Tesla, the investment

[Zaphod]

So for everyone that is interested in discussing the company as a going concern, finances, possibilities, their future, etc...here is your thread. I've made lots of my opinions known already, as have a few others. So please do chime in! Its fun, and no hard feelings, we're talking about the stock only, not each other.

Fine, I'll start. Today Teslas Vice President of World Finance announced he's leaving the company. I'll leave that there with a question I saw someone post on TWTR,

"if TSLA is such a great company and everything is great then why are all of the finance and accounting teams leaving?"

another funny one:

"BREAKING: TSLA causing worldwide shortage of red flags."

Seriously though, what about the situation isnt at least a tiny bit concerning? Of note they are not profitable, cant make profit even in volume (no operating leverage), and given they have slashed capex the last couple years have no real likelihood of being able to service an amazing increase in volume even if its what the market demanded. That is, you cant build more cars if you've not built out lines/factories to do so, saying nothing of the truck/semi/etc....All of this is in context with an astronomically sky high stock price.

So my conclusion is the equity price tumbles to match reality. Time frame and course are harder, but by 2019q2 several big unavoidable things happen that should be making things more clear.

If they raise money some way on the other hand, short burn of the century indeed, would be nuts. Which makes me assume they probably cant.

Still, making money off of this is really hard if you're also trying to limit risk, etc...options have such high IV that unless an overnight crash you might be right but make no money. Given short interest it may slowly drift down as covering ends up supporting the price (see LFIN).

I feel like a lot has been said from the negative side and this separate thread is for those bothered by it being on the other one. Also posterity and such.

[VagabondMD]

I am long LEAF, no position in Tesla. If I could figure out a way to purchase out-of-the-money puts 18-24 months out, I might take a small position in my fun account (but probably won't).

[burritos]

Vagabond MD wrote:

I am long LEAF, no position in Tesla. If I could figure out a way to purchase out-of-the-money puts 18-24 months out, I might take a small position in my fun account (but probably won’t).

Click to expand...

Leaf owner here. Love my leaf, but have absolutely no interest in investing in nissan stock.

[Craigy]

Just from an investment perspective, even if all the rainbows and unicorns are legitimate, the company is still rolling with a market cap bigger than Ford, as big as Honda, BMW, GM, etc., and those companies actually produce and sell a ton of product.  Best case scenario, how much higher a value could the earnings ever justify?  Tesla has tons of IP, but they hardly have a patent on the concept of the electric car.

[Dont_know_mind]

Irritating manner and an old video from June but it sums up the reasons not to short Tesla, although it's tempting.

https://www.youtube.com/watch?v=iUOfuaTdibE

Too much short interest. Also, although on the ropes, it's not clear to me that Musk is done and dusted.

I am really paranoid about shorting, it's much harder than buying compacted trash.

I think Bitcoin was a better short earlier this year. I did short 1 bitcoin but I didn't have the nerve to hold it for more than a week.

Musk may well have a D&A issue, and maybe personality issues, but that is in the news and so is all the other stuff mentioned.

It may well get bought out if it drops low enough. Possibly by apple. And at any stage, Musk could tweet something stupid and with the short interest you get stopped out. So if you shorted here, where would the stoploss be. Previous highs ? Which is a wide stop and a poor risk:reward given how far it might fall.

Too hard for me to play. Fun to watch though.

[q-school]

Looks fun!  Thanks for starting the thread.

I’m not investing in Tesla either way, but i think the shorts are correct.

 

[Zaphod]

I personally wouldn't short it directly, not enough control and way too much risk. This stock doesnt trade on fundamentals and at times acts as if its a small float likely due to the high short interest. I'd use options, though given the afore mentioned IV issues you have to think about structure to recoup some costs.

I just closed a sept7/Sept 21 diagonal that was 402.5/405. Stock seems to be in a consolidation week so just waiting to see where it settles before going one way or the other. That was paying for little lottery positions. Will figure out next play by end of week. There's so much juice in the options buying is a tough game. Has to be timed relatively well or more itm woth a longer tenure. Unless a clear catalyst or price extreme presents itself, much of the time tesla is simply a stock to watch as even when you're right, it can still be very hard to make money.

