TSLA Market Action: 2018 Investor Roundtable

[YasB]

This is per Tesla's current claim that their 20 GWh of annual, automotive battery production is equal to (or more than) the combined annual, automotive battery production of all other automakers, i.e. a current, total annual production of at most 40 GWh.

I think that claim is dubious. According to EV Sales 145.000 Plugins were sold in July. Substract ~20.000 Teslas and you are left with 20 GWh of batteries for the other 125.000 Plugins. That seems to little, even if you discount the average pack size for Hybrids and leave out busses and trucks completely.

So for VW (which has no history of vertical integration) to simply assume that they can buy their 50+ GWh batteries annually is in my view overly optimistic.

Why? I'm pretty sure, if i go to CATL tomorrow and say: "Here you have $5 billion and there are supply contracts for the necessary primary resources. Could you please build a factory right over there and deliver me x GWh of battery cells four years from now." They would probably say something like "Hmm...kay." and get to work.

Bear in mind that Tesla claims to have a roadmap for bringing their GF1 up to about 100 GWh annually. With their ongoing progress, Tesla surely already has contracts with suppliers of raw materials also for the future. So it is not obvious that even the supply of raw materials for the batteries VW will need is available (at prices that will allow for a profit).

Well, if i'd believe in Teslas roadmap, i certainly wouldn't be in the bear camp. And i do not see a reason, why Tesla would be able to secure that amount of resources given their limited financial resources and VW couldn't. Which of course only is a problem, if the necessary resources are as limited as you say. About a year ago, Musk said that Tesla was aiming for 1 million cars by 2020. That seems to be delayed by 2-3 years, until the china plant is up and running at full capacity. So which one is it? Did they sign to many supply contracts and sit on to many resources? Or didn't they and the race for those resources is still open?

 

[humbaba]

The problem is that he doubled down with his next tweet; "Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote."

...and Musk backed off by reversing his recommendation before putting it to a shareholder vote. There is nothing in there that even remotely resembling securities fraud. For those who want to know, he even laid out his reasoning for reversing his decision and posted it publicly.

1. difficulty for shareholders -- Musk was not aware of how difficult it would be for shareholders to retain shares in a private company. Not only would some institutional shareholders have had compliance issues, but retail investors pretty much could not have done so. As Musk had made clear from the outset that he wanted to be inclusive so this was a block.

2. difficulty for Tesla -- Musk had not realized just how much would have to be done in order to go private and the focus needed to be on operations in order to achieve profitability. In other words, going private would have hindered their ability to execute and thus endangered profitability and thus survival. Clearly, this is again a block.

3. funds were not an issue -- going through the process demonstrated that funds were available.

"Investor support is confirmed" is in agreement with the above. Funds where not an issue.

"Only reason why this is not certain is that it's contingent on a shareholder vote." Since funding was not an issue this was essentially a true statement. However, as noted above, Musk had not realized the impact to shareholders, nor cost to the company.

Not being an idiot, when Musk learned the first two points he used that information to draw a new conclusion -- that it was better to stay public.

Some people prefer leaders who take a hardline and never back away from a position. I prefer someone who is capable of reflexion and adapting. Musk didn't through a hissy fit and insist on taking it private whatever the cost just to save face. No, he reversed his decision because (with more information) he realized it was the right thing to do.

Staying Public

 

[jhm]

"Funding secured"
Is completely up to interpretation.

Could be anywhere from: "I might be able to get enough funds to do this. If I beg everyone I know." Over " I've got this fund willing to invest billions (and others will most likely join in)" To "The signature on the closed deal is still drying"

And there's no clear definition of any legal boundary


Beyond that, the whole statement was preempted with "considering" making the deal a possibility only in the first place

"Secured debt" is debt that has collateral attached to it. Musk may have sufficient assets to secure a funding large enough to take Tesla private. Basically, he could have secured the funding with his existing holdings in SpaceX and Tesla. Whether he'd actually want to go that route is another matter, but he could have put his entire net worth into hawk to secure funding if necessary.

 

[ZsoZso]

Investor commitment to Tesla is amazing. Most companies would be down a lot more than this on a criminal probe news.......

Bear commitment against Tesla is amazing. Media re-posting month-old information as "news" with fake labeling (calling a voluntary document request a "criminal" investigation) based on unnamed sources is enough to dump ~$300 million in short-selling.

See correction of fake-news here:
Tesla reportedly faces DOJ investigation over Elon Musk tweets

Update 9/18/18 1:10PM ET: A Tesla spokesperson sent us the following statement:
"Last month, following Elon's announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it. We have not received a subpoena, a request for testimony or any other formal process. We respect the DOJ's desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received."

 

[-=buzz=-]

The problem is that he doubled down with his next tweet; "Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote."

But what is "after discussions with major (current) investors I decided that staying public is the way to go" if not an inofficial shareholder vote...?

