Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Fact Checking]

You've shared the argument before that raising equity is a bad tradeoff because of the compounding dilutive effects, but the alternative I fear is a much lower growth trajectory without raising cash.

I'd suggest patience: the long term debt schedule is almost empty for the next 2 years, so cash earned from operations for the next 24 months can go almost entirely towards growth. If it just stays at the current ~$1.2b levels then that's ~10 billion dollars of investments.

 

[Remus]

That's not my point. Will AP fatalities affect Tesla's bottom line? How will BMW fires affect their bottom line? Which company can absorb millions in lawsuit payouts better?

All of this snark about BMWs catching on fire when Teslas are self-driving under trucks and decapitating the driver are ridiculous, boorish and people just need to stop with it.

You'll note that the original "ha ha ha ha BMW catch fire HA" comment was simply a complete non-sequitur response to the comment that BMW has similar market cap to Tesla but has enormous profitability and delivers over 10X as many vehicles as Tesla does.

Just like IBM was enormous profitable selling expensive boxes and nobody got fired buying IBM. Their supporting engineer charges hundreds of dollars per hour as labor cost and the clock began when they leave office on their way to you!

Warren Buffet invest in it.

Now what?

History had hand delivered warnings to IBM, twice! The first time is right before the dot com bubble years when people begin to use multiple small computers for big tasks. IBM had a near death experience but they fully recovered because nobody can get the fleet of small computers working right. Ignoring this dire warning, IBM went on with its old ways raking in *sugar* load of money.

The second warning comes from a young company called Google.

Long before that, Dr. Lamport published this mystical story called Paxos. Long thought as fancy toy for academics only, nobody in industry thought Paxos is feasible at all. Engineers in Google had other thoughts. They successfully used Paxos to coordinate operations of tens of thousands commodity PCs and achieved the unthinkable. They unlocked the power of horizontal scaling, doing number crunching in a scale never seen before, without buying any expensive machines. They even published their work on many academic and industry venues.

Wise engineers in IBM took notes, they warned the management that this new technology trend may spell trouble for the future of IBM. So the management did something, they offered some cheaper models, connect them together as an HA solution, and called it a day. Luckily Google is busy using that technology for themselves, not selling them. So IBM sees no real threats.

Until IBM got hit by cloud computing. They really felt the pain now and started chasing from behind, wanting to use their profit from big machines to fund the growth in cloud. the problem is the big machine sales in the ditch now and they still can not compete with AWS or Azure on price.

 

[Intl Professor]

This is a reassuring note by Krugman. The main takeaway is he believes the main cause is the loss of bargaining power by labor. One factor is the decline of unions, especially compared to other similar nations. For me the best confirmation was assertion today in Canada there is the same level of unionization as a percent of labor force we had in 1973.

Opinion | Don’t Blame Robots for Low Wages

 

[Joe F]

Does that change their profitability?

Going forward? How well are BMW's selling compared to Tesla in Q3, Q4 and the yet to be released Q1 numbers, keeping in mind Q1 '19 overseas sales are still in transit.

Have you driven past a BMW dealer lately? I have. Lots are full of unsold cars. Why is that?

 

[StarFoxisDown!]

My only gripe with Tesla and Elon right now is...…...would it kill you guys to issue a statement about the status of SR/SR+ orders since the announcement and/or make a statement about still being production constrained and will be for the foreseeable future? We've seen a couple funds meet with Tesla's IR and come away saying "we get the impression they are selling every car they make"

Normally I would say that they don't need to be responding the media and FUD because of the on-going false narrative but considering they're kinda partially responsible for the confusion going on(price cuts, store closing, not commenting on SR margin, etc...), it sure would be nice to see them come to the defense of the stock and their shareholders. Feels like we're being left out to dry a bit until Q1 production/deliveries(for the demand narrative) and the Q1 earnings(for all of the worries about cash crunch, margins, etc..)

This is all short term noise and I'm glad for everyone that has the funds and ability to be buying right now.

 

[Antares Nebula]

You are looking at a single quarter that was not totally terrible for Tesla. Let's compare again for Q1 2019 and see how things look.

I don't have a dog in this fight, other than owning and being slightly disappointed in Tesla products and owning and being generally satisfied with BMW products.