No one in their right mind would venture to buy Tesla outright (ie by equity or tender). There's no need. If you want to own Tesla you buy the bonds, a majority stake in key suppliers that hold the liens on the factories, etc.. and you get them for pennies without their liabilities (which at this point are massive and much of their current problem).

[Dont_know_mind]

Zaphod wrote:

I personally wouldn’t short it directly, not enough control and way too much risk. This stock doesnt trade on fundamentals and at times acts as if its a small float likely due to the high short interest. I’d use options, though given the afore mentioned IV issues you have to think about structure to recoup some costs.

I just closed a sept7/Sept 21 diagonal that was 402.5/405. Stock seems to be in a consolidation week so just waiting to see where it settles before going one way or the other. That was paying for little lottery positions. Will figure out next play by end of week. There’s so much juice in the options buying is a tough game. Has to be timed relatively well or more itm woth a longer tenure. Unless a clear catalyst or price extreme presents itself, much of the time tesla is simply a stock to watch as even when you’re right, it can still be very hard to make money.

No one in their right mind would venture to buy Tesla outright (ie by equity or tender). There’s no need. If you want to own Tesla you buy the bonds, a majority stake in key suppliers that hold the liens on the factories, etc.. and you get them for pennies without their liabilities (which at this point are massive and much of their current problem).

Click to expand...

I think it's most likely to range trade so I guess you could sell option premium, but it's risky.

I had thought that Bitcoin and Tesla would break before the general market does so it will be interesting to see if or when Tesla does.

My guess would be about a year but who knows. Nothing I would bet any money on.

I think my only real edge is buying wholesale liquidation so I am waiting to take the other side of that. Maybe the debt at 10% or something. But there are probably going to be much better compacted junk plays during an actual downturn. What I am really waiting for is mid caps with a good chance of surviving selling for less than option value. That sort of stuff has 1:10 risk/reward and is basically a free, time unlimited call option (as long as they don't go bankrupt).

 

 

[Zaphod]

Dont_know_mind wrote:

Zaphod wrote:

I personally wouldn’t short it directly, not enough control and way too much risk. This stock doesnt trade on fundamentals and at times acts as if its a small float likely due to the high short interest. I’d use options, though given the afore mentioned IV issues you have to think about structure to recoup some costs.

I just closed a sept7/Sept 21 diagonal that was 402.5/405. Stock seems to be in a consolidation week so just waiting to see where it settles before going one way or the other. That was paying for little lottery positions. Will figure out next play by end of week. There’s so much juice in the options buying is a tough game. Has to be timed relatively well or more itm woth a longer tenure. Unless a clear catalyst or price extreme presents itself, much of the time tesla is simply a stock to watch as even when you’re right, it can still be very hard to make money.

No one in their right mind would venture to buy Tesla outright (ie by equity or tender). There’s no need. If you want to own Tesla you buy the bonds, a majority stake in key suppliers that hold the liens on the factories, etc.. and you get them for pennies without their liabilities (which at this point are massive and much of their current problem).

Click to expand…

I think it’s most likely to range trade so I guess you could sell option premium, but it’s risky.

I had thought that Bitcoin and Tesla would break before the general market does so it will be interesting to see if or when Tesla does.

My guess would be about a year but who knows. Nothing I would bet any money on.

I think my only real edge is buying wholesale liquidation so I am waiting to take the other side of that. Maybe the debt at 10% or something. But there are probably going to be much better compacted junk plays during an actual downturn. What I am really waiting for is mid caps with a good chance of surviving selling for less than option value. That sort of stuff has 1:10 risk/reward and is basically a free, time unlimited call option (as long as they don’t go bankrupt).

 

 

Click to expand...

My belief is it will move in a max pain distribution in relation to any position I may take. This is usually what happens.

[Dont_know_mind]

Zaphod wrote:

Dont_know_mind wrote:

Zaphod wrote:

I personally wouldn’t short it directly, not enough control and way too much risk. This stock doesnt trade on fundamentals and at times acts as if its a small float likely due to the high short interest. I’d use options, though given the afore mentioned IV issues you have to think about structure to recoup some costs.