 

[Intl Professor]

If memory serves, the news of Tesla cooperating voluntarily to SEC request was reported earlier. What appears to have happened, someone tipped off Bloomberg this was the opening of a criminal investigation. Seems to me today's dip was old news repackaged as FUD.

I stopped Firebird once and maybe ggr did it again or another post. Please stop trolling and taking the bait. Dead issue and I will delete any further posts. Papafox will elaborate more fully I'm sure.

 

[Remus]

Why? I'm pretty sure, if i go to CATL tomorrow and say: "Here you have $5 billion and there are supply contracts for the necessary primary resources. Could you please build a factory right over there and deliver me x GWh of battery cells four years from now." They would probably say something like "Hmm...kay." and get to work.

I am not so confident in CATL's ability to consistently deliver high quality battery cells. Chemical engineering turned out to be challenging for China. Generic drugs produced in China are not as effective, people are forced to cough up with big bucks for imported ones. We are talking about generic antibiotic or even plain old pain killers like ibuprofen. CATL had trouble maintain consistent quality with their batteries, a high percentage of the batteries produced had to be scraped.

 

[Intl Professor]

Also, I'm getting tired of the repetitive close examination of legal consequences on tweet to go public and funding issue. That has already been beaten to death and needs no reiteration. FUD! Throw water on your fire right away.

 

[lklundin]

Why? I'm pretty sure, if i go to CATL tomorrow and say: "Here you have $5 billion and there are supply contracts for the necessary primary resources. Could you please build a factory right over there and deliver me x GWh of battery cells four years from now." They would probably say something like "Hmm...kay." and get to work.

I freely admit that regarding experience in managing billion dollar contracts of any kind, I am as qualified as secretary of education Betsy Devos is in handling educational grants in that size. (I.e. like Devos I dabble in things for which I have zero professional qualification).

And it is possible that Electrek's claim is false.

In fact, if in due time you turn out to be right, then so much the better.

But again, I read how Elon Musk and other Tesla executives make visits to e.g. lithium miners, so I have to think that they are working to ensure future supplies at competitive prices. And if VW tomorrow increases global demand by 50 GWh, then basic supply and demand logic dictates that they will cause prices to go (further) up. Especially if a significant fraction of the easiest to get resources are already committed to others like Tesla.

But with luck we are both still around in five years, so let's see how things go.

 

[SW2Fiddler]

it was written sensationally but it was accurate - so it's clearly not 'FUD'.

The "F" in FUD does not stand for Fake or False.
It stands for FEAR. As in Fear, Uncertainty, Doubt ginned up by sensationalist wording, implication, timing... today's FUD featured some really sus Timing in relation to dump trades...

 

[jhm]

Some yokel questions a Bloomberg reporter on this.

Dana Hull on Twitter

 

[Fact Checking]

I really do not understand the level of hostility towards basic information and data about Tesla - there are almost 5 pages of comments saying the Bloomberg article was FUD - yes it was written sensationally but it was accurate - so it's clearly not 'FUD'.

Whether what Bloomberg wrote is true, misleading or false was not the argument I made.

I made the argument that it was possibly part of an illegal, criminal scheme of market manipulation:

• Minutes before the article was published I saw suspicious price action, for example a ~30k shares sell order at 11:30 EDT, possibly a trader taking a short position based on insider information with a market order, which is inefficient but has the advantage of executing immediately. I was still wondering about that odd transaction when the big drop happened.
• Furthermore, both the drop and the "catching of the falling knife" was too fast in my opinion and not characteristic of typical bad news price action: the price dropped about 9.8% from its daily high, just short of the 10% drop level that would have triggered an automatic circuit breaker that bans activist short selling trades for two days.
• The fall gave me the impression of well informed market participants stopping the fall with limit orders, then (possibly) re-shorting the stock at higher levels again.

(Yes, I know about algo trading, and no, it's not characteristic of them to trade on random news in such volumes - most of them are parsing predictably timed economic events that have an uncertain outcome. It's also very atypical of algo trading to offer 2+ million TSLA shares of liquidity to "catch a falling knife".)

To what extent the Bloomberg article was truthful or misleading was immaterial to my argument: both insider trading and market manipulation are felonies, even if the news was presented in an entirely truthful and neutral fashion.

And yes, I think SEC experts and investigators should take a good look at today's tape and should request identifying information for the trades performed before and after the news, to determine whether any crimes were committed.

 

[ggies07]

Also, I'm getting tired of the repetitive close examination of legal consequences on tweet to go public and funding issue. That has already been beaten to death and needs no reiteration. FUD! Throw water on your fire right away.

Yes yes yes.

 

[Intl Professor]

Whether what Bloomberg wrote is true, misleading or false was not the argument I made.

