Short-Term TSLA Price Movements - 2016

[esk8mw]

You are forgetting one thing. There is also the value in being GAAP positive. If those $11M makes the difference between -0.03 EPS or 0.02 EPS (quite plausible even) then I am pretty sure the value in stock price reaction alone would be enough to balance out any potential future revenue stream. Not to mention value in the pride of the employees, fired on by the internal memo from Elon and then actually being able to deliver on it instead of disappointingly missing the stretch goal so narrowly.

That's a very narrow set of circumstances and wouldn't have been known to Elon in mid August or whatever. If the expected value of waiting to sell is 10x that of selling now, there would have to be a very very compelling reason to sell the credits now and give up $90 million or whatever in EV. They have no idea what their exact GAAP numbers will be that far out, and taking a chance at foregoing significant revenue a few months out for a small possibility of moving a needle from negative to positive would be foolish, IMO. Just as likely that they give up the chance at a lot more money to move it from -0.15 to -0.08, which wouldn't matter much to anyone.

In times like these, people tend to follow the hard dollars, not speculate about a potential side benefit of moving quarterly number a tiny bit. Also keep in mind there would be a huge, not to be ignored potential benefit of softening Q4 numbers with an extra $100 million in revenue if they wait to sell. I would hope they are not so short-sighted that they can't look more than a few weeks out re: potential ZEV credit benefits to the financial statements if there was a solid chance the market would return (if indeed it crashed in the first place, which is certainly not proven in any way).

Bottom line - I'll be quite angry if there's less than $25 million or so in ZEV in the financial statements this quarter, unless it's clearly explained to us why they were dumped at a massive discount.

 

[doggusfluffy]

One more ZEV wildcard to toss into the mix. Also I believe California AG was involved in the original suit against VW.

U.S. judge signals likely approval of VW diesel buyback settlement

In addition to other settlement costs, VW will pay more than $600 million to 44 U.S. states, spend $2 billion on zero-emission vehicle promotion and infrastructure, and another $2.7 billion to offset diesel pollution. Breyer must still approve those settlements.

 

[Johan]

You are forgetting one thing. There is also the value in being GAAP positive. If those $11M makes the difference between -0.03 EPS or 0.02 EPS (quite plausible even) then I am pretty sure the value in stock price reaction alone would be enough to balance out any potential future revenue stream. Not to mention value in the pride of the employees, fired on by the internal memo from Elon and then actually being able to deliver on it instead of disappointingly missing the stretch goal so narrowly.

What would be the actual "value" to Tesla in an immediate stock price reaction to positive EPS? Why would Tesla care about the short term price of TSLA here and now, especially seeing as they've clearly said that they don't expect a need to raise capital anytime soon.

 

[vgrinshpun]

@vgrinshpun: I have tried to get IR to give me timing of the pressers today.
No answer, but it is early on the west coast.
You have good luck with Evanston: How about an email to him??
Thanks

It looks like that what matters is not who is asking, but what the question is. My most recent question about Silevo, for example, went unanswered...
It is highly unlikely that they will answer the question on timing of the announcement...

 

[AudubonB]

Great analysis. Here is a simpler one that gives the same result: In the pessimistic scenarios the other automakers have a large inventory which discourages them from buying more. Fine. But, Tesla still controls the ZEV "oilfields". They are the only game in town for sourcing. They are the ZEV OPEC. They can just completely embargo any sales for as long as it takes and essentially set the price. The only way that they lose this advantage is by panic dumping. Better to sit on them and let them rot than panic sell.

I believe, AustinEV, that the playing field is not exactly so titled toward Tesla as you lay it out. My understanding of California's situation (I am not familiar with the handful of other states' rules) is that an automaker out of compliance with ZEV sales needs purchase an EV credit OR pay a fine. Therefore, if I understand it correctly, the fine places an upper bound on the amount of a credit.

 

[racer26]

I don't believe the value of ZEV credits would have tanked that badly. They didn't get any easier to produce.

