General Discussion: 2018 Investor Roundtable

[avoigt]

Yes, a conveniently timed leak. And your theory makes sense, because it made me angry as an investor because it seemed so desperate. But given all the other info we have, and looking at the timeline, both things could very well be true. The email could be very legit and I am not even ascribing any bear traps to the situation. I am just trying to find out how all the info we have could fit together. Its a puzzle where you have pieces from different puzzles mixed in. But if you line them up based on timing, then you can see how it could all work together. If I am right, we could be looking at 2800 exit rate (2500 previous 7 days) where they state that the Ghromann machine ramp will lift them on their way to 5k/w and profitability with no know bottlenecks to stop them. One can dream.

Allow me to add to your thoughts.

I was asking myself what the motivation from Tesla could be to release an internal mail like that to the workers whereby they know that such an e mail will be leaked to the press. We have seen that before. The only motivation I can think of is that Management intended that the information goes to the press for example to distribute positive news.

That does not make any sense for me because it’s not an information that’s worth to be leaked nor that is positive. It does not help the SP, the production nor does it help to produce faster in a highly automated production. If they would have send an e mail to the robots I would more likely have bought it *joking* as harder and faster does not help here in my understanding. The team working on the bottle necks know very well what they do, may be partly external specialist and are likely not workers but engineers like Gromann.

Also we all wait for the investor letter next week so why would management release a mail a week earlier aware that it will go to the press in minutes likely with negative touch in a very negative environment? It does live in the news only for a few days prior to the letter and dies right after regardsless if right or wrong.

Finally, most of us will agree that Bloomberg has not a track record with regards of Tesla about accuracy, honesty and fairness. And last not least it’s again hearsay and why should such a letter not be fully leaked to say reddit after a while to be validated? That did not happen as far as I know. The production tracker from Bloomberg has also not a track record of accuracy and although I welcomed it at start have to ask myself why it differs that much from what people here calculated with the same input.

This all smells a bit too fishy to me ......

P.s. what I like with this board is that information is tested in various ways be it a positive or negative. Let’s keep that attitude as it’s the only option we have to get closer to truth.

 

[Waiting4M3]

Allow me to add to your thoughts.

I was asking myself what the motivation from Tesla could be to release an internal mail like that to the workers whereby they know that such an e mail will be leaked to the press.

The letter sure is helping me sleep a lot better this long Easter weekend.

Finally, most of us will agree that Bloomberg has not a track record with regards of Tesla about accuracy, honesty and fairness. And last not least it’s again hearsay and why should such a letter not be fully leaked to say reddit after a while to be validated? That did not happen as far as I know. The production tracker from Bloomberg has also not a track record of accuracy and although I welcomed it at start have to ask myself why it differs that much from what people here calculated with the same input.

It was leaked to Dana Hull who has covered Tesla for a long time and is not negatively biased. She's not the same people doing the tracker or writing hit pieces.

 

[Reciprocity]

First report of a VIN in the 14xxx. VIN progression, registration algorithm & other VIN-related exchanges

It is a second hand report but there are also a bunch of 13xxx reported this morning so it seems credible. Be nice to see some more 14xxx and 15xxx to confirm.

This is from the March 20 batch of VIN registrations, so lag time between registration and first report continues to drop (from 15 days for March 2 batch to 11 days for March 10 batch to 10 days for March 20 batch). I don't think it can go down much from here.

In any case, another indication of a solid ramp.



Edit: I see @geneclean55 and @j0hn beat me to the punch!

The bolded makes a ton of sense when you think about a big deliver push in conjunction with a production ramp. While they where working through issues, VINs would be assigned slow and sloppy, like old people drive. But now that things are humming, the VINs are getting assigned more incrementally. I am seeing less of those odd ball 6xxx and 7xxx VINs still being assigned.

 

[Reciprocity]

I think possibly when Doug wrote the letter they were at 200/day or 1500/wk, and when they reached 300/day this week, they decided now it's safe to "leak" the letter. It's not as disastrous as your original suspicion, and not as "exciting" as the "bear trap" theory that some have floated.

