Does that even count as "hedge-fund manager" these days?
Although, I gotta hand it to him, this does seem a bit absurd:
"As a reality check, Tesla is worth twice as much as Ford ... yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss"
You need to factor in future profits, where Tesla is the strongest player for electric cars, autonomous driving (the first multitrillion dollar market) and benefits of the Musk ecosystem (Boring company, SolarCity, Hyperloop)
Ford isn't really one of the car companies that looks like it will remain relevant in 10 years time.
Maybe it's more accurate to say that Tesla is the strongest for electric car technology development (and mindshare?), but is the weakest at manufacturing cars? Whereas a player like Ford may be excellent at manufacturing cars (personal opinions aside) but is not perceived to have the same electric car technology.
Maybe the battery capacity alone is the differentiator? If Ford wanted to start rolling out electric cars, they'd need a lot of batteries, and from what I understand Tesla may be the front-runner in high capacity, low price batteries. That is, until the requisite rare-earth metals are monopolized by a hostile (economically or otherwise) nation and squeeze rent-seeking profits from the electric car boom (fad?).
That's an accurate description. Though acquiring the best electric car and autonomous driving technology is probably a magnitude harder than ramping up manufacturing.
Manufacturing also isn't easy, but it also isn't
super hard compared to electric cars and autonomous driving.
Dozens of car companies have managed to do it, while none have managed to build electric cars and AD well yet.
Probably because they are a new company and want to innovate on manufacturing to make it 5x better than the industry standard like with everything they do.
Well, fanboyism aside, if that's the goal, and it no-doubt is, then it appears that they are currently failing at that goal, objectively speaking. That might change in the future, but for now, it's just not reality. Give 'em credit for trying, but a rational market doesn't really reward trying as much as succeeding.
But Tesla didn't 'invent' electric cars, or electric motors, or motor controllers, or batteries, etc. I'm sure they have put lots of R&D effort and money into their implementations and execution of these things, but the fundamentals are pretty basic stuff that's been around for a while. At least since the Prius, or the GM electric car in the 90's, or any of the much earlier stuff.
I'm not an expert in the area, but I am not aware of a game-changing implementation that Tesla has made, is there one? Like, did they make electric motors better in some fundamental, un-reproducable way? That would be a 'moat' they could use to stave off competitors. Or is their battery tech a game changer? From my lay perspective, it appears that their battery manufacturing capacity (i.e., gigafactory) may be, but the battery tech itself is more or less industry-standad stuff.
I guess the big question is what is their competitive advantage compared to Ford, GM, Honda, Toyota, etc.? I ask that not as an attack, but a genuine question to ponder. Nissan has the Leaf in production today, they have all the tech necessary to develop and manufacture and bring to market an electric vehicle. What's stopping them from launching a 'Tesla-killer' under their Infinity brand aimed at the same market as Tesla? It appears nothing is, at least nothing technological. It's probably just a product-market fit question, and as soon as the market for a high end electric vehicle is big enough (thanks to Tesla) then they probably will. And at that point, what Tesla is just another car manufacturer, but one that seems to suck at manufacturing and bringing cars to market. Those kinks may be ironed out, but in the long term it seems that they should be expected to settle into a position as one of many car maker options, where consumers choose a Tesla for similar reasons as one would choose any other car. So, from that perspective, the valuation seems spurious.
Is the play all about self-driving cars? Is the promise of self-driving cars the only thing behind Tesla and Uber? Then again, I ask what advantage these players have, if any. The incumbents may be slow, but do you really think Toyota, GM, Ford, etc. aren't working on this stuff too? They are. Every major car manufacturer has a self-driving car program in the works. Heck, Mercedes has been working on it since at least the late 90's when they brought to market the first radar-assisted cruise controls.