The number required was softened, but it seems like that may be short lived, and with Tesla continuing to demonstrate that you can in fact build ZEVs that customers will buy (which is the argument the incumbents have been making to CARB for decades is that nobody wants to buy their crappy compliance cars), and other nations mandating 100% ZEV by dates not that far into the future, its easy to believe that CARB will once again tighten the belt sooner or later.

For 1-3 years, they might get away with not needing to produce ZEV credits, but that doesn't change that Tesla is one of the only companies producing the true ZEV credits (and not AT-PZEV ones, or the other kinds) in significant quantities.

Simply offering a ZEV does not produce ZEV credits. They have to actually *sell* the ZEVs, and that's going to be really difficult for the other automakers to do, with the disincentive their dealers have to selling them in the form of reduced service income.

 

[dalalsid]

The theory is to remove them when they've done their job and changed the market. The practice is... well, the oil industry... ask for more.

So far alternative fuel subsidies have done their job and sunset after X cars. The only problem with them is that they are by manufacturer and not overall market. Which makes things unfair for the pioneers as their subsidies are gone making them uncompetitive when everyone else tries to catch up.

 

[AlMc]

I sent a request to the generic IR email earlier. Just sent one to Evanston directly .

Worth a shot

 

[racer26]

I believe, AustinEV, that the playing field is not exactly so titled toward Tesla as you lay it out. My understanding of California's situation (I am not familiar with the handful of other states' rules) is that an automaker out of compliance with ZEV sales needs purchase an EV credit OR pay a fine. Therefore, if I understand it correctly, the fine places an upper bound on the amount of a credit.

You're correct, and that bound is $5k per credit. The reality of the situation is that not a single credit has ever been purchased from CARB this way.

 

[CorneliusXX]

What I said is that they won't change the rules of the incentive already in place. It was written with a definitive end built into it, designed to keep cost reasonable until it could be determined if further cost in subsidizing it was worthwhile.

I agree, Tesla building something good enough to trigger the cap likely means that Tesla can stand on its own two feet after that. That being said, it is unfair to Tesla to tie the endgame scenario to success of a single automaker. A more reasonable subsidy would have tied it to TOTAL EV sales of all manufacturers, not a per manufacturer limit. Otherwise, you unfairly give buyers incentive to buy less-popular (and presumably less compelling) EVs over Model 3 when they can get the incentive on another car but not Model 3. You essentially force Tesla (who, remember, produced the sufficiently compelling EV to trigger the end of the subsidy) into a $7,500 price disadvantage to inferior products.

This is less of an issue than everyone thinks though, because both GM and Tesla are in a race to the 200k finish line (with nobody else even close, and nobody else with a credible competitive product) and will reach it at approximately the same time - the difference is that by the time they reach the finish line, Tesla will be producing ~10x as many EVs as GM on an annual basis, and so if you want the credit in the 6 quarter long wind down, you're more likely to get it buying Tesla. There may be a brief window in which Bolt is eligible and Model 3 is not, but it will be shortlived.

I agree with your assessment. There will be a time when the more compelling vehicle won't be subsidised. However I think the current arrangement is better for the sector as the individual manufacturer cap means that every manufacturer has the opportunity to get the benefit which should encourage them to enter the market even if they are a little late. If the subsidy was uncapped by manufacturer we would probably have Tesla as the runaway winner and having little competition. If the incentive drags all manufacturers into the EV market i think this would be better for the long term advancement of EVs.

 

[Gerardf]

Just watch the SP - a big dive or climb and you'll know

A (small) jump now, any news ?

 

[Tslynk67]

A (small) jump now, any news ?

That was a "blip", not a "jump"

 

[racer26]

I agree with your assessment. There will be a time when the more compelling vehicle won't be subsidised. However I think the current arrangement is better for the sector as the individual manufacturer cap means that every manufacturer has the opportunity to get the benefit which should encourage them to enter the market even if they are a little late. If the subsidy was uncapped by manufacturer we would probably have Tesla as the runaway winner and having little competition. If the incentive drags all manufacturers into the EV market i think this would be better for the long term advancement of EVs.

