TSLA Market Action: 2018 Investor Roundtable

[jhm]

The quick ratio is a measure for a company pay pay back short term liabilities. Take total current assets ( less inventory) divided by total current liabilities. Anything less than one suggests the company cannot manage its short term liabilities. CFO is cashflow from operations although referencing net income would have be equally valid.

Actually, it was your use of "garner CFO" that was strange. I wouldn't know what it means to "garner" a Chief Finance Officer.

You may want to read up on this thread before posting more. This has all be hashed out repeatedly. Every couple of days some new bear shows up, and thinks they inform us about how Tesla works. They drag the discussion down into a rehash of very tired ideas. You might be a nice guy. So read up before you embarrass yourself more by presuming you have something novel to say. Good luck.

 

[Mich]

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.

Is there any real chance that this will happen?

 

[omgwtfbyobbq]

Most of life is how we chose to respond. I post here infrequently because this place represents a different view point than my own. If you wish to apply some label to it ( troll fud whatever) thats on you. Personally someone elses views don't really bother me. If the moderators want to ban me, thats okay.

As for today, I am not sure how anyone can hold a meaningful position long in this stock without taking into account the real risks associated with whats going on. Does this news not effect your outlook on the company? What, if any, catalyst be needed for you to change your mind? I am genuinely curious. As a short seller, my opinion would change if the company got a new CEO and was structurally profitable on a sustained basis. I was considering covering part of my short ( at a handsome profit i might add) if they were able to report healthy demand in M3, ingoing demand, positive FCF, and start paying off the albratross of debt due in one year. The numbers are plain for all to see - 3 billion in accounts payable, short term debt of 2 billion, less than 1.3 billion in cash ( net deposits), and a bottom line burn of 700 million quarterly. You can read them on tesla's own 10q.

good luck

I was going to give you the benefit of the doubt until you mentioned $3 billion in accounts payable while ignoring $3.3 billion in inventory. Seriously?

 

[phil0909]

I think his wording was misleading. SEC may fine him. I don't see where it gets to a criminal level. The criminal probe does not seem unreasonable, but I can't think of a realistic scenario where Elon committed a criminal act with his tweets. Does anyone have a reasonable scenario where Elon may be criminally liable for his tweets?

Sure, there's lots of reasonable scenarios, but we'd just be speculating. I think the important thing is that DOJ must think it's plausible, otherwise they would not be asking for documents.

Tesla says it should all be "quickly resolved". It's been 3-7 weeks so far since the initial DOJ document request last month, so it has not been resolved that quickly...

 

[Off Shore]

I've been TSLA long only since 2010. TSLA has a dizzying history of short term ups and downs. I admire those able to make money on these changes as traditional analysts who ignore fundamentals of nature and technology including Tesla's capex. My concern is with the fundamentals and Tesla is neither short of cash, demand, nor ideas for expansion in existing lines and new products. An easy defense for a long.

What principles do you use for judging when to buy and sell short term? I'm too old to learn them but I'm sure others would like to know your secret sauce, unless of course too many may use it thus screwing the pooch—kinda like reverse crowd sourcing. You sound a bit like our wealth manager who is shocked I bought Baidu at $8.67 and Tesla overall at about $93 average because they now constitute close to 58% of our portfolio. Just sold some BIDU to pay cash for our M3 on Sunday and except for TSLA have given him green light to move stuff into safer investments because the Orange and Congress and tariffs are going to crash the economy. (I do wish he hadn't sold the 100 shares we had in NVDIA at $17 and change per share three years ago.) Did you miss that train too?

Since you've mentioned your upcoming purchase, Profe, I'll take the opportunity to remind you that we'll be expecting a fairly extensive photo spread on the delivery process. If your moderator's scruples prevent you from posting in Market Action, you may post elsewhere but we'll require a link here. Have fun!

 

[jhm]

Tesla Is Under Investigation By The Justice Department

This is a pretty good summary of the situation. Note this:

Short-sellers who had anticipated that Tesla's stock would fall said Musk's tweet was meant to manipulate the shares, according to the Associated Press.

Stephen Crimmins, who spent 14 years at the S.E.C., first as a trial attorney and then deputy chief litigation counsel, told The AP that Musk "speaks loosely" and that his behavior probably won't cross the line into a criminal realm. Prosecutors would have to make the case that Musk lied to influence the stock price, he said.

 

[Fact Checking]

Nope, this company can (and will) slow down expense growth, freeze or even lower expenses, while it waits for revenue to catch up.