I just closed a sept7/Sept 21 diagonal that was 402.5/405. Stock seems to be in a consolidation week so just waiting to see where it settles before going one way or the other. That was paying for little lottery positions. Will figure out next play by end of week. There’s so much juice in the options buying is a tough game. Has to be timed relatively well or more itm woth a longer tenure. Unless a clear catalyst or price extreme presents itself, much of the time tesla is simply a stock to watch as even when you’re right, it can still be very hard to make money.

No one in their right mind would venture to buy Tesla outright (ie by equity or tender). There’s no need. If you want to own Tesla you buy the bonds, a majority stake in key suppliers that hold the liens on the factories, etc.. and you get them for pennies without their liabilities (which at this point are massive and much of their current problem).

Click to expand…

I think it’s most likely to range trade so I guess you could sell option premium, but it’s risky.

I had thought that Bitcoin and Tesla would break before the general market does so it will be interesting to see if or when Tesla does.

My guess would be about a year but who knows. Nothing I would bet any money on.

I think my only real edge is buying wholesale liquidation so I am waiting to take the other side of that. Maybe the debt at 10% or something. But there are probably going to be much better compacted junk plays during an actual downturn. What I am really waiting for is mid caps with a good chance of surviving selling for less than option value. That sort of stuff has 1:10 risk/reward and is basically a free, time unlimited call option (as long as they don’t go bankrupt).

 

 

Click to expand…

My belief is it will move in a max pain distribution in relation to any position I may take. This is usually what happens.

Click to expand...

Zaphod, I am curious, what is your asset allocation and investment strategy overall at the moment and where does your discretionary trading or option strategy fit into this/what is the relative size ?

[Zaphod]

Dont_know_mind wrote:

Zaphod wrote:

Dont_know_mind wrote:

Zaphod wrote:

I personally wouldn’t short it directly, not enough control and way too much risk. This stock doesnt trade on fundamentals and at times acts as if its a small float likely due to the high short interest. I’d use options, though given the afore mentioned IV issues you have to think about structure to recoup some costs.

I just closed a sept7/Sept 21 diagonal that was 402.5/405. Stock seems to be in a consolidation week so just waiting to see where it settles before going one way or the other. That was paying for little lottery positions. Will figure out next play by end of week. There’s so much juice in the options buying is a tough game. Has to be timed relatively well or more itm woth a longer tenure. Unless a clear catalyst or price extreme presents itself, much of the time tesla is simply a stock to watch as even when you’re right, it can still be very hard to make money.

No one in their right mind would venture to buy Tesla outright (ie by equity or tender). There’s no need. If you want to own Tesla you buy the bonds, a majority stake in key suppliers that hold the liens on the factories, etc.. and you get them for pennies without their liabilities (which at this point are massive and much of their current problem).

Click to expand…

I think it’s most likely to range trade so I guess you could sell option premium, but it’s risky.

I had thought that Bitcoin and Tesla would break before the general market does so it will be interesting to see if or when Tesla does.

My guess would be about a year but who knows. Nothing I would bet any money on.

I think my only real edge is buying wholesale liquidation so I am waiting to take the other side of that. Maybe the debt at 10% or something. But there are probably going to be much better compacted junk plays during an actual downturn. What I am really waiting for is mid caps with a good chance of surviving selling for less than option value. That sort of stuff has 1:10 risk/reward and is basically a free, time unlimited call option (as long as they don’t go bankrupt).

 

 

Click to expand…

My belief is it will move in a max pain distribution in relation to any position I may take. This is usually what happens.

Click to expand…

Zaphod, I am curious, what is your asset allocation and investment strategy overall at the moment and where does your discretionary trading or option strategy fit into this/what is the relative size ?

Click to expand...

My asset allocation in theory is 100-150% stocks. In practice it really varies. I have been for most of the year and am mostly in cash right now. Though most the volatility has died I decided in mid February I had already had a good enough year that even zero % gain or loss to inflation was acceptable to some kind of freak draw down. I have at times been in and out of bonds instead, and after the hike this month will likely allocate a good portion to that mostly on the short/intermediate duration funds. I will trade indexes around that at extremes and good r/r setups or trends.