Very plausible theory. I generally do not buy the Bear trap idea either, I think its more of a coincidence. If anything, it woudl be a warning to bears to look out for the potential of stormy weather.

 

[Ichabod]

Yes, but at some point, you have to have the cars show up somewhere. Unless you think Tesla is perpetrating some kind of trickery by purposely making it seem like more is being produced then is? And doing so to the detriment to your biggest supporters and to benefit your most ardent haters? Given that they will have to come clean next week and longs will be crucified for supporting the stock in light of all the fancy VIN registrations and assignments. I guess they could be randomly assigning and randomly registering and randomly producing.. but I doubt it. Again, to the detriment to longs and benefit of shorts.

I'm not accusing Tesla of anything, and I'm sure it isn't random, but as has been discussed at length earlier, there was a similar abrupt increase in VIN registrations at the end of Q4, which many took to indicate a big production jump at the end of 2017. I don't attempt to explain why, just observe. Also, extra VIN registration is not a detriment to supporters or a benefit to haters. It certainly doesn't help haters, and it only hurts supporters if they read too much into the data (assume, and we all know what happens when you do that). I think there are much more telling indicators in the email leaks than in VIN registrations.

 

[geneclean55]

It is a shame that Dana didn't just upload the complete email. I agree that something is a little odd. Maybe her interpretation?
After all, the quote was production currently "above" 200 but presumably less than 300. That is a lot of wiggle room. They could have been at 201 or 299 for example
The other snippets that she was willing to share suggest they were closer to 300 than 200.

 

[Reciprocity]

I'm not accusing Tesla of anything, and I'm sure it isn't random, but as has been discussed at length earlier, there was a similar abrupt increase in VIN registrations at the end of Q4, which many took to indicate a big production jump at the end of 2017. I don't attempt to explain why, just observe. Also, extra VIN registration is not a detriment to supporters or a benefit to haters. It certainly doesn't help haters, and it only hurts supporters if they read too much into the data (assume, and we all know what happens when you do that). I think there are much more telling indicators in the email leaks than in VIN registrations.

I agree, but this is different Q4. It's less sudden and abrupt and more consistent and smooth over the last 10+ days or so.

 

[Ichabod]

I agree, but this is different Q4. It's less sudden and abrupt and more consistent and smooth over the last 10+ days or so.

From the standpoint of pure curiosity and just following the story, I agree with you. As an indicator to help make an investment decision, it's not even worth considering. It is plausible, but not actionable, at least in my opinion.

 

[ValueAnalyst]

First report of a VIN in the 14xxx. VIN progression, registration algorithm & other VIN-related exchanges

It is a second hand report but there are also a bunch of 13xxx reported this morning so it seems credible. Be nice to see some more 14xxx and 15xxx to confirm.

This is from the March 20 batch of VIN registrations, so lag time between registration and first report continues to drop (from 15 days for March 2 batch to 11 days for March 10 batch to 10 days for March 20 batch). I don't think it can go down much from here.

Thanks for this. What has been the lag time for Model S and Model X?

In any case, another indication of a solid ramp.

Why do you think the stock plunged worse than ever, despite several indications of a solid ramp now for two weeks?[/QUOTE]

 

[EinSV]

Why do you think the stock plunged worse than ever, despite several indications of a solid ramp now for two weeks?

My two cents FWIW.

