TSLA Market Action: 2018 Investor Roundtable

[YasB]

What is your purpose here?

YasB

Somehow I suppose you won't believe me.

 

[YasB]

If you disagree with my post saying you won't believe me, this means you are believing me, right?

Sorry ... couldn't resist.

Will stop it now.

 

[jhm]

I've been thinking about this since Brian raised it a few months ago. Of course, if the conversion rate is anywhere below the relevant option-set price the people will convert However, there are a number of complications for the board:

1 A capital raise by this method is still a capital raise - it will show that Musk was wrong when he said no capital needed or wanted;
2 While the larger players will know about and expect this, a number of mid-level investors will not and will be negatively surprised by the dilution;
3 This will cause strong demand for puts and therefore may increase shorting - so leading the board to want to price the conversion lower; and
4 While a lot of converts have this feature it's rarely used - I think it would be seen as a sign of financial distress.

So, all in all, it's not quite as simple as it sounds.

This is helpful. Certainly there are downsides to such an action. Your list points to both motives for shorts to attack the stock now as well as attack memes to be exaggerated later. As motive, the lower the share price can be driven, the higher the conversion rate must be. This path maximizes the dilution to inflict maximal damage to the stock.

The problem for attack shorts with this strategy is the stock dilution always has more bark than dog. It is more useful to shorts as a threat to frighten longs before it actually happens. The stock always performs better after a capital raise than before. So point 2 above is fairly irrelevant. By the time these shareholders understand how the option works, it will have been accomplished and the stock will rally on post capital raise relief. Item 3 also depends more on the anticipation of a dilutive event than on the post event reality. So this leave item 4 which pretty much amounts to bear wagging a finger at the stock, which is nothing new. But to the present situation if Tesla generates positive cash in the next two quarters, it will repudiate the finger wagging.

So from my view point the sooner Tesla can resolve this, the better. It is more damaging to allow bears to use this issue to continue to grind down on the stock than to simple face the nominal dilution and move on. Like I said the bark is bigger than the dog. Put the dog to rest, and the barking stops.

 

[Tslynk67]

Most interestingly, Elon has re-tweeted the cleantechnica article about Jesselivenomore’s excellent short-thesis from TMC: A Sinister Cellar Of The TSLA Short Story? | CleanTechnica

 

[jhm]

I think that's basically it. Model 3 isn't what's hitting the Camry (yet!), RAV4 is what's hitting the Camry.

Camry buyers tend to be very conservative (I don't mean this in the US political way) in their automotive preferences, and the Model 3 is a radical car (read: opposite of conservative). Furthermore, putting $1,000 down sight-unseen, and another $48,000 without being able to drive the car, is even more radical.

Also worth noting that the new Camry went for lower and sportier than the previous generation, and the dip in sales starts appearing as the new Camry came out. I think Toyota's logic here is that traditional Camry buyers were already starting to move to the RAV4 (so trying to get a sport sedan buyer was worth the gamble), as well as the Camry replacing the Avensis in Europe (and therefore needing to be lower and sportier to be more compatible with European driving). But, they may have started scaring off their traditional buyer as a result of those changes (again, I don't think they see this as a loss, because their traditional buyer was already considering a RAV4).

This Camry driver converted straight up to the Model S. Converting from Camry to Model 3 is pretty trivial. The conservative Camry driver can spend more on a car. They just don't always see a compelling reason to do so. But then comes along a Tesla.

 

[uselesslogin]

Instead of tweeting reasons to cause short positions to explode, Elon is now re-tweeting articles simply complaining about short sellers. I think it's safe to say the 3-week short warning has passed, was actually supposed to be the 5000/wk Model 3 news, and the short position explosion is not going to happen. Shame on me.

Of course that only means we have to wait for Q3/Q4 reports and also that Elon does in fact spend a lot more time running his business than analyzing his own stock. I might get some March 2019 calls with my trading cash since the story between now and then seems a lot more certain. I'm debating between doing so now and/or waiting for after the Q2 report. Probably 50/50.

 

[Ellec]

Instead of tweeting reasons to cause short positions to explode, Elon is now re-tweeting articles simply complaining about short sellers. I think it's safe to say the 3-week short warning has passed, was actually supposed to be the 5000/wk Model 3 news, and the short position explosion is not going to happen. Shame on me.

How has it passed? He tweeted it two weeks ago Sunday, So "about 3 weeks" is probably Monday morning next week.

Elon Musk on Twitter

 

[Navin]

How has it passed? He tweeted it two weeks ago Sunday, So "about 3 weeks" is probably Monday morning next week.

Elon Musk on Twitter

This is a great example of a likely paid consultant or short seller infesting this msg board with nonsense and FUD. Just plain twisting truth to get others to get anxious about their position. Enough.

