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    Re: Tesla Roadster

    And this talk will vanish in thin air when Tesla hits 5-6000 model 3 a week sometime between June and September...


    Re: Tesla Roadster

    SciFrog:

    And this talk will vanish in thin air when Tesla hits 5-6000 model 3 a week sometime between June and September...

    Might be difficult to run 24/7 as according to Musk’s latest email when Cal-OSHA is hanging around. https://jalopnik.com/tesla-facing-another-probe-in-california-after-subcontr-1825416738.  There are some assembly line balancing issues that make this difficult too but I’ll leave out posting all those details here for now.  


    Re: Tesla Roadster

    For those with a genuine interest in Tesla and their design and production of the Model 3, the following discussion provides some interesting due diligence material...

    (NB: Includes both positive and negative aspects; 1hr30 running time)

    "Tesla Model 3: Inside & Out"

    SPECIAL GUEST: Sandy Munro, Munro & Associates, Inc.

    03:00 – Tesla Model 3 Teardown Analysis
    14:55 – The Good Stuff: Model 3 Automatic Drive Modules
    26:46 – