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How We See It - Short-Sellers in the Blogosphere

Since Tesla’s IPO in June, some stock traders who are "short selling" Tesla stock have been moonlighting as financial bloggers. It's important to remember that these short sellers are not objective observers or neutral pundits. Worse, their posts often contain factual errors. So-called shorters only make money when a stock loses value, and they may lose substantial sums if a stock stays the same or increases in value. In other words, they have a vested and leveraged financial interest in rapidly plunging stock prices.

Recently, Tesla shorters have expressed disbelief that Tesla can get Model S to market for less than $1 billion. The catchy phrase "Billion-dollar bravado" pops up with alarming frequency – and for one simple reason: for more than a decade, analysts have believed that the cost to a traditional car maker of developing a new platform is $1 billion. The sum is so oft-quoted that it's become an unquestioned industry standard.

Tesla has told investors that Model S development would cost about $400 million, undercutting conventional wisdom by a wide margin. Remember, Tesla has previous success in frugal product development: the Roadster was developed for $125 million.

The billion-dollar thesis doesn't apply to Tesla. Analysts presume capacity for a high-volume product, typically for 200,000 units or more per year, and an enormous workforce (tens of thousands) for research, design, overall development, and production engineering.

Tesla currently employs 800 people, and expects to ramp to approximately double the headcount by the time Model S starts production. We believe that volume for the Model S could be approximately 20,000 per year. Tesla has a proven powertrain design and will leverage Roadster R&D for Model S. Knowledgeable analysts will admit that giant automakers can and have broken the $1 billion barrier when they adhere to lean production principles.

Tesla and Toyota have a strategic partnership focused on electric vehicle manufacturing. Tesla plans to manufacture the Model S at the Tesla Factory in Fremont, Calif., where Toyota perfected the most innovative and leanest manufacturing tenets in the industry. Tesla's strategic partnerships with both Toyota and Daimler are indirectly helping to reduce costs of the Model S even further.

Inconveniently for short sellers, none of those facts support their position.

OK, this explains one of the messages I saw in autobloggreen, which I tried to correct as well as I could. I repeatedly asked his source for his apparently ripped-from-thin-air claims of how much production costs (and also how much Tesla had already used), and got only some vague "it's everywhere", "read financial news".

I believe I managed to change his opinion, and if not his then at least some of the other readers got the idea that you should not trust everything you read on internet, especially if it comes from that kind of sources.

Only 800 people? That is remarkable. It also explains how you have managed to stay...human? I think that is the word. Less people, less bureaucracy, more tight community and faster movement, better reactions.

If you have the time to look you can find way too much misinformation in the blogosphere. They are usually instigated by a few people with ulterior motives and then propagated by misinformed public, mostly teenagers based on blog contents that I've seen.
I try to leave comments and correct them when I think its worth the effort. But then there is no way you can eradicate the ignorance that exist in the blogosphere where misinformation can travel at the speed of the net.
Alternately there are great articles from good sources such as the piece in October issue of Wired magazine.

I think it's a good effort on Teslas part to respond to some of these but I prefer Tesla to spend the effort on building the Model S and getting it out sooner than later. That's the best way to cap the ignorance and shut these people up.
And of course I can be cruising in my Model S even sooner, the wait is killing me.
Go Tesla.

What I get a kick out of is that the President of GM made about $35M per year in salary (I wonder how much he would be paid if he was good enough to keep the company out of bankruptcy).
In the 4 years that Tesla was developing the Roadster, he got about $35MX4 = $140M in salary while Tesla put only $125M into designing a car. Personally, I see that as highlighting the streamlined nature of Tesla compared to the big 3.
Go Tesla!

Can you do a bit bisnes explaining and explain what is that 343.06 M "Other Liabilities" that I see appeared in 2Q this year. That is a lot for three month period.

Source:
http://www.dailyfinance.com/financials/tesla-motors-inc/tsla/nas/balance...

That makes me look bad when I just wrote to one place that you don't have half a billion in debts.

The government money is a loan, not a grant. I expect the bulk of the liabilities are those long-term debts, which Musk has promised to pay off at an accelerated rate.

And I don't see that number anywhere. Total liabilities are 108M. I think you're 'fused!

Check "Quarterly Data". Balance sheet has two "tabs" annual and quarterly.

There is that mystery 343.06 M "other liabilities", and it is very recent. All other reports have there only ~20 M max. If that is not "long term debt" or "short term debt" then what is it? Some major purchase? Then how doesn't that show on assets?

Seriously that report makes even me think twice of buying Tesla stock. That mystery liability increases from 15M to 343M in just three months. It doesn't look good. Common equity and Capital surplus both go badly (very badly) in negative in that same time period.