It is in my financial best interest for Tesla to succeed, since I have a decent chunk of change tied up in one of their rapidly depreciating assets.

BMW is crap reliability. I've owned two previously. The ones made in the 80s/90s okay. Later models, all sorts of problems, and they don't stand by their work. All four window motors replaced early on. Window top water guard came off at around 50,000 miles on both sides. Paid for a new one, which came off again just after a year. Neither the local dealer or BMW North America would honor the warranty. Told me that I had to pay full price to repair it again. Never again will I buy one!

 

[Buddyroe]

Yer tellin' me! Only 6 vehicles starting production or revealed in the last 7 years!

Slackers.

Nio "revealed" 4 or 5 cars already. Does that impress you? So Tesla revealed the Semi and the new Roadster. Revealing your concept or even your production model is zero, zilch, nothing until you commit to a production date and some evidence of that production begins. Essentially, Tesla has put 3 cars into production in 15 years (see how you can use statistics to prove any point).

A ton of people have clicked Disagree on my posts about the Model Y. However, I see that Wall Street agrees with me.

Ironically, my wife couldn't watch the reveal because she had to be in to work early today (6am ET) - but, when I woke up, I had a text waiting on me that read, "Did you put our deposit in on the Y? It's awesome! I want a white one". Go figure.

 

[MarcusMaximus]

My only gripe with Tesla and Elon right now is...…...would it kill you guys to issue a statement about the status of SR/SR+ orders since the announcement and/or make a statement about still being production constrained and will be for the foreseeable future? We've seen a couple funds meet with Tesla's IR and come away saying "we get the impression they are selling every car they make"

Normally I would say that they don't need to be responding the media and FUD because of the on-going false narrative but considering they're kinda partially responsible for the confusion going on(price cuts, store closing, not commenting on SR margin, etc...), it sure would be nice to see them come to the defense of the stock and their shareholders. Feels like we're being left out to dry a bit until Q1 production/deliveries(for the demand narrative) and the Q1 earnings(for all of the worries about cash crunch, margins, etc..)

This is all short term noise and I'm glad for everyone that has the funds and ability to be buying right now.

We should get production and delivery numbers in ~2 weeks.

 

[MarcusMaximus]

Essentially, Tesla has put 3 cars into production in 15 years

Umm... Roadster + Model S + Model X + Model 3 = 4 vehicles.

 

[NicoV]

Several robust sources of data are suggesting that Q1 cash flow will be just fine, I'll be able to estimate Q1 cash flow figures in about 2 weeks, when the April 1-2 delivery report is out.

The European 'end of quarter push' is looking good so far, but let's not count our chickens before they are hatched, the Chinese Model 3 customs hick-up has shown that unexpected events can happen too.

I just read on fb about a Tesla owner who was warned that he should come on time for his maintenance appointment next week in Hasselt, because otherwise he might have a long wait time because of a massive amount of deliveries. Hasselt is about 2h away from Zeebrugge.

Personally I called the Ghent (less than one hour from Zeebrugge) Sec to make an appointment for my tire swap to summer tires. Much to my surprise, after a long time on hold, somebody from a different sec answered the phone, explaining that Ghent was too busy with delivering Model 3s to pick up the phone, and that she would send a mail so that ghent would call me back. No phone call so far.
so yes, they are in full 'throw everything we ve got' mode to deliver any remaining model 3's

 

[EVDRVN]

So the question begs. Why is Elon intentionally underselling the Y?
From previous events, we understands that they know how to jazz it up. If it is toned down, there is probably a reason for it.

Not sure if there is a good answer, IMO it was a cringing presentation from some of his jokes to the way cars were crowded together, the energy of his presentation and the overall content. He seemed to be, "well it's over there next to the other cars". In fact people seemed underwhelmed when the car came out and first thought was what was the point of this and the stock should take a dive tomorrow vs a boost. Oddest event and a big dud IMO.

 

[Do It]

You've shared the argument before that raising equity is a bad tradeoff because of the compounding dilutive effects, but the alternative I fear is a much lower growth trajectory without raising cash.

Talking about needing capital raise without showing a model is spreading fud. Remember bankwuptcy fud last year? It turned out to be 3B away from it. Paging luvb2b...

