Short-Term TSLA Price Movements - 2016

[Jayjs20]

I found the existence of this article amusing.

You Really Don't Want to Make 150 Percent? Huh.

 

[vgrinshpun]

"Sept 16 (Reuters) - Nevada's utility regulator on Friday approved a settlement between SolarCity Corp(SCTY) and the NV Energy unit of Warren Buffett'sBerkshire Hathaway Inc(BRK/A) that grandfathers roughly 32,000 rooftop solar energy customers into older, more favorable rates for 20 years.

The 3-0 vote by the Nevada Public Utilities Commission came nine months after that body, with NV Energy's support, approved new charges and reduced subsidies for people who had installed or applied to install rooftop solar.

That decision had prompted SolarCity(SCTY), run by technology entrepreneur Elon Musk, and other solar installers to leave the state.

But NV Energy later endorsed the grandfather provision, despite having argued that the old rates forced its customers to subsidize those using green power.

Nevada Governor Brian Sandoval, a Republican, also supported the accord.

"This is an important step to establish regulatory certainty in Nevada for customers," Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association trade group, said in a statement. (Reporting by Jonathan Stempel in New York and Nichola Groom in Los Angeles)"

 

[madodel]

Why doesn't Tesla put up information kiosks at Superchargers? People can see the cars charging, talk to the owners and get information on Teslas at the kiosks. Not a replacement for a showroom but can at least direct people to where to get information and how to order online.
Michigan rejects Tesla’s bid to open dealership

 

[paulch]

I just ran some numbers regarding the TSLA/SCTY arbitration play. I'm no expert, so would appreciate if others can point out if my line of thinking is correct.

If deal goes through, SCTY at current prices gets you TSLA shares at about ~$155 compared to TSLA at ~$203 currently.

Seems like the only way to "guarantee" a profit is to LONG SCTY and SHORT TSLA. Based on my math, that trade nets ~14% profit.

If the deal does not go through and SCTY goes bankrupt, the loss is somewhere around 40-50%. This means the deal has to be at least 75% likely to go through for this arbitration to make sense.

But more than that, besides losing on SCTY, if you're short TSLA and it goes to $300+, you stand to lose a lot more. Basically, the potential loss is unlimited based on how high TSLA goes.

It seems the likelihood of the deal going through has to be at least 90% or maybe a lot higher for it to make sense for institutional investors to do it. Since the purpose is "guaranteed" profits, 95% chance of making 14% vs. 5% chance of losing 80% no longer seems like such a good deal. So it may be that it's not that the market thinks the deal will fall apart, but even at low probability, it's not worth the risk. Any chance this could be what's happening?

Why people assume SCTY will bankrupt if the merger does not happen? There is no fact that SCTY is at the edge of bankrupt.

Elon mentioned that even if the merge does not happen, SCTY will still be doing fine alone. If we trust Elon's integrity, there is no reason to be over-pessimistic.

It's true that the entire solar industry is at its low point this year, but as the cost of solar panel (products) keeps on dropping exponentially, Solar will become the major energy source in the next 10 years, the solar industry will boom, and the stock of solar companies will soar.

Human being have to learn how to harness the energy from the Sun, once we reach that point, the cost of energy will drop dramatically, close to zero, and the human history will enter a phase.

 

[esk8mw]

The 'Go shop' provision for SolarCity has ended several days ago. If I understand correctly, SEC response/demand for clarifications regarding S4 would start right after that. Nothing so far: EDGAR Search Results

Will there be a document if SEC gives green signal for the voting to go ahead?

It will be posted to EDGAR when it's ready. The SEC may not have even started reviewing until the period ended, which means it could be a little while before the first round of comments is received. Even if the SEC has no comments (0.00001% chance) they would file a letter saying they have no comments.

As I said, I have an alert up with my EDGAR tool and you will all be among the first to know.

 

[racer26]

Why people assume SCTY will bankrupt if the merger does not happen? There is no fact that SCTY is at the edge of bankrupt.

Because that's the story that the financials look to imply. Also, because a merger deal sponsored by management on both sides failing would be a serious vote of no confidence.

SCTY has huge assets in installed solar generation that they borrowed money on short term loans to finance the installation of so that they could collect the feed-in tariffs for 20 years. The short term loans they financed them on are coming due soon and need to be refinanced. SCTY is struggling to find financing on favourable terms, and that poses a big problem. If the financing terms get bad enough, they end up upside down on millions if not billions in installed assets.

 

[Quesder]

Ok, when we had a good up-slope to $201.xx yesterday, many people got cocky and yelling to shorts. Then we ended up at $200.4 . Bad.
But today I think we can really get cocky and yell now.

Ok, joke is over. Even though we think that Q3 deliver can be excellent, we probably have to sell-before-the-news, maybe on 10/3.
Do you guys think so? I remember last year Q3 (or Q2?) the market just realized that TESLA may beat the expected delivery number, and the stock went about $280. And TESLA did defeat, but the stock price just dropped after that. So I am thinking maybe I still have to sell this time.