Third quarterly report should be there soon.

It could be purchase of that 442.15 M of Preferred stocks though. Some artificial "this looks bad" from IPO.

I'll wait for third quarterly report, maybe it makes more sense. Stock markets have their own language and that is very difficult to understand by someone that hasn't studied it for a while.

since tesla is a company that probably wont make money for another 2 years, I personally am hesitant to buy any stock because I think given their current revenue, its overpriced. but once the model s comes out, they should be raking in money as fast as they can make em.

Whistle;

Indeed, as long as they make sure they have a decent gross margin on each car. If they clear $10K/car, and sell 20,000/yr., that's $200M contribution to overhead and equity each year. Much of that would go towards loan repayment and plant for a while. Other ventures (Toyota's RV4, ESS systems for Daimler, etc.) should also make contributions.

If TM makes good use of the NUMMI plant, it could handle a lot of things in parallel, IMO.

I see that third quarter report has appeared. That looks much, much better than two previous ones.

I agree with Mehdi, that the wait for the Model S is killing "us"!

Whistle has it wrong about the stock now being a bad buy. If you wait for 2 years, you will pay the higher price then. Give Tesla a vote of support NOW, as an American company that still knows how to do the job right! And reap the benefits later!

I know that Tesla has said that they have no dividends to pay, but they should try to generate some loyalty (could there be more?), and offer something to us shareholders! A lapel pin, hat, or jacket? For different levels of investor loyalty of longevity, or shares owned.

I get cards from Tesla, and I have received several nice little gifts along the way. And since I can't do anything about the wait, I enjoy watching Tesla grow.
But for you people who can't decide to invest in Tesla any more than a few dollars, what do you expect in returns?

I, too, enjoy the gifts from Tesla. Tesla is a classy company to acknowledge that some people have put down money to secure a place in the queue for a Model S. I would still be a great supporter of Tesla without the gifts, but it's nice to know that they remember their supporters.
I promote Tesla at every opportunity. The local classic car club has gone from outspoken hostility to all electric cars, to skeptical, to asking for rides when my Model S arrives. Rides in the Roadster convinced the most skeptical.

Speaking of rumour-mongering and bad-mouthing, take a look at this:
http://www.automoblog.net/2011/08/06/tesla-and-toyota-and-a-billion-doll...

He's claiming Tesla got its loan through criminal collusion, and spend much of it on partying and fat payouts to executives, etc. You might like to track him down for a wee chat.

@Brian H,
Some blogs aren't even worth the time to prepare a reply. We're living in a world of misinformed haters. Sometimes the best thing to do is move forward in a positive way, creating a ground swell of positives and public support. Tesla is doing just fine in that regard.

Huge upcoming milestones will be:
- October 1st Fremont event
(Model S Beta unveiled to the press & reservation holders)
- December 2011 unveil of Model X concept
- Early 2012 ? Production intent Model S
- Model S is on display in Tesla stores (1Q 2012 ?)
- Mid 2012 Model S production begins
(with more than 10,000 reservations, hopefully)
- End of 2012, 5,000 Model S cars delivered, and still . .
(more than 10,000 reservations in the queue!)

This appeared today on http://seekingalpha.com/article/296317-plug-in-vehicles-weighed-in-the-b...

key point = "The message for investors is clear. When you cut through the hand waving and glittering generalities plug-in vehicles with big batteries have been weighed in the balance and found wanting. They promise the worst possible combination of facile emotional appeal and dismal economics. They can only be attractive to the philosophically committed or the mathematically challenged. As the ugly truth becomes apparent to congressmen, businessmen and consumers who are staggering under crushing debt burdens and facing an immediate need to balance revenues and expenses, the hype induced euphoria over companies like Tesla Motors (TSLA) that make plug-in vehicles and battery companies like A123 Systems (AONE) and Valence Technologies (VLNC) that make big battery packs for toys must fade because immutable laws of economic gravity won't permit any other outcome."

original source = http://www.cmu.edu/me/ddl/publications/2011-PNAS-Michalek-etal-PHEV-Valu...

As a reservation holder and TSLA investor, this is the most credible attack on Tesla's business model in my view to date ( e.g. large battery packs are not and may never be cost effective) What is the company response to this view?

I don't know what the company view is or if they'll respond. While probably true that they are not currently cost effective, it remains to be see if changes in technology will make them cost effective in the future. However, I too am philosophically in favor of using EVs and hold TSLA stock. There are other reasons than immediate financial rewards to using EVs and reducing the number of ICEs in use.

I think the economics of Model S purchase and use will refute the entirety of that "attack". Not only will cost of ownership/use be superior to parallel class ICE cars, but the pleasure of ownership -- for which consumers are prepared to pay BIG money -- will be in a class of its own.