I don't mean to shit all over Tesla here, as surely their existence has sped up the development and public perception of electric vehicles in a major way. And I get the Musk fanboy-ism, he's totally cool and his portfolio of companies is equally totally cool (even though, contrary to perception, he did not in fact 'found' Tesla, Martin Eberhard and Marc Tarpenning did, Elon came in at the series A round of funding). And their cars are totally awesome, and that's something to admire. But as far as their current market valuation, from a totally dispassionate analysis, it seems irrational. Long-term it's hard to see them as justifying a valuation at multiples that much higher than the incumbents. I just don't see the logic. But maybe it doesn't have to be 'logical,' maybe financial markets aren't entirely rational, and maybe that's OK.
Their electric cars simply perform 50% better than the vast majority of other electric cars in every aspect, speed, acceleration, range (very important). Then you can also add design, driving comfort, software integration, where they beat any other electric car (manufacturer).
Thus, their technology is vastly superior.
Mastering manfucacturing isn't
easy for a young company, though, it simply takes time.
The other car companies had more than 100 years to figure it out, give Tesla a few more years to catch up
with them.
You do not see new car companies popping up left and right, because profitable manufacturing at scale is insanely hard, and profit margins are not that great. So companies who acquired that knowledge tend to stick around. Unseating them is tricky, as Tesla M3 scale up illustrates.
Only that they would have gone bankrupt if it hadn't been for the government in 2008 when it was around 105 years, next to a few other large car manufacturers.
It makes a bit more sense if you think about Tesla's valuation as a bet on future potential. Ford will probably stay at about the same size and make the same kind of money, at least for the foreseeable future. Tesla on the other hand is more of a gamble, who could end up being extremely big if things pan out for them.
And at least right now, investors seem to think that Tesla will become wildly successful eventually. Will that actually happen? Who knows.
Keep in mind that new car sales in the US are at their lowest since 2010, and not getting any higher, so if anything there is also a possibility that Ford might make less money in the future.
"It makes a bit more sense if you think about Tesla's valuation as a bet on future potential."
In my opinion that's a very small bit that can't possible justify the current price. If I was going to justify investing Tesla today I would have to make the case to myself that my ROI on Tesla would be better then my other possible ROI I could get else where. Let's say I am hoping for a very reasonable 6.5% return, based on rule of 72 I would expect the value to double in ~ 11 years. Assuming Ford grows at a similar rate over the next eleven years Tesla would have 4x the market cap as Ford currently does. I just don't see how you could expect to invest at the current levels and expect a reasonable return. Even if Tesla perfectly executes for the next 11 years there is no way it would be worth it's current evaluation let alone have room for a decent ROI.
It broke to the downside after trading sideways for two years. Taking their financial position and M3 delays into account, it is not a good move. Limits their capital rising options.
Well, true, but talks about tesla bubble gained traction after tesla reached capitalization of ford - year or two ago. So I (somehow optimistically) assume that tesla shortsellers shorted TSLA highs during last year or two, which puts their positions into black atm.
> Musk can raise a couple of billion whenever he wants
This is true, until it isn't. Moody's just downgraded their bonds, and their stock just hit another low. Whether Musk goes to the debt markets or the equity markets to raise, the price just got much more expensive.
And at some point, these downward spirals feed on themselves. We saw this in 2007-2009 when banks badly in need of raising capital couldn't even do so because the mere announcement of intention to raise spooked the markets (either more debt or more dilution) so much that the price of doing so was prohibitive.
TSLA does have one strong tailwind, though: the short interest in the stock has become so great that it's nearly impossible to find shares to borrow anymore. And there's always the risk of a very large short squeeze.
I wonder what a total Tesla collapse would mean for Tesla vehicle owners. I assume they'd be purchased and service centers would remain open, but the aggressive timelines on the Roadster / Semi / potential Model Y would be scaled back.
But the DeLorean engine and drivetrain were produced by others (Peugeot-Renault-Volvo) and were common to many other vehicles. Teslas are of unique design, manufacture, and service.