I made the argument that it was possibly part of an illegal, criminal scheme of market manipulation:

• Minutes before the article was published I saw suspicious price action, for example a ~30k shares sell order at 11:30 EDT, possibly a trader taking a short position based on insider information with a market order, which is inefficient but has the advantage of executing immediately. I was still wondering about that odd transaction when the big drop happened.
• Furthermore, both the drop and the "catching of the falling knife" was too fast in my opinion and not characteristic of typical bad news price action: the price dropped about 9.8% from its daily high, just short of the 10% drop level that would have triggered an automatic circuit breaker that bans activist short selling trades for two days.
• The fall gave me the impression of well informed market participants stopping the fall with limit orders, then (possibly) re-shorting the stock at higher levels again.

(Yes, I know about algo trading, and no, it's not characteristic of them to trade on random news in such volumes - most of them are parsing predictable economic events. It's also very atypical of algo trading to offer 2+ million TSLA shares of liquidity to "catch a falling knife".)

To what extent the Bloomberg article was truthful or misleading was immaterial to my argument: both insider trading and market manipulation are felonies, even if the news was presented in an entirely truthful and neutral fashion.

And yes, I think SEC experts and investigators should take a good look at today's tape and should request identifying information for the trades performed before and after the news, to determine whether any crimes were committed.

Then report it to SEC. If you want company, pm for my legal name.

 

[uselesslogin]

I've always liked that this site shows tolerance to opposing views and I've tried to be sure to read their views. Tesla has screwed up over the years but they have also made amazing cars. In the end I think their amazing product will more than make up for other missteps.

That being said, what is the point anymore? My mind was made up a long time ago and I have to see how the Model 3 being in full production changes Tesla's financial situation before I would even consider selling the stock.

In the past, I've hesitated before ignoring posters I don't agree with. I don't think I will anymore. Perhaps in March I'll unignore everyone since the numbers will all be out on the table. I may as well enjoy the echo chamber until then. I sure as heck am not going to change my mind until I have all the information.

 

[Cosmacelf]

While I am on this rant, the phrase "not an advice" is grammatically illiterate. It should either be "This is not advice" or (better) "Not an Advisement".

/mic

Thanks for that. That has been bugging me too.

 

[SW2Fiddler]

Thanks for that. That has been bugging me too.

Jokes can be plumb ruin't by over'splainage...

But here's the origin.

 

[dondy]

I think that claim is dubious. According to EV Sales 145.000 Plugins were sold in July. Substract ~20.000 Teslas and you are left with 20 GWh of batteries for the other 125.000 Plugins. That seems to little, even if you discount the average pack size for Hybrids and leave out busses and trucks completely.

Let see: most of this 140k comes from China (like 80k or more). chinese best EV is ByD yan =40kwh battery number of sells per month is in the range of model S.
the rest are ~20 kwh contraptions.
Europe: Leaf max 40kwh, majority 30kwh.
Renault Zoe max 40kwh, significant percentage 23kwh.
The rest is same mess in 20-40kwh with the small exception of the latest korean cars (I add bolt here since it's more korean than american).

Majority of the sold cars still have batteries of 20-30kwh size.

Why? I'm pretty sure, if i go to CATL tomorrow and say: "Here you have $5 billion and there are supply contracts for the necessary primary resources. Could you please build a factory right over there and deliver me x GWh of battery cells four years from now." They would probably say something like "Hmm...kay." and get to work.

sure they will come to local authorities, and those will ask to build a beton bottom to the factory according to quite strong specifications for chemical factories in order to isolate factory completely from ground waters, then local authorities will forbid massive immigration of chinese workers and put restrictions on the number of chinese engineers, and in the end if it ever comes to the national authorities the offer will be stroked off as a undesirable investment. It is done and done and done already. All existing projects in Europe are assembly factories.
Please go with your nonsense about CATL to SA or other swamp.
None of the european companies will be able to produce EVs even with the advertised meager rates. And I didn't start about motors...

 

[BioSehnsucht]

(via reddit)

I wonder if this still happens (from 2013) Bloomberg News Pays Reporters More If Their Stories Move Markets

TL;DR among other things they get bonuses for "market moving" stories. They also got them for accuracy but I am pretty sure which one is easier to do repeatedly and efficiently.

If that's already the environment you're in, and that seems totally ethical (or, just have no more ethics) to you, it's not much of a leap to leak a story a few minutes ahead of time so someone can short ahead of it.

 

[Zaxxon]

Jokes can be plumb ruin't by over'splainage...

But here's the origin.

Man, you went and ruined it.

But that did reiterate to me how out of control this thread has gotten. Your link to the 2017 thread revealed that there were 1349 pages in the 2017 iteration of this thread. We're on 1866 with 28.5% of the year remaining--on pace for 2,609 pages. We should not be attempting to keep pace with Tesla's production growth rate. If only we had another thread for non-market action investor content...