 

[vgrinshpun]

Yea, to your edit - looks like the game is up - TSLA is not tied to market so far today and perhaps forced covering pressure is mounting. Volume is up significantly in the last 15 mins.

Interestingly enough, max pain still sits at $207.5. I take it as it is MM best agregate guess of where we are likely to end up by the end of today.

The volume is up again and we are about to break through $205.

Maybe we are heading to $207.5 after all...

 

[TrendTrader007]

From your chart what price do you think it will reach after the q3 results are released ? If it hangs around 200 then I thought we will not see the previous highs of 220-230

I can't forecast prices
All I can tell you is the way TSLA is acting I'm superoptimistic that for the next 4 quarters it could go up big time and if I know my TA then this is at least a $400 stock within a year or so

 

[FluxCap]

A few points on the death spiral, from Elon's perspective I think it does make sense to acquire SCTY and that way SCTY can be assured of better and continued financing due to TSLA's stronger financial position. This can stop the spiral of death for SCTY and is probably the intent/hope for the acquisition, as well as the synergies created by combining SCTY w/Tesla Energy. It all makes sense to me.

But what if (note: I think it's healthy to discuss certain what if situations when investing, especially when stakes are large) there's a major economic recession next year

Dave, I respect your thought sharing and there are plenty of people afraid of what next year will bring for the economy and their portfolios, and I do understand your frustrations with SCTY's prior managerial mediocrity. However, I don't think this translates to a good reason to sell SCTY, hope for a voluntary merger cancellation by shareholders, and remain long TSLA. That just seems to me like investing in two contradictory directions at once. (Incidentally, I think in a likely HRC presidency, we will see serious gains in TSLA and renewables, while in a Trump presidency we would see global war and misery that makes any portfolio strategy irrelevant).

My take on the SCTY deal is just this: I was surprised and disappointed when it was announced because I thought it was not yet time, and further disappointed when I read through the filings revealing SCTY management's lack of skill. But once the boards and Elon decided that this deal was going to happen, I sucked it up and begrudgingly went along. Why? First, because I started to see more synergies upon reflection than were immediately apparent, particularly in a ready-made Tesla Energy workforce. Second, because we simply have to have a strong solar company brand in the USA to move to sustainable energy adoption in a more widespread way, and if SCTY needs Elon's direct supervision to do this, then so be it. Third, it would be a vote of no confidence in Elon Musk and the Board of Tesla for me to go against their clear will here, and a 'no' vote would damage TSLA's credibilty and share price in a much more meaningful way than you may realize.

I see some definite mismanagement and a business model that is overdue for some realignment in SCTY. I don't see rampant fraud that portends imminent bankruptcy, or debt structures that are so insurmountable as to guarantee destruction of both companies. And the boss of my portfolio has decreed that he will right the ship at SCTY under his supervision, so basically, I'm on board with that.

In my experience, large and successful institutional investors set their emotions aside in big decisions like this, and will, in the end, vote for the merger to happen in the best interests of their portfolios, despite some serious venting and giving Elon (and SCTY management) an earful.

 

[dandurston]

Dave, based on Elon e-mail it is almost certain that Q3 will be non-GAAP profitable, and, if the efforts Elon requested from the team are successful, Q3, in addition to being non-GAAP profitable will also be GAAP profitable and cash flow positive.

I could easily be wrong, but I think we're not properly evaluating GAAP and non-GAAP profitability for Q3. Historically, the large difference between GAAP and non-GAAP profitability comes from differences in booked revenue. Under GAAP rules Tesla can't count the full revenue of a car sale if it's backed by the RVG (resale value guarantee) since the buyer could sell it back at 3 years so the sale isn't a sure thing. Once the 3 years passes then the remaining value of the car can be booked under GAAP rules. Non-GAAP counts the full value of the sale right away.

This all changed for Q3, when Tesla ceased the RVG in most markets. So now they can book the full sale amount of a car as revenue and thus GAAP and non-GAAP revenue should be very similar. Additionally, 3 year old cars are now coming off the RVG so Tesla can also count this revenue under GAAP rules even though it was already counted under non-GAAP. So GAAP revenue could actually exceed non-GAAP.

I'm sure there's more to this than I understand, but when Elon said Tesla might be GAAP profitable for Q3 and we all took that as non-GAAP is a slam duck, we might be off base. Hopefully someone more knowledgeable than I can wade in on this.

 

[TrendTrader007]

Forecasting prices is a fool's errand
All one can do is make an educated guess as to the probability of an event occurring
I'll post my big picture TA thoughts in more detail later but I'm very impressed by the resilience of this stock and TSLA if it continues to hold up nicely for the next 10 trading days should bring huge profits to shareholders over the next 4 to 6 quarters

 

[Papafox]

Captain, that MM starship's tractor beam is just too powerful. Our deflector shields are exhausted and we're heading to 205 whether we like it or not!