For the sake of completeness, beyond the ones you mentioned there's an impressive array of "levers" Tesla can pull to influence growth and income:

• Increasing/decreasing the price of options and models: since Tesla has effectively no competition in the EV space and is severely supply limited, they can shift sales both in time and between models and options by adjusting pricing.
• Availability of options: right now both Long Range and Premium Upgrade Package are mandatory option. These are options with 50%+ gross margins, which allows the increase of margins until supply (production) catches up.
• Geographic availability of models and options: right now the Model 3 is only sold in US+CA, about 25% of Tesla's global market. By "unlocking" new geographic regions Tesla can increase the new order flow.
• Bundling of options: Tesla recently "unbundled" the Performance Upgrade option into several smaller options, to allow sales at intermediate price levels.
• Referral incentives: the only bigger marketing expense Tesla has at the moment are incentives in its referral program. By changing referral tiers and referral and referree rewards Tesla can manage the speed of the creation of new customers who are discovered through this channel, or who are seeking discounts this way.
• Financing, CPO and trade-in pricing: Tesla can shift demand, shift revenue and manage inventory via these parameters.
• Timing of delivery: since most sales are effectively build to order, Tesla can delay or speed up deliveries, depending on options, finegrained geographic location (east coast deliveries take a week longer) and time of year, to smooth deliveries but also to manage inventory at the end of quarter or end of year.
• Factory utilization: for example Tesla usually ramps down Model S/X production in the final 2-3 weeks of the year, not just because of holidays, but also to reduce inventory levels. Since S/X production is limited by 18650 cell supply Tesla can slow down or speed up S/X production, to shift sales between quarters and to reduce inventory, without hurting overall annual sales targets.
• Capital expenses: you mentioned capex spending, beyond contractually obligated capex spending (such as Model 3 production equipment already ordered/delivered) there's a significant amount of discretionary capex spending that Tesla can (and does) fine-tune: introduction of new products, expansion of manufacturing capacity, expansion of stores and service centers, expansion of the Supercharger network, etc.
• Operating expenses: historically Tesla had the least success in managing opex levels, but has improved opex percentage in Q2 to a new record low level of 18% of revenue already, with 15% or lower expected for Q3 and Q4. Tesla performed layoffs, reduced contractor expenses and implemented a hiring freeze in most business segments for much of Q2. They also improved services margins and phased out opex intense features like unlimited supercharging.
• (There are others as well, these are the main ones.)

Over the last decade Tesla has gained significant experience and expertise in adjusting these levers.

Tesla has a natural monopoly in their primary market, with a competitive advantage of at least 3-5 years, which gives Tesla significant degrees of freedom to maximize either revenue, gross margins or income that traditional carmakers can only dream about.

The main reason Tesla was in the red for all but two quarters since their IPO was in large part because Tesla chose a hyper--aggressive configuration of these levers to maximize revenue growth and market expansion.

In Q2/2018 Tesla already demonstrated an impressive turnaround to everyone who knows what to look for, and in Q3-Q4 chances are looking good so far that these improvements in cash flow and (gross and net) income flows are going to be more obvious in the bottom line numbers as well.

 

[mrdoubleb]

For the sake of completeness, beyond the ones you mentioned there's an impressive array of "levers" Tesla can pull to influence growth and income:

• Increasing/decreasing the price of options and models: since Tesla has effectively no competition in the EV space and is severely supply limited, they can shift sales both in time and between models and options by adjusting pricing.
• Availability of options: right now both Long Range and Premium Upgrade Package are mandatory option. These are options with 50%+ gross margins, which allows the increase of margins until supply (production) catches up.
• Geographic availability of models and options: right now the Model 3 is only sold in US+CA, about 25% of Tesla's global market. By "unlocking" new geographic regions Tesla can increase the new order flow.
• Bundling of options: Tesla recently "unbundled" the Performance Upgrade option into several smaller options, to allow sales at intermediate price levels.
• Referral incentives: the only bigger marketing expense Tesla has at the moment are incentives in its referral program. By changing referral tiers and referral and referree rewards Tesla can manage the speed of the creation of new customers who are discovered through this channel, or who are seeking discounts this way.
• Financing, CPO and trade-in pricing: Tesla can shift demand, shift revenue and manage inventory via these parameters.
• Timing of delivery: since most sales are effectively build to order, Tesla can delay or speed up deliveries, depending on options, finegrained geographic location (east coast deliveries take a week longer) and time of year, to smooth deliveries but also to manage inventory at the end of quarter or end of year.
• Factory utilization: for example Tesla usually ramps down Model S/X production in the final 2-3 weeks of the year, not just because of holidays, but also to reduce inventory levels. Since S/X production is limited by 18650 cell supply Tesla can slow down or speed up S/X production, to shift sales between quarters and to reduce inventory, without hurting overall annual sales targets.
• Capital expenses: you mentioned capex spending, beyond contractually obligated capex spending (such as Model 3 production equipment already ordered/delivered) there's a significant amount of discretionary capex spending that Tesla can (and does) fine-tune: introduction of new products, expansion of manufacturing capacity, expansion of stores and service centers, expansion of the Supercharger network, etc.
• Operating expenses: historically Tesla had the least success in managing opex levels, but has improved opex percentage in Q2 to a new record low level of 18% of revenue already, with 15% or lower expected for Q3 and Q4. Tesla performed layoffs, reduced contractor expenses and implemented a hiring freeze in most business segments for much of Q2. They also improved services margins and phased out opex intense features like unlimited supercharging.
• (There are others as well, these are the main ones.)