 

[defc0n]

How has it passed? He tweeted it two weeks ago Sunday, So "about 3 weeks" is probably Monday morning next week.

Elon Musk on Twitter

It’s obvious by his new demeanor.

 

[defc0n]

This is a great example of a likely paid consultant or short seller infesting this msg board with nonsense and FUD. Just plain twisting truth to get others to get anxious about their position. Enough.

You think I’m a paid consultant?

 

[defc0n]

This is a great example of a likely paid consultant or short seller infesting this msg board with nonsense and FUD. Just plain twisting truth to get others to get anxious about their position. Enough.

I have some tin foil hats to sell you.

 

[schonelucht]

What is your purpose here?

Same as I when I went looking for that article. Elon says that the article contains a false statement about battery production. Namely that it overstates battery scrap to such an extent that it was larger than battery production at that point. So the article contains an upper bound on battery production at that point in time. That's interesting information to cross reference with my assumptions on battery production. But unfortunately, I also don't know what Elon's referencing exactly. The only thing I could find was a maximum dollar amount of raw scrap material for both drivetrains and battery together ($150M). That's less helpfull since we don't know how much raw material goes into battery&drivetrains. But assuming it's $5k per car, that's enough for 30 000 cars in a timeframe from beginning of 2018 through end of May. This sounds in line with what we know : production in Q1 and Q2 together was 38 000 Model 3 but a lot of it was in June.

 

[ZsoZso]

But what do I know? I am just a small fish trying to swim with the sharks.

OK, time to go prep for the fireworks. Happy 4th of July to all!

How is your bet about Nissan Leaf outselling the model 3 in 2018 coming along ?
With a quick googling I found the following data about recent Leaf sales globally:
2018 Nissan LEAF Sales Fall Off A Cliff In Key Global Markets In April | CleanTechnica
Nissan Leaf: Global sales on the rise | CarAdvice

So they seem to be proud of 15% YoY growth:
"Nissan shifted more than 50,000 units worldwide – 54,541 to be precise – in the Japanese FY2017 (April 1 - March 31, Japanese financial year) "
So projecting the same growth forward would get to an estimated <60K units world wide for the whole year.
It is questionable whether Tesla can beat that in Q3 alone, but I am pretty confident Q4 alone will do it.

 

[defc0n]

Of course that only means we have to wait for Q3/Q4 reports and also that Elon does in fact spend a lot more time running his business than analyzing his own stock. I might get some March 2019 calls with my trading cash since the story between now and then seems a lot more certain. I'm debating between doing so now and/or waiting for after the Q2 report. Probably 50/50.

Hard to say, I think there is a good chance it will go up quite a bit from now leading up to Q2 earnings. Many will disagree with me, and I obviously might be wrong, but I wouldn't hold through Q2 earnings report.

I currently still hold shares still since I'm expecting a short term rebound pretty soon, but I'm down quite a bit on this trade.

 

[Unpilot]

Pre Market up ...Thoughts on MMD continued bear attack today?

 

[RobStark]

How is your bet about Nissan Leaf outselling the model 3 in 2018 coming along ?

EV Sales: Global Top 10 May 2018

 

[CuriousSunbird]

This is helpful. Certainly there are downsides to such an action. Your list points to both motives for shorts to attack the stock now as well as attack memes to be exaggerated later. As motive, the lower the share price can be driven, the higher the conversion rate must be. This path maximizes the dilution to inflict maximal damage to the stock.

The problem for attack shorts with this strategy is the stock dilution always has more bark than dog. It is more useful to shorts as a threat to frighten longs before it actually happens. The stock always performs better after a capital raise than before. So point 2 above is fairly irrelevant. By the time these shareholders understand how the option works, it will have been accomplished and the stock will rally on post capital raise relief. Item 3 also depends more on the anticipation of a dilutive event than on the post event reality. So this leave item 4 which pretty much amounts to bear wagging a finger at the stock, which is nothing new. But to the present situation if Tesla generates positive cash in the next two quarters, it will repudiate the finger wagging.

So from my view point the sooner Tesla can resolve this, the better. It is more damaging to allow bears to use this issue to continue to grind down on the stock than to simple face the nominal dilution and move on. Like I said the bark is bigger than the dog. Put the dog to rest, and the barking stops.

Point 3 was more referring to professionals who short to hedge the puts they write.

 

[tivoboy]

When we dip below 300$ I’ll probsbly sell the July 325$ calls sold for 30$ last week.

 

[mongo]

Morning all,
Another day, another 100k /minute morning volume.

 

[Unpilot]

Seems to be a lot of ammo...kind of like the 4th final fireworks...that ended ..this will as well