For the play account, which is 10% of regular, I mostly trade options and sometimes futures (though I try to abstain outside hedging purposes), but a lot less this year than last. I like to trade volatility and its products as they have some predictable tendencies, large premiums, and are subject to human behavioral issues.

I havent been trading much overall right now as the vix curve is flat and we're at a local high and there are some disconnects that arent immediately obvious how they will be resolved, and Im busy with other things too. The increased global macro risk is quite striking rn.

I'd love to be a faithful buy and hold investor, but I dont think I can stomach it. I also dont 100% buy that you cant see signs of a recession or at least some stagnation on the horizon and position yourself accordingly to limit losses. Also dont think its that difficult to get back in. I did both in 2015/2016 just fine, and have use leveraged products to get my 100 or 100+% market exposure without all the cash being in the pot. You dont have to nail the top or the bottom, thats not the goal at all. The goal is to recognize situations that have asymmetric risk/reward and position accordingly.

[Hatton]

Observations......1.  The less I do the more money that I make.

2.  The more negative stories on the front page of the WSJ the more likely a company will crater or bankrupt.  Recent example Theranos.           Now possibly Tesla.

[ajm184]

Viewing this stock from afar, I would be highly worried as an investor (equity or bond).  You have a CEO, like the President who really needs to stop using Twitter.  A not crazy, though onerous bond maturity schedule with 1.2Bio due in the next 6 months.  Between a CEO and bonds, this is likely the root cause of financial executives departures.  It is highly likely Tesla will be issuing stock later this year/early next to repay debt.

As Charlie states the three sins are ladies, liquor, and leverage.  Between Tesla and its CEO, they have checked all three (trading liquor for pot).

From an investment standpoint, I would look at well structured bonds with specific collateral, such as IP around batteries.  Not sure if this is possible and the bonds are all pari passu.

[Dont_know_mind]

Be careful with the futures and leverage. If you haven’t blown up your account, it’s something you have to be prepared for. Unfortunately, I lost my brain after a large return with the China scare in 2014 and blew up my futures account. I think I would was up around 200% in a few months.

I think with Tesla, people view it as a bellwether of liquidity. As it is cashburning, whatever the bear/bull arguments the continuing funding depends on capital markets being open.

I guess if you wanted to short it you would need to study the debt market for it to decide when it was game over for funding. And get in there before everyone else. I haven’t got the time or the motivation to do that. And I think I have no edge with that.

As it hasn’t broken down with all the recent news I do wonder whether it will make new highs. Massaging some data  about it being no longer cashflow negative in q3 or q4 may do that because everyone knows it’s Achilles heel is dependence on  funding.

For my part, I won’t be trading Tesla. I will be watching it though. If it breaks down, that would have me thinking about cashing the current stock allocation I have. I have around 400k in index funds, which is not large at all. I guess it’s there to reduce FOMO if the market continues for another year or 2 or 3. In the meantime hopefully I can do nothing and avoid making any mistakes.

I have been watching mining related real estate and have been really tempted to buy something this year but refrained. What I am really waiting for is to buy that or mining contractors during the next downturn. I see a lot of value there and a good risk:reward. But resources are very (inversely) dollar related and I will wait until tech has peaked.

I think the current period has similarities to 1998-2000. It is not exactly the same. The period between the Asian financial Crissis (1997) and the tech peak (2000) was shorter than the current period between the Yuan devaluation scare (2014) and whenever the tech peak will be.

Perhaps this time will be different in other ways. The right move in 1999 was to watch but avoid participation in tech to find the right time to buy resources. Resources had a few false starts before being ground into the ground.  But had amazing returns from 2001-2007. You will probably find this a bit ridiculous but spot uranium went up over 10x.

I like investments with a long potential timeframe and runway.

[Zaphod]

DOJ investigating now. Could be nothing or very serious.

Over/Under on how much longer EM is CEO?