Over the last decade Tesla has gained significant experience and expertise in adjusting these levers.

Tesla has a natural monopoly in their primary market, with a competitive advantage of at least 3-5 years, which gives Tesla significant degrees of freedom to maximize either revenue, gross margins or income that traditional carmakers can only dream about.

The main reason Tesla was in the red for all but two quarters since their IPO was in large part because Tesla chose a hyper--aggressive configuration of these levers to maximize revenue growth and market expansion.

In Q2/2018 Tesla already demonstrated an impressive turnaround to everyone who knows what to look for, and in Q3-Q4 chances are looking good so far that these improvements in cash flow and (gross and net) income flows are going to be more obvious in the bottom line numbers as well.

While you have some fair points, in 2017 North America has made up 53% of Tesla S/X sales. Not 25%. I don't think we have regional numbers of Model 3 reservations to be able to make such a claim.

 

[dondy]

Apart from the bigger batteries of BYD e6 (80 kwh), BYD e5 (48 kwh), BYD Song (48/62 kwh), BYD Qin (48 kwh), Geely Emgrand (45 kwh) and some others, the fact that there doesn't seem to be something called a BYD Yan and that we are talking about 125k and not 140k worldwide sales (ex Tesla) you may be correct.

Byd e6 in reality has or 60kwh rated (actual 48) or 40kwh rated packs, they can sell 72kwh, but it's too expensive for China.
total number of sold e6 is a bit more than 50k over 7 years sells time. Most of them last two year 60kwh versions.
The same reality check applies to all other mentioned models, btw. BYD Qin which sells good are hybrids, electrical versions (again up to 48kwh with 30kwh standard) are much less common (ratio is less than 1:2).
They use Fe... type batteries and very Chinese way of battery ratings.

I mean of course BYD Yuan EV360, it's one of the bestselling EV in China at the moment, it's reworked BYD Yuan ICE. One of the very few decent chinese cars.

CATL revealing details on battery factory in Erfurt - electrive.com

You are funny.

You are funny, it's an example of yet another battery assembly factory (cells coming from China), more of it it is the example which has very low chance to become true.

 

[dondy]

Sure, there's lots of reasonable scenarios, but we'd just be speculating. I think the important thing is that DOJ must think it's plausible, otherwise they would not be asking for documents.

Tesla says it should all be "quickly resolved". It's been 3-7 weeks so far since the initial DOJ document request last month, so it has not been resolved that quickly...

DOJ or identical institutions ask for documents to make conclusions, not to confirm them. You can not think something is "plausible" or not without having necessary information.
They collect initial information, build the case, if the basis is solid enough to involve prosecution they start official investigation. There is nothing of a kind quite yet and the chance of it is 0.

 

[phil0909]

DOJ or identical institutions ask for documents to make conclusions, not to confirm them. You can not think something is "plausible" or not without having necessary information.
They collect initial information, build the case, if the basis is solid enough to involve prosecution they start official investigation. There is nothing of a kind quite yet and the chance of it is 0.

Are you trying to disagree with me? Because you are saying exactly what I said, except for that thing about zero chance.

So, if the chance is zero, you should explain that to the Department of Justice, and save them all that work. I'm sure they'll appreciate your help.

 

[YasB]

You are funny, it's an example of yet another battery assembly factory (cells coming from China), more of it it is the example which has very low chance to become true.