Gene Munster had a pretty good summary of some of the reasons:

Tesla. We remain positive on TSLA. Shares are down 20% in the past month mostly due to fears of another miss in Model 3 production. The recent stock dive is due to a combination of a Model X accident that is being investigated, Waymo’s partnership with Jaguar, which legitimizes a key competitor (the I-Pace electric SUV), growing concern among all companies testing self-driving vehicles amid the Uber fatality, and news that Moody’s has downgraded Tesla’s bonds to B3 from B2, citing significant shortfall in the Model 3 production rate and a tight financial situation. We continue to believe the Tesla story has the best risk-reward among tech companies over the next 5 years. How To Think About Recent Volatility in Tech | Loup Ventures
​

I would add:

• Negative macro environment
• Effective FUD amplifying all negative news (Tesla bankruptcy gibberish etc. plus increased negative social media activity to manipulate sentiment)
• Additional 3M+ net shares shorted since mid-March (if ihor's numbers are correct)
  • translates to increased supply which according to basic laws of supply and demand amplifies downward price pressure
  • also quick drop in SP increases fear which shakes out weak longs, amplifying the decrease further
• @Papafox's thread summarizes unprecedented short activity over the past month -- as just one data point 60-70% of transactions over the past month involved shorts every single trading day in March (see chart below)
• So IMO increased FUD plus increased net shorting plus increased short price manipulations have amplified downward pressure from macros and negative news while nullifying positive news, especially indications of a Model 3 ramp and new AP neural net with stellar performance

 

[Icer]

A distressing thing is everyone assumes this is a leak to game expectations.
MeToo.

I saw it as prepping or softening for a below 2500 number.
Mentally we all multiplied by 7 and thought, okay 1400-2100 a week.
So the actual number will come out and folks invested,
actively watching will think, okay I already knew that.
No problem , no need to panic.

I was a bit bothered by the "haters" element. But psychologically this may be to reinforce
fans, investors determination and will to stand in there. "Can't let them win". Us vs them.
Well, that is the part I don't like. I really want folks to just think of this as a great American company, worthy of support. To somehow escape the political abyss the country is in. Everyone needs a car, these are great cars, period.
Oh well, maybe next year.

The big problem is nobody really knows what is going on there, and everyone wants to know, right now.
So there is an intense focus and attention to the company across all media.
Everyone runs a Tesla story it seems.

People are really paying attention, the stories get clicks.
Every day someone is on the TV or interwebs talking about Elon.
The man's charisma and interest in him are a bit of a double edged sword.
I do not envy the man, it really is a crazy amount of pressure.

 

[EinSV]

Thanks for this. What has been the lag time for Model S and Model X?

Since Model 3 program is very different than S/X, which is primarily made-to-order, I haven't tried to compare.

 

[MattEnth]

I think 1500/wk now still gives us a very good chance at hitting 4000/wk by Q2 end, which is close enough to cash flow positive.

Not to be too much of a downer... but "cash flow positive" seems like a pretty big stretch.

I think the biggest data point investors will be looking at over the next month or so are not the number of Model 3sproduced, but the gross margin of the Model 3. It was negative in the Q4 report, which meant that Tesla lost money on every Model 3 produced, well short of the 18%+ gross margin it needs. There will also be questions of how much of the margin is dependent upon car add-ons and upgrades, which will give light to just how close (or how far) Tesla is from the promised $35,000 price point.

 

[22522]

Why do you think the stock plunged worse than ever, despite several indications of a solid ramp now for two weeks?

Voting makes winners and losers. Losers leave.

The stock ownership is rolling based on Elon's compensation package.

There is some question if Elon's package makes it harder for Tesla to raise money.

Did the compensation plan convert a story stock into a speculative financial stock with a highly compensated CEO, where all the metrics are about money, and none about product?

Is there a "time to ship the millionth Tesla metric" explicitly called out?

Did the compensation plan over state Key man or whatever?

The Boring Company is not Tesla.
Space-X is not Tesla.

 

[ValueAnalyst]

Not to be too much of a downer... but "cash flow positive" seems like a pretty big stretch.

I think the biggest data point investors will be looking at over the next month or so are not the number of Model 3sproduced, but the gross margin of the Model 3. It was negative in the Q4 report, which meant that Tesla lost money on every Model 3 produced, well short of the 18%+ gross margin it needs. There will also be questions of how much of the margin is dependent upon car add-ons and upgrades, which will give light to just how close (or how far) Tesla is from the promised $35,000 price point.

