai for land use rights where we are constructing Gigafactory Shanghai. Under the terms of the arrangement, we are required to spend RMB 14.08 billion in capital expenditures, and to generate RMB 2.23 billion of annual tax revenues starting at the end of 2023. If we are unwilling or unable to meet such target or obtain periodic project approvals, in accordance with the Chinese government’s standard terms for such arrangements, we would be required to revert the site to the local government and receive compensation for the remaining value of the land lease, buildings and fixtures. We believe the capital expenditure requirement and the tax revenue target will be attainable even if our actual vehicle production was far lower than the volumes we are forecasting.

 

 

 

 

[mloub]

I mean this to me is the critical excerpt from the footnote:

 

"...we are required to spend RMB 14.08 billion in capital expenditures, and to generate RMB 2.23 billion of annual tax revenues starting at the end of 2023. If we are unwilling or unable to meet such target or obtain periodic project approvals, in accordance with the Chinese government’s standard terms for such arrangements, we would be required to revert the site to the local government and receive compensation for the remaining value of the land lease, buildings and fixtures..."

 

So they are committed to spend $2b USD of Capex in Shanghai. That makes sense, and fits with the expected cost for a factory of this size and production capacity. So how much of that was spent in 2019? By the looks of it almost nothing, which makes no sense. Long-lived International Assets barely budged, and capex for 2019 was anemic.

 

If Tesla managed to transfer the cash out-flow for this required Capex off their books, whose books did they transfer it to? And if so, why is Tesla still recognizing the China loans and the resulting cash meant to fund the Shanghai capex on their books?

 

I truly am curious how folks who see a ton of potential in Tesla manage these fundamental math questions from the financial statements. What am I missing? And why is the company not addressing this, or being asked these questions in their conference calls?

 

In my experience whenever a company's story, and cash-flow statements don't match, one shouldn't settle for pat answers. If a plausible explanation doesn't surface soon, one would have to assume the worst and stay away. Reminds me very much of Sinoforest - a value investing favourite in its day - that was reporting phenomenal earnings, but almost no associated cash flow. Turns out they were swapping land back and forth with related parties at inflated prices so that they could increase their comparables and their carrying value of land on their books. Lots of reported earnings but no cash.

 

In this case, the problem is the inverse, lots of growth capex being implied (and financed), but no cash out-flow to match it.

 

M.

 

[Dalal.Holdings]

Normally I would let my friend Dalal chime in, but based on his statements in this thread I don't think he reads the 10K.

 

I love it when those who are perennially wrong exhibit high levels of arrogance.

 

It reveals who's on the other side of some of my trades.  ;D

[Dalal.Holdings]

Have to say I was way wrong on stock performance here.  Really pretty nutty.  I still think it doesn't make sense, but the price is what it is after a lot of very bad news.

 

At least you can admit when you are wrong unlike my buddy Dhando over here. They tell me that the first step in self-improvement is admitting when one gets it wrong (100% happens to everybody).

 

Clearly that exercise is more hypothetical for some.

[Foreign Tuffett]

I mean this to me is the critical excerpt from the footnote:

 

"...we are required to spend RMB 14.08 billion in capital expenditures, and to generate RMB 2.23 billion of annual tax revenues starting at the end of 2023. If we are unwilling or unable to meet such target or obtain periodic project approvals, in accordance with the Chinese government’s standard terms for such arrangements, we would be required to revert the site to the local government and receive compensation for the remaining value of the land lease, buildings and fixtures..."

 

So they are committed to spend $2b USD of Capex in Shanghai. That makes sense, and fits with the expected cost for a factory of this size and production capacity. So how much of that was spent in 2019? By the looks of it almost nothing, which makes no sense. Long-lived International Assets barely budged, and capex for 2019 was anemic.

Keep in mind that the new lease standard knocked off $1.617 billion from PP&E effective 1/1/19 (page 80 from 10-K). One you adjust for that PP&E did go up Y/Y.

 

The below is probably the closest thing we have to 2019 Shanghai capex spend #.

 

"....capital expenditures, which were $1.33 billion during 2019, mainly for Gigafactory Shanghai construction, Model 3 production, and Model Y preparations"

 

If Tesla managed to transfer the cash out-flow for this required Capex off their books, whose books did they transfer it to? And if so, why is Tesla still recognizing the China loans and the resulting cash meant to fund the Shanghai capex on their books?

 

The China loans are on the balance sheet. Unpaid principal balance is $741 million, but they carry them for less. Page 97 of 10-K.

 

I truly am curious how folks who see a ton of potential in Tesla manage these fundamental math questions from the financial statements. What am I missing? And why is the company not addressing this, or being asked these questions in their conference calls?

 

In my experience whenever a company's story, and cash-flow statements don't match, one shouldn't settle for pat answers. If a plausible explanation doesn't surface soon, one would have to assume the worst and stay away. Reminds me very much of Sinoforest - a value investing favourite in its day - that was reporting phenomenal earnings, but almost no associated cash flow. Turns out they were swapping land back and forth with related parties at inflated prices so that they could increase their comparables and their carrying value of land on their books. Lots of reported earnings but no cash.

 

In this case, the problem is the inverse, lots of growth capex being implied (and financed), but no cash out-flow to match it.

 

M.

 

I think you are missing a few pieces of the puzzle. My comments in bold

[A Dhandho Investor]

Have to say I was way wrong on stock performance here.  Really pretty nutty.  I still think it doesn't make sense, but the price is what it is after a lot of very bad news.

 

At least you can admit when you are wrong unlike my buddy Dhando over here. They tell me that the first step in self-improvement is admitting when one gets it wrong (100% happens to everybody).

 

Clearly that exercise is more hypothetical for some.

 

I can admit that I was wrong on stock performance, but as they say ‘the market can stay irrational longer than you can stay solvent’

 

https://electrek.co/2020/04/10/tesla-puts-sales-and-delivery-staff-furlough/

 

 

 

 

[Dalal.Holdings]

Have to say I was way wrong on stock performance here.  Really pretty nutty.  I still think it doesn't make sense, but the price is what it is after a lot of very bad news.

 

At least you can admit when you are wrong unlike my buddy Dhando over here. They tell me that the first step in self-improvement is admitting when one gets it wrong (100% happens to everybody).

 

Clearly that exercise is more hypothetical for some.

 

I can admit that I was wrong on stock performance, but as they say ‘the market can stay irrational longer than you can stay solvent’

 

https://electrek.co/2020/04/10/tesla-puts-sales-and-delivery-staff-furlough/

 

Yet you still cannot sift signal from noise!