Maybe some car company will buy them and make them into their electric car division, especially ones that haven't invested that much into electric cars and now feel a bit behind. The only thing is, it is not like Tesla got any special technology, Tesla is more of a marketing scheme, but branding and marketing certainly worth something, not sure how much though.
Tesla's creditors might be persuaded to take a haircut depending on how much they believe in Musk and his plan, but it all depends on the exact circumstances if and when it happens.
Well unless I'm reading wrong the top options in terms of open interest are the
Jan 2019 P50
Jan 2019 P100
Jan 2019 P200
all puts, all well out of the money, so yeah, lots of people are hedging on a severe downturn within the next year.
Having said that, Short interest is right around its average over the past year, so I guess you can infer that investors are sick of getting their face ripped off by shorting the stock and are willing to pay option premiums to get short exposure.
He's been a long-time Tesla short-seller, so this may well be just seeing what he wants to see. It doesn't mean he's wrong, but if Tesla sees themselves running out of money in 3 months they must have a plan lined up already. No company that size would just ignore the issue this late in the game - they'd be raising money from sale of stock, which they don't seem to be doing, or from selling bonds, which they don't seem to be doing. My guess is that means they have private funding lined up to cover the shortfall (if indeed he's right in the first place that they will run out of money in 3 months - which I don't think we should take at face value.)
That's all true. Equally, people cancelling Model 3 orders have found getting their money back taking many months - it does seem like they're managing cashflow very tightly.
I would find it unlikely they don't have a plan in place, too. They desperately need to get supply up and moving though...
Coincidentally, people who should be responsible for such plan promptly left the company last month.
Tesla’s VP of Finance, Susan Repo, has left to become CFO of another company, Bloomberg News' Dana Hull reported late Tuesday. The departure comes less than a week after Tesla’s chief accountant Eric Branderiz left the company for "personal reasons," the company disclosed on March 7.
> Thompson manages $25 million and his Tesla TSLA, -0.42% short is the fund’s biggest position. To be fair, he’s been betting big against Tesla for years, which, of course, means he’s endured some brutal stretches.
Unless I'm missing something, what this article really means is nothing new to see here...?
Tesla being lead by a person with lots of past success including getting ready to setup a colony on Mars - you probably can stretch out the risk a little further than compared to say, most anyone else. There are a lot of people, including those with wealth, who will want to see Tesla succeed even if that requires certain unusual measures for a public company; I doubt it will come to this.
I mean I get what your saying and I agree that Elon's reputation and past success should skew the risk equation a little in Elon's favor. But the risk question is not "being stretched a little" is been completely thrown out. There is absolutely no logic to why a company that produced 100,000 cars/year for a total loss of 2 billion is worth 2x a company that produced 6,200,000 cars/year with total profits of 7.2 billion. (That is not even mentioning the 12 billion in cash reserves held by Ford). I love Tesla/SpaceX/Elon as much as the next millennial but I would not touch Tesla stock with a 10ft pole.
> There is absolutely no logic to why a company that produced 100,000 cars/year for a total loss of 2 billion is worth 2x a company that produced 6,200,000 cars/year with total profits of 7.2 billion.
A company's valuation is determined by expectations for the future.
Everything is exponential. If most people are a 1 or 2, and Elon is a 3 - that's a huge lead/advantage that on an exponential scale puts him more than a little ahead.
Good catch on the wording, thanks for pointing it out.
To clarify, the past success part of the future colony on Mars is in the groundwork he has already laid with Tesla/Solar City, SpaceX, Boring Company -- all necessary technology for a proper foundation of a colony.
> Tesla, without any doubt, is on the verge of bankruptcy
Haha! "Without any doubt". Okay, sure, Mr. Future Predictor. He gives it 4 months. This is silly doomsday insanity, Apple-will-be-bankrupt-soon kind of hilarity.
