2017 Investor Roundtable:General Discussion

[EinSV]

I'm just shaking my head at the fact that they're still net shorting rather than net covering. I mean, heck, even if the company were in terrible shape, they'd be at great risk due to the already high percentage of the float short.

My pet theory -- admittedly speculative and w/o hard data other than the patterns @Papafox and others have documented -- is that some of the bigger shorts who are still in the game have made their main bets on options and are ok losing some money on shorting shares if it depresses the SP and protects their option bets, or at least helps reduce their losses. In other words, it is like the mortgage market in "The Big Short" in reverse -- Tesla SP being artificially depressed to protect short option bets versus mortgage backed securities prices being artificially propped up.

But if that's right, at some point the paper losses on options and shares should become so large that the manipulators are forced to cut their losses and stop throwing more good money after bad. I think you eventually end up with the same result as if they were short on stock and facing margin calls, except potentially even bigger losses.

 

[sub]

I couldn't imagine selling shares to buy a model 3 (I have 2 reserved), talk about opportunity costs!

 

[neroden]

My pet theory -- admittedly speculative and w/o hard data other than the patterns @Papafox and others have documented -- is that some of the bigger shorts who are still in the game have made their main bets on options

I like it but the open interest on options simply isn't large enough to account for the 31 million shares sold short, IMHO.

 

[Lump]

I just want to take this opportunity to mention AMZN is worth almost 2X WMT.

Amazon worth almost twice as much as Walmart

 

[luvb2b]

you can't say if there is net shorting or not from this data. it is only the sell side of the transaction. if there were more or less buy to covers that would determine net covering or net shorting. there is no such data on a daily basis for buy orders that i know about.

I'm just shaking my head at the fact that they're still net shorting rather than net covering. I mean, heck, even if the company were in terrible shape, they'd be at great risk due to the already high percentage of the float short.

 

[neroden]

you can't say if there is net shorting or not from this data.

That's why the data from IB and Fidelity is relevant.

 

[luvb2b]

your numbers are on the spot with mine. my understanding from reading about the non controlling interests is that these structures that hold the solar leases and non recourse to the parent - so that bottom line of what left really is what goes to solarcity shareholders. as far sre deal, as mentioned earlier there was no disclosure around the gains created by the transaction, but it couldn't have been more than 50 million on a 241 million sale.

Description.......9 mo's 2016..12 mo's 2016...4Q16 ( All in $k)

Net Profit (Loss)..(758,704)....(820,347)...(61,643)

Attributable to .....(731,442)...(1,059,121)...(327,679)
Other Interests

Attributable to ...(27,262)....238,774....266,036
Shareholders

So the Net Loss in the 4th Quarter was nearly $62 million but SCTY laid off over five times that amount to " non-controlling interests and redeemable non-controlling interests."

I suspect it relates primarily to "Sammons Renewable Energy (SRE), a Sammons Enterprises, Inc. company, announced today (12/20/16) that it led the equity portion of a $241 million cash equity transaction with SolarCity (SCTY). Franklin Park Investments manages SRE. As part of the deal, SRE is investing in a portfolio of solar projects in 16 states, including 26,000 home residential systems and 19 commercial and industrial solar projects. The financing is non-recourse to SolarCity." Sammons Renewable Energy Leads $241 Million Solar Cash Equity Transaction with SolarCity | Sammons Enterprises Inc.

 

[luvb2b]

that data doesn't give you buy to cover or purchase information either. it only addresses supply of shares to short at two brokers which can change for several reasons other than covering and shorting.

the only way I know to get to net shorting is from the bimonthly short interest reports.

That's why the data from IB and Fidelity is relevant.

 

[BornToFly]

I was just thinking about the value of self driving technology. In 5-10 years, every auto manufacturer will have self driving, making it almost worthless after that point. The value is in the next 5 years. Tesla should sell its technology to share with another automaker now. Based on Mobileye, Tesla can make Billions which would help fund the next Gigafactory, without having to dilute shares, or pay interest on loans/bonds.

 

[aronth5]

One thing to keep in mind about SolarCity revenue is that it is seasonal. Much of the revenue physically depends on the amount of sunlight each quarter. So Q2 and Q3 are higher revenue than Q1 and the preceding Q4. There is also secular growth y/y as new systems are deployed, but the seasonality is pronounced. So I would not expect anything big in Q1, but Q2 could be "surprising" to a market that has difficulty understanding how the seasons work.

Today this is certainly valid but don't forget expansion into the southern hemisphere has the potential to balance out seasonal revenue.

 

[brian45011]

as far sre deal, as mentioned earlier there was no disclosure around the gains created by the transaction, but it couldn't have been more than 50 million on a 241 million sale.

I don't think it is the "gain" but how much of the liability for the losses on the underlying transactions are transferred to the equity purchasers.

Some light reading:
Tax Equity 101: Structures

What Is Tax Equity Financing?

I am skeptical these transactions accrue to the benefit of TSLA shareholders regardless of what the "Net income (loss) per share attributable to common stockholders" on Income Statement shows.

 

[luvb2b]

apologies for so many posts... these are interesting and funny off twitter - really feels like a ceo who thinks his company is about to make a lot of money

 

[geneclean55]

that data doesn't give you buy to cover or purchase information either. it only addresses supply of shares to short at two brokers which can change for several reasons other than covering and shorting.

the only way I know to get to net shorting is from the bimonthly short interest reports.