 

[bdy0627]

^This 100%. And in my opinion (which I know is unpopular here) a lot of the drama we are seeing recently is all related to Tesla, err Musk's decision that he wants Tesla to be self funding from here on out vs raising additional capital.

Even this Model Y announcement felt rushed and feels to me like a wasted opportunity. I watched it live and let's be honest, it was underwhelming. Invites were sent at the last minute and the setting kind of small and cramped and had poor lighting. At the event Musk barely showed or even talked about the Y. The live stream cut out almost immediately afterwards and before Musk mentioned any details about preordering the car. It would have been better to have more time spent on the Y (Like a comparison with other CUVs in the segment) and less on all the achievements Tesla has made. Yes I know Musk had originally given a date of 3/15/19, but this event did not have the proper preparation, there's no other reason I can think of as to why it was such a weak presentation.

I agree with some of your points. I watched the event while it was streaming live, and I found it disappointing as well. I was looking for a great deal of information and coverage on the model Y. I was really surprised there was only about 5 minutes of that. The event seemed minimally focused on the Y. However, Tesla isn't known for consistently strong presentations. The X reveal was pretty bad. The 2nd model 3 reveal was pretty weak as was the event to signify the start of deliveries of the model 3. That's just the way Tesla approaches these events. They are not Apple. I think part of the charm of the events is that they do still seem to come from a startup rather than a $50B market cap company looking to release its 5th vehicle. This event was no different. Now, who's producing the SpaceX live stream events? Those have gotten much more polished over time. That has not rubbed off on Tesla.

 

[Swampgator]

Sorry to hear that. I have had the opposite experience. Couldn't be happier. I guess the question I have is did you just get a "lemon" or are there more people out there like you? Have you had other people say they have similar problems?

Ninja has always been a glass half empty kinda guy. I really do appreciate his pushback though on some of us Fanboys
That said, while my Model 3 has not been perfect it is still the best thing I have ever purchased. And my BMW was so unrealiable I sold it after 18 months before the (then 2 year) warranty was up. That's not going to happen with my Model 3

 

[Driver Dave]

Found link to this one:

Electric Cars Are an Extraordinarily Bad Idea

Funny to read... so wrong.

 

[Antares Nebula]

Timing of Model Y Gives Cash Insight | Loup Ventures

Seems they issued some kind of correction:

Correction: Model Y Timing in Line with Company Expectations | Loup Ventures

 

[Remus]

A lot of new eyes on this event. Lots of comments about how awkward it is on the web. However those of us who followed over the years can probably notice that Elon is giddy. Compared to the Elon on model 3 unveil.

Either things are going well, or he got another hollywood girlriend.

I thought its only me.

He gained lot of weight during the production hell times, but it appears to me that he lost most of it. His social media behavior is different too. I still remember the "dark ages" when he repeated tanked the stock price and we were like "this guy will never learn".

it seems to me the gained weight and the nasty social media posts are due to tremendous amount of pressure at that time. The short thesis is that Tesla is facing bankwupcy since they can't sell cars. I think if that is true, Elon may not be able to loss weight and laugh when people comment on his shoes.

 

[brian45011]

The $2500 does not hit the income statement until Tesla delivers the car.

When you order a Model Y, Tesla's Cash asset and Customer Deposits liability both increase $2500. Tesla does not recognize any of the $2500 as revenue until you get your car and the paperwork is complete.

Thanks (The language in the boilerplate that the payment is NOT a deposit is confusing.)

 

[Joe F]

You'll note that the original "ha ha ha ha BMW catch fire HA" comment was simply a complete non-sequitur response to the comment that BMW has similar market cap to Tesla but has enormous profitability and delivers over 10X as many vehicles as Tesla does.

Since it was me who first mentioned what you refer to, at no point did I include what you blithely state as "Ha ha ha..."

Please stop exaggerating; It's rather boorish.

 

[bdy0627]

So the question begs. Why is Elon intentionally underselling the Y?
From previous events, we understands that they know how to jazz it up. If it is toned down, there is probably a reason for it.

With volume production planned for late 2020, there isn't much point in selling it hard right now. There are some negatives to doing so, primarily to avoid reducing demand for current products. That's the simplest answer to me.