Tesla's not going away and certainly will not be bankrupt. This dude thinks that the entire financial world will abandon Tesla completely - but that's just not true. Tesla could raise as much money as necessary for as long as necessary and Elon knows it. This guy doesn't because he's old and curmudgeonly and stunk in his ways without at all understanding what drives people and investments today.
> This is silly doomsday insanity, Apple will be bankrupt soon kind of hilarity.
Apple is probably not a good comparison here.
Apple was about three months from bankruptcy when Steve Jobs came back, and his pulling it back from the brink is regarded as a once-in-a-lifetime turnaround success. If Tesla's situation is as dire as Apple's was, that is not a good sign.
Note also that before he had time to introduce things like the iMac and iPod, Jobs had to stop the bleeding by brutally slashing unproductive businesses. I don't see Tesla doing anything like that.
I was referring to Modern Apple, post-2016 Apple, not Apple from nearly 30 years ago. I am not referencing that moment in time, I am referencing a very strong company with huge cash reserves and a dedicated wealthy fanbase along with fawning investors, both private and public.
> I don't see Tesla doing anything like that.
Of course not, that would Actually bankrupt the company. What Tesla must do is what they say their plans are: ramp up production and bring new product categories online. They will succeed, and if there are short-term cash issues they will be resolved.
Tesla is a $10T play. Elon wouldn't let it die in 4 months because of some silly, relatively small cash issue getting in the way.
We are talking about interest rate on Tesla debt. It was 5.5% last august, and now, with downgrades and M3 delays, it is 7%. If Tesla would like to tap capital markets for more cash to borrow, interest rate might get uncomfortably high, because market considers Tesla debt getting more and more risky. At some level, interest rate gets prohibitively high, meaninig that markets do not trust you to pay back in time. Since tesla carries a lot of debt (6B?) which it needs to refinance, such move could be deadly.
If there is any substance to a rumor, then there has to be someone that can offer some insight that doesn't stand to make millions from spreading a false or exaggerated rumor with the exact same contents.
> Thompson manages $25 million and his Tesla short is the fund’s biggest position.
I don't doubt there is something to this - but how the hell does a hedge fund manager shorting this very stock become someone to interview and publish in the matter?
Does anyone know what marketwatch does to make money, is it accept money to let people manipulate stocks like this?
There is no way a serious mainstream news outlet can publish news based on rumors from a single person that has a personal financial interest in spreading false news or exaggerated rumors.
If they do it for free then they are giving away their credibility. And if they take thousands of dollars for a piece like this - then they are selling their credibility. I don’t know which would be worse.
78 comments
[ 3.3 ms ] story [ 153 ms ] threadDoes that even count as "hedge-fund manager" these days?
Although, I gotta hand it to him, this does seem a bit absurd:
"As a reality check, Tesla is worth twice as much as Ford ... yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss"
Ford isn't really one of the car companies that looks like it will remain relevant in 10 years time.
Maybe the battery capacity alone is the differentiator? If Ford wanted to start rolling out electric cars, they'd need a lot of batteries, and from what I understand Tesla may be the front-runner in high capacity, low price batteries. That is, until the requisite rare-earth metals are monopolized by a hostile (economically or otherwise) nation and squeeze rent-seeking profits from the electric car boom (fad?).
Manufacturing also isn't easy, but it also isn't super hard compared to electric cars and autonomous driving.
Dozens of car companies have managed to do it, while none have managed to build electric cars and AD well yet.
I'm not an expert in the area, but I am not aware of a game-changing implementation that Tesla has made, is there one? Like, did they make electric motors better in some fundamental, un-reproducable way? That would be a 'moat' they could use to stave off competitors. Or is their battery tech a game changer? From my lay perspective, it appears that their battery manufacturing capacity (i.e., gigafactory) may be, but the battery tech itself is more or less industry-standad stuff.