 

[joseph7h]

Mobileye Is A $10 Stock That's 'Hyper-Inflated', Could Collapse In 6 Months: Chowdhry

"Do you think, since your corporate servers are running on INTC Chips, it is okay for INTC to demand all your Data, just because you use INTC Processors," the analyst wrote. "This is the height of Stupidity that MBLY is showing."

 

[austinEV]

Dave, I respect your thought sharing and there are plenty of people afraid of what next year will bring for the economy and their portfolios, and I do understand your frustrations with SCTY's prior managerial mediocrity. However, I don't think this translates to a good reason to sell SCTY, hope for a voluntary merger cancellation by shareholders, and remain long TSLA. That just seems to me like investing in two contradictory directions at once. (Incidentally, I think in a likely HRC presidency, we will see serious gains in TSLA and renewables, while in a Trump presidency we would see global war and misery that makes any portfolio strategy irrelevant).

My take on the SCTY deal is just this: I was surprised and disappointed when it was announced because I thought it was not yet time, and further disappointed when I read through the filings revealing SCTY management's lack of skill. But once the boards and Elon decided that this deal was going to happen, I sucked it up and begrudgingly went along. Why? First, because I started to see more synergies upon reflection than were immediately apparent, particularly in a ready-made Tesla Energy workforce. Second, because we simply have to have a strong solar company brand in the USA to move to sustainable energy adoption in a more widespread way, and if SCTY needs Elon's direct supervision to do this, then so be it. Third, it would be a vote of no confidence in Elon Musk and the Board of Tesla for me to go against their clear will here, and a 'no' vote would damage TSLA's credibilty and share price in a much more meaningful way than you may realize.

I see some definite mismanagement and a business model that is overdue for some realignment in SCTY. I don't see rampant fraud that portends imminent bankruptcy, or debt structures that are so insurmountable as to guarantee destruction of both companies. And the boss of my portfolio has decreed that he will right the ship at SCTY under his supervision, so basically, I'm on board with that.

In my experience, large and successful institutional investors set their emotions aside in big decisions like this, and will, in the end, vote for the merger to happen in the best interests of their portfolios, despite some serious venting and giving Elon (and SCTY management) an earful.

Well said Flux. That's a great explanation of the merger rationale. (and affects of the election fwiw).

 

[racer26]

Mobileye Is A $10 Stock That's 'Hyper-Inflated', Could Collapse In 6 Months: Chowdhry

"Do you think, since your corporate servers are running on INTC Chips, it is okay for INTC to demand all your Data, just because you use INTC Processors," the analyst wrote. "This is the height of Stupidity that MBLY is showing."

That is kind of a pretty spot-on analogy.

Its kind of amazing how quickly the tide can turn. A month or two ago, I thought MBLY had a pretty bright future as the automakers start getting on board with more and more ADAS features. Now, I think they are scum and that their public breakup with TSLA has permanently damaged their reputation.

 

[TrendTrader007]

And I'm actually thinking of long term capital gains strategy with TSLA based on long term price action

 

[vgrinshpun]

I could easily be wrong, but I think we're not properly evaluating GAAP and non-GAAP profitability for Q3. Historically, the large difference between GAAP and non-GAAP profitability comes from differences in booked revenue. Under GAAP rules Tesla can't count the full revenue of a car sale if it's backed by the RVG (resale value guarantee) since the buyer could sell it back at 3 years so the sale isn't a sure thing. Once the 3 years passes then the remaining value of the car can be booked under GAAP rules. Non-GAAP counts the full value of the sale right away.

This all changed for Q3, when Tesla ceased the RVG in most markets. So now they can book the full sale amount of a car as revenue and thus GAAP and non-GAAP revenue should be very similar. Additionally, 3 year old cars are now coming off the RVG so Tesla can also count this revenue under GAAP rules even though it was already counted under non-GAAP. So GAAP revenue could actually exceed non-GAAP.

I'm sure there's more to this than I understand, but when Elon said Tesla might be GAAP profitable for Q3 and we all took that as non-GAAP is a slam duck, we might be off base. Hopefully someone more knowledgeable than I can wade in on this.

The post I linked includes detailed reasoning on this. Ignoring the deferred revenue and lease accounting, the difference between GAAP and non-GAAP is in stock based compensation, which was $67.3M in Q2. This was the key for my conclusion. You can see more details here.

 

[Jayjs20]

Alright, I caved and bought 18 shares of SCTY. That is the proper number to get, right? Should net me 2 shares of TSLA if it goes through?

 

[vgrinshpun]

Captain, that MM starship's tractor beam is just too powerful. Our deflector shields are exhausted and we're heading to 205 whether we like it or not!

Ok, Captain, they might be moving the tractor beam up. Stand by