A time where the more compelling vehicle is less subsidized, unless the rules of the game are changed to remove the 200k cap, or change the way the wind down works, or any number of other options. With a new POTUS literally on our doorstep (and with all signs pointing to green-energy-conscious HRC as the new POTUS), there is a significant chance the rules of the game will change in a way favourable to Tesla before the end of the existing program puts Tesla at a competitive disadvantage.

I don't believe for a second that the rules will be changed in a way that results in cutting off the subsidy sooner than the current rules dictate. It would be political suicide.

Other jurisdictions are strengthening, not weakening, their EV incentive programs (particularly for the Model 3 price point) as the ball has gained some momentum. Ontario changed the rules this spring altering the net incentive available to Model 3 to be likely $14,000 (up from $8,500) and nerfed it for low-end Model S from $8,500 to $3,000 and for fully loaded P100D from $8,500 to $0. The theory being that if you're buying a high-value car, you don't need as much help, but we want to put as many butts in the driver's seat of EVs as possible, as quickly as possible.

 

[GoTslaGo]

Actually that would mean that either Tesla produces a lot more S-X than expected or that the M3 production is delayed.

Thanks for pointing out!

 

[esk8mw]

BTW, as I haven't seen anyone comment on it yet, the SEC retroactively uploaded a bunch of CORRESP and UPLOAD filings going back to May for SCTY. Curiously, SCTY received comments on its 10-K, but I still haven't seen any comments on the S-4 (even though the SEC has approved it and they are clear to vote now).

Anyway, you can see what the SEC was focused on and how SCTY responded, which is always interesting. I haven't gotten all the way through it yet but there's definitely some interesting discussion about debt, MYPower loans, regulatory credits, etc. I recommend starting with the 6/8/16 CORRESP filing (which gives SCTY's responses to the SEC's initial comments) and follow the chain from there if you are so inclined.

 

[NOLA_Mike]

The arbitrage gap between $TSLA and $SCTY continues to narrow.

$TSLA $200 = $22 $SCTY

Sincerely,
Capt. Obvious

 

[Fallenone]

If you re-read the initial post about this topic, I suggested there COULD be a "regulatory credit" surprise this quarter. The term encompasses ZEV, GTG, and CAFE credit sales. The latter two have been running $15-$20 million/quarter for the last three and a half years (when that detail is reported). Politicians are intent on making those burdens on traditional ICE OEMs ever more onerous. Consider that revenue stream, that drops straight to the bottom line, irrelevant as you prefer

Sorry I missed this in your first post.

 

[BobSk]

What would be the actual "value" to Tesla in an immediate stock price reaction to positive EPS? Why would Tesla care about the short term price of TSLA here and now, especially seeing as they've clearly said that they don't expect a need to raise capital anytime soon.

Tesla doesn't care about normal fluctuations, but if the stock gets hammered too low, it would have three negative effects:
1. The vote may not pass.
2. Many Tesla supporters lose money and can't buy Tesla cars anymore.
3. Shorts/manipulators make a lot of money and they can do more damage down the road. Think about the negative ads they constantly put out in the past 6 years.

There are more reasons, such as negative effect on Tesla's brand image, difficult to borrow money, etc.

 

[AudubonB]

I sent a request to the generic IR email earlier. Just sent one to Evanston directly .

Worth a shot

To the town in Wyoming, or to Tesla's IR?

You'd be more likely to get a response if you spelled Jeff EVANSON's name correctly.....



*****am writing this partly because it's not the first time in the past days that his name has appeared here thus misspelled*****

 

[NOLA_Mike]

CNBC is having Chanos on now so get ready

EDIT: He is thoroughly poo poo'ing the SCTY acquisition ATM