I guess the big question is what is their competitive advantage compared to Ford, GM, Honda, Toyota, etc.? I ask that not as an attack, but a genuine question to ponder. Nissan has the Leaf in production today, they have all the tech necessary to develop and manufacture and bring to market an electric vehicle. What's stopping them from launching a 'Tesla-killer' under their Infinity brand aimed at the same market as Tesla? It appears nothing is, at least nothing technological. It's probably just a product-market fit question, and as soon as the market for a high end electric vehicle is big enough (thanks to Tesla) then they probably will. And at that point, what Tesla is just another car manufacturer, but one that seems to suck at manufacturing and bringing cars to market. Those kinks may be ironed out, but in the long term it seems that they should be expected to settle into a position as one of many car maker options, where consumers choose a Tesla for similar reasons as one would choose any other car. So, from that perspective, the valuation seems spurious.
Is the play all about self-driving cars? Is the promise of self-driving cars the only thing behind Tesla and Uber? Then again, I ask what advantage these players have, if any. The incumbents may be slow, but do you really think Toyota, GM, Ford, etc. aren't working on this stuff too? They are. Every major car manufacturer has a self-driving car program in the works. Heck, Mercedes has been working on it since at least the late 90's when they brought to market the first radar-assisted cruise controls.
I don't mean to shit all over Tesla here, as surely their existence has sped up the development and public perception of electric vehicles in a major way. And I get the Musk fanboy-ism, he's totally cool and his portfolio of companies is equally totally cool (even though, contrary to perception, he did not in fact 'found' Tesla, Martin Eberhard and Marc Tarpenning did, Elon came in at the series A round of funding). And their cars are totally awesome, and that's something to admire. But as far as their current market valuation, from a totally dispassionate analysis, it seems irrational. Long-term it's hard to see them as justifying a valuation at multiples that much higher than the incumbents. I just don't see the logic. But maybe it doesn't have to be 'logical,' maybe financial markets aren't entirely rational, and maybe that's OK.
Their electric cars simply perform 50% better than the vast majority of other electric cars in every aspect, speed, acceleration, range (very important). Then you can also add design, driving comfort, software integration, where they beat any other electric car (manufacturer).
Thus, their technology is vastly superior.
Mastering manfucacturing isn't easy for a young company, though, it simply takes time.
The other car companies had more than 100 years to figure it out, give Tesla a few more years to catch up with them.
That said, IBM certainly did well in that particular transition.
You do not see new car companies popping up left and right, because profitable manufacturing at scale is insanely hard, and profit margins are not that great. So companies who acquired that knowledge tend to stick around. Unseating them is tricky, as Tesla M3 scale up illustrates.
And at least right now, investors seem to think that Tesla will become wildly successful eventually. Will that actually happen? Who knows.
They would have to get 60X bigger in terms of output to get where Ford already is and has been for a long time.
Do people really think that Tesla will grow 120x larger with 100% probability? Or 240x larger with 50% possibility? That seems irrational to me.
In my opinion that's a very small bit that can't possible justify the current price. If I was going to justify investing Tesla today I would have to make the case to myself that my ROI on Tesla would be better then my other possible ROI I could get else where. Let's say I am hoping for a very reasonable 6.5% return, based on rule of 72 I would expect the value to double in ~ 11 years. Assuming Ford grows at a similar rate over the next eleven years Tesla would have 4x the market cap as Ford currently does. I just don't see how you could expect to invest at the current levels and expect a reasonable return. Even if Tesla perfectly executes for the next 11 years there is no way it would be worth it's current evaluation let alone have room for a decent ROI.
How did he get to manage his own fund if he doesn't even get that.
I think his hedge fund is just fine.
This is true, until it isn't. Moody's just downgraded their bonds, and their stock just hit another low. Whether Musk goes to the debt markets or the equity markets to raise, the price just got much more expensive.
And at some point, these downward spirals feed on themselves. We saw this in 2007-2009 when banks badly in need of raising capital couldn't even do so because the mere announcement of intention to raise spooked the markets (either more debt or more dilution) so much that the price of doing so was prohibitive.