The best is yet to come.

Having followed John Petersen for a while, I have to underline that his point of view is that of the society as a whole, not that of a Tesla owner.

There is a real problem that Li-ion batteries use lots of non-ferrous metals, of which only 8.4kg are produced every year per person in average (300kg aluminum body + 250kg of the 500kg battery pack means that raw materials are produced for a car per person every 65 years). Two orders of magnitude more oil is extracted. Metals need more processing and refining than oil. Those metals are already used by existing industries. Mining production accelerations is done in the decade time frame (and use a lot of energy to do so).

So until we find a way to use less non-ferrous metals in batteries (either chemistries based on Fe, Si) or capacitors good enough get produced, EVs will not replace ICE in any meaningful numbers (do not confuse lab success with manufacturing and economic success). John's arguments, again, from society's point of view, is that we better use those scarce battery resources to reduce more oil consumption per kWh of storage than in EVs until we find a way to really scale up (hybrids, not plug-ins).

My opinion is that Tesla is a niche player and its role is important to change public opinion and advance all other tech except batteries (but including the pack, PEM etc.). They will be ready to dominate the industry when the right battery will arrive. TSLA can have a nice run if they manage to deliver on their promises, but do not put all your hope in total domination.

I wrote two Seeking Alpha articles about Tesla. One is about the excellent products they promise and their potential as a company. The other is about a looming short squeeze in TSLA, which may be triggered (attention: this is a rare event therefore with low probability, one should consider lost any money bet on that, just like a lottery ticket) by an event like the one starting tonight / tomorrow.

The metals argument is bogus. Tesla's packs (and motors) do not use rare earths, are only 3% lithium, and lithium is very abundant and completely recyclable. ICE cars use a lot more industrial metals than EVs. This is a complete red herring.

Nicu has his head where the sun doesn't shine.

As for storage, note the new entries on the battery thread. Re: http://www.gizmag.com/energy-storage-membrane-created/19996/

2% the cost per kwh of LiIon. 500,000X the energy density of capacitors.

Yowza!

Dream on. It is a nice dream though. Hopefully it pans out in quantities at prices that really can be afforded. If it looks like it's going to, I'd probably opt for the 160 mile pack with the hope that it could be upgraded in a few years. Also, hopefully Tesla would incorporate the new technology when (if) it becomes available. Then the Model S could become affordable for many more people.

Arithmetic errors; 12-25% cost per kwh of LiIon. No electrolyte solutions. 0.2 farads vs 1 microfarad / cm^2.

Very lightweight. Soft and flexible, so it can't be "broken".

Perfect for electric planes, too!

:D
:)
Elon will be VERY interested ...

@Douglas - I am not talking about rare earths, not Lithium - but the bulk of the weight of any cell is non-ferrous metals
@Brian - I warned you not to get excited by lab results (that are not even independently verified yet)

Mainstream EVs a nice dream and it will probably work out. But it will take much longer than most of us expect, with many setbacks.

Yes, buckets of shortages tomorrow, but no shortages today!

Approximately zero "Peak Somethingorother" predictions have ever come true. If you can think of one, please share.

Before there is any "peak something", prices go up to unbearable levels. How much was a barrel of oil 20 years ago ? Every time the economy seems to get up on its feet, oil goes up and we're back to square 1. Metals go up more or less at unison with that.

You should ask people who had to go out in the street and get shot this spring (and even today in some places, like Syria and other arab countries) because there was some "peak food" and they could not feed their children. Or go a little more to the south where millions are chronically suffering from famine or even lack of water.

Globalization means that many people (like 10 times more than today) will want to have a fraction of the american way of life. There is simply not enough anything to support 2x today's consumption, let alone 10x. We should plan today or we are going to wake up 10 or 20 years from now, asking what we are asking about the whole oil industry : how comes they never thought of consequences ?

False. Oil in real dollars has been stable for many decades. The price-of-food-crisis is caused by deflection of substantial amounts of farm output and land to stupid ethanol schemes, etc. (A few years ago, before he was squelched, the head of the UN Food and Agriculture Organization said the use of corn for ethanol was a Crime Against Humanity, and mass murder.)

There will be resources (partly due to advanced element recovery etc. from waste streams with fusion torches) for 2 or 10X current consumption rates. I repeat the challenge: name ONE "Peak" prediction that has come to pass.

As someone (an oil minister?) said, the Stone Age didn't end because of a shortage of stones. Learn some technological history.

P.S.;
the "millions" suffering is a rapidly declining number. The UN's 10-yr challenge to cut poverty in half, issued in 2005, was met 5 yrs early, in 2010.

The sole problem is a surplus ... of kleptocracies.


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