The Chinese battery cell manufacturer CATL will begin construction of their planned battery cell factory in Germany next year, according to Europe boss Matthias Zentgraf. The production start for the battery cells is estimated for 2022.

CATL to begin German factory construction in 2019 - electrive.com

Ok. Somehow it seems, as if you just make that stuff up as you go. Next you'll probably want to tell me, that LG Chems plant isn't really producing cells and the new hungarian plants will only be for pack assembly and / or never build, because of ... reasons.

It has been entertaining to talk to you, but i've got some more serious stuff to do now.

 

[gora321]

I like Kimbal's focus on what's important. They tried to confuse him, but he remained focused
Are we focused?

 

[KarenRei]

Today’s events are very disturbing to me because it appears (circumstantially) that the news of criminal investigation was timed to manipulate the market AND that the price drop was purposefully limited to avoid a 10% drop. Am I correct in reading the posts on this? If so this looks to me as the most significant evidence of conspiracy to manipulate and possible fraud. The timing appears to be orchestrated. It is important to understand that this is not truly a First Amendment issue. This involves commercial speech and even if true, issues involving conspiracy to manipulate or defraud are not protected.


Almost everyone on here knows more about the market than me. However I have 40+ years in State and Federal Court experience unfortunately in environment, energy and health care. I am retired and I don’t even know how to file an SEC complaint. However, I am willing to be lead Plaintiff/Complainant and move forward with an SEC complaint if there is support from those on the board. I am not talking about $$, but rather advice and commitment. Do any of you see a way to do this? Clearly it would not be on the board.

You can file a report with the SEC here (click on "Submit a Tip"):

SEC.gov | Report Suspected Securities Fraud or Wrongdoing

The argument to make was laid out by Fact Checking:

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.

 

[Xenius]

Is there any real chance that this will happen?

None whatsoever.

 

[Tslynk67]

Haven't read the last 10 pages yet - was out boozing yesterday evening, so only saw the cliff-drop and read a few headlines.

However, as I understand it, there is no criminal investigation, nobody has been subpoenaed and Tesla gave some info voluntarily to what is probably a relatively normal process. And yet the SP closes 20 points lower and remains there in pre-market?

Earlier today, CNBC had a positive headline from UBS, since then has been replaced with dear old Bobby Lutz - you know the FUD's on full-throttle when the trundle him out! Screen-grabs attached, no links...

 

[SO16]

Sure, there's lots of reasonable scenarios, but we'd just be speculating. I think the important thing is that DOJ must think it's plausible, otherwise they would not be asking for documents.

Tesla says it should all be "quickly resolved". It's been 3-7 weeks so far since the initial DOJ document request last month, so it has not been resolved that quickly...

You act surprised that the government moves slowly.

 

[bdy0627]

I personally just can't believe Elon behaved so stupidly. Part of me wants to think it's all part of a bear trap, but logically I know that's not the case. How could he not know he would be held accountable when he was tweeting that crap!!??!

I think brilliant people have strengths which appear to be balanced by gaping (often unbelievable) deficiencies - we're finding it out the hard way with Elon. I think it comes down to lack of respect of authority.
This is what has allowed Elon to succeed but has also led to his failures.

Severe lack of sleep is no joke. It impairs the mind in a number of ways: depression, irritability, anxiety, forgetfulness, fuzzy thinking. I think Elon got to a point where his lack of sleep was a major factor for his behavior recently, possibly influencing his decision-making about taking Tesla private and the way he communicated it. It was pretty bizarre. I don't think that was Elon functioning at his normal level.

 

[KarenRei]

Haven't read the last 10 pages yet - was out boozing yesterday evening, so only saw the cliff-drop and read a few headlines.

However, as I understand it, there is no criminal investigation, nobody has been subpoenaed and Tesla gave some info voluntarily to what is probably a relatively normal process. And yet the SP closes 20 points lower and remains there in pre-market?

Earlier today, CNBC had a positive headline from UBS, since then has been replaced with dear old Bobby Lutz - you know the FUD's on full-throttle when the trundle him out! Screen-grabs attached, no links...

View attachment 336209View attachment 336210

Only 10 points (3,35%) lower. Which seems to be an expected drop on jitters, given how volatile TSLA is.

 

[bdy0627]

Tesla Is Under Investigation By The Justice Department

This is a pretty good summary of the situation. Note this:

It sure is ironic that shorts are all up in arms over a tweet from Elon that made them, on the whole, billions of dollars.