TSLA does have one strong tailwind, though: the short interest in the stock has become so great that it's nearly impossible to find shares to borrow anymore. And there's always the risk of a very large short squeeze.
This is just spreading unsubstantiated FUD.
Jan 2019 P50
Jan 2019 P100
Jan 2019 P200
all puts, all well out of the money, so yeah, lots of people are hedging on a severe downturn within the next year.
Having said that, Short interest is right around its average over the past year, so I guess you can infer that investors are sick of getting their face ripped off by shorting the stock and are willing to pay option premiums to get short exposure.
I would find it unlikely they don't have a plan in place, too. They desperately need to get supply up and moving though...
Coincidentally, people who should be responsible for such plan promptly left the company last month.
Tesla’s VP of Finance, Susan Repo, has left to become CFO of another company, Bloomberg News' Dana Hull reported late Tuesday. The departure comes less than a week after Tesla’s chief accountant Eric Branderiz left the company for "personal reasons," the company disclosed on March 7.
http://markets.businessinsider.com/news/stocks/tesla-stock-p...
Unless I'm missing something, what this article really means is nothing new to see here...?
A company's valuation is determined by expectations for the future.
If they can reinvent "the machine that builds the machine", the sky is the limit.
https://www.youtube.com/watch?v=mSO1dnSbu_k
If they fail, then the shorts will have some fun.
But I wouldn't bet against Elon Musk even with long odds.
How is that a "past success"?
To clarify, the past success part of the future colony on Mars is in the groundwork he has already laid with Tesla/Solar City, SpaceX, Boring Company -- all necessary technology for a proper foundation of a colony.
Haha! "Without any doubt". Okay, sure, Mr. Future Predictor. He gives it 4 months. This is silly doomsday insanity, Apple-will-be-bankrupt-soon kind of hilarity.
Tesla's not going away and certainly will not be bankrupt. This dude thinks that the entire financial world will abandon Tesla completely - but that's just not true. Tesla could raise as much money as necessary for as long as necessary and Elon knows it. This guy doesn't because he's old and curmudgeonly and stunk in his ways without at all understanding what drives people and investments today.
Apple is probably not a good comparison here.
Apple was about three months from bankruptcy when Steve Jobs came back, and his pulling it back from the brink is regarded as a once-in-a-lifetime turnaround success. If Tesla's situation is as dire as Apple's was, that is not a good sign.
Note also that before he had time to introduce things like the iMac and iPod, Jobs had to stop the bleeding by brutally slashing unproductive businesses. I don't see Tesla doing anything like that.
> I don't see Tesla doing anything like that.
Of course not, that would Actually bankrupt the company. What Tesla must do is what they say their plans are: ramp up production and bring new product categories online. They will succeed, and if there are short-term cash issues they will be resolved.
Tesla is a $10T play. Elon wouldn't let it die in 4 months because of some silly, relatively small cash issue getting in the way.
The difference is Apple prints money. And Foxconn is arguably the best there has ever been when it comes to manufacturing.
Tesla burns money.
The only similarity is their cult leaders.
Maybe Tesla can rise as much as necessary, but i won't call 7.1% yield to maturity as very favorable.
https://www.cnbc.com/2017/12/14/jim-chanos-we-think-tesla-is...
> Thompson manages $25 million and his Tesla short is the fund’s biggest position.
I don't doubt there is something to this - but how the hell does a hedge fund manager shorting this very stock become someone to interview and publish in the matter?
Does anyone know what marketwatch does to make money, is it accept money to let people manipulate stocks like this?
They are one of the largest mainstream financial sites, partnered with CBS and owned by Dow Jones.
This is a very odd question.
If they do it for free then they are giving away their credibility. And if they take thousands of dollars for a piece like this - then they are selling their credibility. I don’t know which would be worse.