As always, bears keep moving the goal post, as Tesla continues to execute on its mission. This post is a prime example.

 

[ValueAnalyst]

I think possibly when Doug wrote the letter they were at 200/day or 1500/wk, and when they reached 300/day this week, they decided now it's safe to "leak" the letter. It's not as disastrous as your original suspicion, and not as "exciting" as the "bear trap" theory that some have floated.

Do you know for a fact that Model 3 line runs 7 days a week, or are you assuming? I don’t know the answer.

 

[MattEnth]

Why do you think the stock plunged worse than ever, despite several indications of a solid ramp now for two weeks?

Well, first of all, let's talk about what a "solid ramp" is. To me, a "solid ramp" is where you're able to achieve a production rate of X units for less than $Y billion. How long it takes doesn't matter as much as how much it costs. To call this a "solid ramp" feels like quite a stretch, especially considering the initial goal of 0-->5k/week in 6 months (now it's 0-->5k/week in >1 year).

It's also funny to hear you call it a "solid ramp" considering that you were expecting 1500/month in September. That didn't happen until January.

But I think you're putting too much emphasis on the Model 3's production as a function of the underlying company valuation.

Tesla has been trading with "tech company" multiples that are being called into question. I don't think serious investors have cared about Elon's "targets" (other than how the SEC might care).

I know this will be an unwelcome opinion here, but Tesla is behind in the autonomous vehicles race. When Tesla put autopilot on the road, it was magic. And Tesla looked like it was going to be a magical tech company. People were talking about how they'd start competing with Uber, Lyft, etc.

But that was 2014. It's 2018, and Tesla is way behind. They sure have highway miles driven, but when it comes to everyday driving, you're in a different ballpark.

If Tesla isn't the leader in autonomous vehicles, it's hard for me to see how you value them as a tech company and not a manufacturing company.

 

[MattEnth]

As always, bears keep moving the goal post, as Tesla continues to execute on its mission. This post is a prime example.

What?

You have moved the goal posts, not me. I'm sure I could dig through your post history and find somewhere where you advocated for the 10k/week Model 3s in 2017. Here's one where you expected 1500/month in September (when did that happen again? January?)

My bear thesis has NOTHING to do with Model 3 ramp now. That part ended at the downgrade.

No, my bear thesis was in November. It goes like this:

• Tesla took out a 1.8B loan in August 2017 on weak bonds.
• Elon promised 5k Model 3s/week by the end of 2017. (SEC implications here).
• He wasn't going to make it. Not even close. But he'd convinced investors (such as yourself) that he might.
• Moody's 2017 rating specifically called out how a Model 3 ramp in 2017 was necessary to maintain their rating.
• **Tesla will be downgraded due to missing their targets and weak cash position.
• **GM and Waymo are going to blow past Tesla in Autonomous Vehicles in 2018.
• As a result of the two ** items, Tesla stock will drop.
• Tesla will need to raise funds in 2018 which will heavily dilute the stock.

 

[Waiting4M3]

Do you know for a fact that Model 3 line runs 7 days a week, or are you assuming? I don’t know the answer.

Here is what I dug up yesterday, as far as I can tell they should be running 7 days.

 

[Krugerrand]

Yep. My bank was verified this morning. So I rushed to deposit my money prior to market opening thinking I was good to go since Scotttrade would allow you to trade as soon as the desposit was complete. I was beyond pissed when I found out that I had to wait an additional day or two for the deposit transaction to be completely settled with Ameritrade. Of course tomorrow is a holiday and now I have to wait until Monday. I’m hoping the recall is enough to keep us down for another day or two. It will probably be all forgotten by Monday though.

It does seem ridiculous in this day of computer tech that transfers, refunds and like often require a day or two or five to complete when it couldn’t have taken the computers more than a few seconds to move the ones and zeros, if that long. Bugs my ass too.