Tesla shelf is out. A couple thoughts (disc: short $TSLA) sec.gov/Archives/edgar…
1. Clearing up Elon Musk’s SEC matter & filing this shelf takes care of 2 outstanding items, which I have previously outlined as necessary for a common equity offering
2. On Page 2, note there is no mention of 2 big previous Elon Musk promises, which appeared to be obvious, unachievable lies
A. China mass production by year end 2019
B. Robotaxis (FSD) in 2020
A. China mass production by year end 2019
B. Robotaxis (FSD) in 2020
3. There are 3 implied delays in the language
The pipeline is described in date order
Model Y in 2020
“Future”, which implies after 2020
For semi-truck, new roadster, pickup truck
The pipeline is described in date order
Model Y in 2020
“Future”, which implies after 2020
For semi-truck, new roadster, pickup truck
4. A multi billion $ common equity offering requires a bulge bracket I-bank as lead
To get a big bank to take the underwriting risk
Musk needs to
A. Walk back ALL timeline & other projections, which appear to be obvious & unachievable lies
B. Give realistic guidance
To get a big bank to take the underwriting risk
Musk needs to
A. Walk back ALL timeline & other projections, which appear to be obvious & unachievable lies
B. Give realistic guidance
5. I-banks have paid tens of billions in govt fines & legal settlements 4 underwriting bad securities
2 get a lead bank
= avoid “knew or should’ve known fraud” potl future liability
= Musk will have to quit lying
= Worst thing for $TSLA stock
= necessary 2 keep Tesla afloat
2 get a lead bank
= avoid “knew or should’ve known fraud” potl future liability
= Musk will have to quit lying
= Worst thing for $TSLA stock
= necessary 2 keep Tesla afloat
6. $TSLA downgraded to Peer Perform at Wolfe Securities this morning
Somehow they estimate Tesla will earn $8.50 in 2020 LOL
Somehow they estimate Tesla will earn $8.50 in 2020 LOL
7. Insurance
Another recent & dubious Musk promise to investors
Not mentioned in the shelf description
Tesla is walking back their lies & hype
Tesla cars cost more to insure due to structural reasons they can’t change, such as aluminum body
Another recent & dubious Musk promise to investors
Not mentioned in the shelf description
Tesla is walking back their lies & hype
Tesla cars cost more to insure due to structural reasons they can’t change, such as aluminum body
8. Tesla just filed to offer $650 million of stock & $1.35 billion of convertible bonds
Assuming the 15% shoes are filled
$747.5 million of equity & $1.55 billion of convertible bonds
Assuming the 15% shoes are filled
$747.5 million of equity & $1.55 billion of convertible bonds
9. $747.5 million of equity is woefully inadequate given Tesla's financial condition, and the likely shortfalls ahead in Q2 and Q3
Tesla has > $9 billion debt
only $1.45 billion of non-customer deposit cash belonging to them at 3-31
will burn alot of $ in Q2 and Q3
Tesla has > $9 billion debt
only $1.45 billion of non-customer deposit cash belonging to them at 3-31
will burn alot of $ in Q2 and Q3
10. The strategy is simple:
Regular debt wasn't a realistic option, TSLA 2025 yielding >8%
Convertible bonds are typically hedged by institutions
Much lower future legal liability risk to I-banks than common equity
Regular debt wasn't a realistic option, TSLA 2025 yielding >8%
Convertible bonds are typically hedged by institutions
Much lower future legal liability risk to I-banks than common equity
11. I-banks underwriting the deal are clearly hoping:
The smaller than expected equity slice
Will cause $TSLA stock to perform well enough, for long enough, to avoid future legal liability
The smaller than expected equity slice
Will cause $TSLA stock to perform well enough, for long enough, to avoid future legal liability
12. Elon Musk is borrowing ANOTHER $10 million from the banks to invest in the deal
He was over $600 million in margin debt 2 years ago
The filings don't disclose his total margin debt now
It's likely close to $1 billion
This is MADNESS by Elon Musk
He was over $600 million in margin debt 2 years ago
The filings don't disclose his total margin debt now
It's likely close to $1 billion
This is MADNESS by Elon Musk
13. Tesla will not come remotely close to fixing its financial woes with this offering
The relative sizes of small equity vs mostly convertible debt are a "hail Mary pass" attempt to keep $TSLA stock from completely cratering
The relative sizes of small equity vs mostly convertible debt are a "hail Mary pass" attempt to keep $TSLA stock from completely cratering
14. It will be VERY INTERESTING to learn
A. During the deal roadshow, will the underwriters force Elon Musk to quit the obvious lies?
I believe yes, though not completely
B. Will resetting expectations in A hurt Tesla stock?
A. During the deal roadshow, will the underwriters force Elon Musk to quit the obvious lies?
I believe yes, though not completely
B. Will resetting expectations in A hurt Tesla stock?
15. What will the convertible deal terms look like?
Most importantly
Tesla will almost certainly want some sort of mandatory conversion language in the deal, e.g. if the stock trades over a certain price, Tesla can turn the converts into common equity
Will Tesla get this?
Most importantly
Tesla will almost certainly want some sort of mandatory conversion language in the deal, e.g. if the stock trades over a certain price, Tesla can turn the converts into common equity
Will Tesla get this?
16. Assuming there is a mandatory conversion price for the converts,
e.g. $TSLA trades >$300 for 20 consecutive trading days
Can Elon PUMP $TSLA hard enough after the deal is done
B4 awful early July Q2 delivery #s
This will be Elon's strategy
e.g. $TSLA trades >$300 for 20 consecutive trading days
Can Elon PUMP $TSLA hard enough after the deal is done
B4 awful early July Q2 delivery #s
This will be Elon's strategy
17. Both offerings are overnight. Pricing tonight, trading tomorrow.
My bet would be that they will eventually upsize the equity component somewhat
My bet would be that they will eventually upsize the equity component somewhat
18. There is a group investor call at 11am to pitch the deal.
19. Tesla has $566 million of solar related bonds due 11-1-19, plus some other odds and ends
If $TSLA raises $2.5 billion
Delivers 70k vehicles in Q2
50k in Q3 (another $1,875 tax credit expires 7-1)
Tesla will have enough cash through 2019, and that's it - barely
If $TSLA raises $2.5 billion
Delivers 70k vehicles in Q2
50k in Q3 (another $1,875 tax credit expires 7-1)
Tesla will have enough cash through 2019, and that's it - barely
20. Thus, I believe this offering won't help Tesla's stock price longer term
When they report Q2 deliveries in early July, the stock will be meaningfully lower
Q2 EPS will be another disaster
Q3 deliveries in early Oct will be horrible, and $TSLA will go much lower still
When they report Q2 deliveries in early July, the stock will be meaningfully lower
Q2 EPS will be another disaster
Q3 deliveries in early Oct will be horrible, and $TSLA will go much lower still
21. My 2 main forecasts for year-end 2019 remain the same
$TSLA will be under $100 per share
Elon Musk will be forced to dump stock in a margin call
(disc: short $TSLA)
$TSLA will be under $100 per share
Elon Musk will be forced to dump stock in a margin call
(disc: short $TSLA)
22. Gene Munster of @LoupVentures was totally wrong on Q1 during our debate
He is misleading investors on CNBC right now
Tesla DOES NOT have $2.2 billion in cash!
They have $1.45 billion in cash - the rest are customer deposits, which don't belong to Tesla
He is misleading investors on CNBC right now
Tesla DOES NOT have $2.2 billion in cash!
They have $1.45 billion in cash - the rest are customer deposits, which don't belong to Tesla
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