I dont believe that shares being removed by their owners from the available shorting pool affects supply.
For example at Fidelity, it seems someone decides on a daily basis how many shares are to be made available for shorting.
The morning before cap raise was announced Fidelity made 0 shares available. Lol
The week before q1car numbers were released millions of shares were available each day. Lol.
Consequently, i believe there is a VERY large pool from which Fidelity has access to. If 200k were made available for shorting tmrw and some of the owners decided to call them back, they could be replaced in milliseconds by Fidelities much larger pool.

 

[neroden]

So, the thing about the SolarCity leases/PPAs. Yes, those non-controlling interests are the other owners of the Special Purpose Entity which actually own the panels. The problematic part is... the profit and loss allocation is whacked, and semi-arbitrary. Highly manipulatable. Many thought it was being manipulated to make SolarCity look better, but after digging into it, I realized it's usually being manipulated in order to give *tax benefits* to the other owners -- tax loss harvesting. The thing about this is that it means that profits/losses allocated to Solarcity in one year do not predict profits/losses allocated to SolarCity in the next year.

The cash flow? The cash flow is just as bad; while cash is real, it's also subject to these complicated contracts relating to cash allocation. In at least some of them, the other investors get "cash first" and SolarCity gets "cash later", but they aren't all like that. Anyway, the only way to actually understand what's going on is to have the full 20-year (or whatever) layout of cash flows and profits in front of you. SolarCity, to their credit, did attempt to provide these, but they were confusing because they kept quoting them per-watt (oy), and the critically important interest rate spread was obscured.

Anyway, as far as I can tell, the revised accounting standards will make the profit and loss make a lot more sense; when the solar panels are leased, SolarCity will realize the same profit as if they were sold: discounted expected (contracted) cash flows minus original costs. (The discount will later be realized as interest income.) Then when they sell them into the Special Purpose Entity they'll realize a profit or loss based on the difference between the cash financing received and the value of the cash flows which were sold (which is sometimes not all of the contract term.) (And again, interest rates will make sense -- you'll be able to compare the rates on the financing received with the effective rate which the homeowner is paying.) This is NOT how GAAP accounts for this stuff now, sadly.

Because the current accounting is quite incomprehensible, and because the lease/PPA business exposed SolarCity to dangerous refinancing risk (they were effectively lending for 25 years and borrowing for 5 or less), I did not feel comfortable with SolarCity until I found a clear statement that they were trying to get out of the lease/PPA business into the sales-and-bank-loans business. The statement was back in, IIRC, June of 2016. Since then Musk has repeated this statement more than once.

 

[Ameliorate]

Read some of the reddit thread re model 3 pictures, photographer supposedly has a bunch more on the road, the model 3 was driving around with a bmw. More pics to come hopefully?

 

[racer26]

Well you'll all be happy to know I'm doing my part. Put down my deposit on a CPO S85 a couple hours ago. Pretty decent deal for a 2014. Decided I was tired of waiting. Now to deal with all the paperwork and insurance and whatnot to get it on the road.

 

[jhm]

If we are going to have an extended discussion of the labyrinthine intricacies of SolarCity accounting, I may have to give myself a frontal lobotomy with a power drill. Please, for the love all that it good, take it somewhere else. We do not need splatters of blood and greymatter on smartphones.

 

[Bgarret]

Well you'll all be happy to know I'm doing my part. Put down my deposit on a CPO S85 a couple hours ago. Pretty decent deal for a 2014. Decided I was tired of waiting. Now to deal with all the paperwork and insurance and whatnot to get it on the road.

The paperwork....the insurance...the "whatnot"...NO!

Farewell oh Racer26, you will now enter into the Tesla occult, to have objectivity and "veils of ignorance" lifted from you.

1,793 posts in less than a year BEFORE you own a Tesla....! A mere distraction. You will now start to explore the "dark web" of TMC, full of "delivery checklists" and "best winter tires" minutiae. To be torn betwixt many worlds, speculating not only on share price, delivery numbers and technical analysis, but now also on "key fob basics" and "Tesla Road trip FAQ's".

I see a future, a future with posts approaching tens of thousands, until you buy Audi's (currently for sale) oasis in the Arizona desert and ascend to that halcyon place at the pinnacle of TMC existence....Moderator.

But seriously. Thanks, and congrats. PM me if you have questions about the 2014 Model S CPO experience, as I have, and love my gateway drug to a sustainable future.

Cheers.

 

[steve3]

The outsized ($150 million) in profit was from the one-time sale of bundled solar leases in Q4 2016 (Tesla’s SolarCity sells $241 million equity in its solar portfolio). There may be more of these in the future, but there was no similar sale for Q1 2017.

@luvb2b Hope this helps in your Q1 estimating...

On the Q4 2016 ER call, it looks like the sale referred to in this Electrek article (announced in late December) was apparently not booked in Q4, but instead should boost Q1 results. At exactly the 1 hour mark:

"Jeffrey Osborne - Cowen & Co. LLC
Hey, good afternoon. I appreciate you squeezing me in. Two quick ones. One, was there a solar securitization in the quarter? And if so, how large was it? [snip]...

Jason S. Wheeler - Tesla, Inc.
Quick answer here, no, there's no solar securitization in Q4. There's one in Q1."

 

[SPadival]

I am just $2,000 short of a free base model 3.

Will you panic an sell

Of course not. Even when it finally arrives here in Australia next year (penalized because we drive on the correct side of the road). We don't have good lease options here. So i might take a loan and buy.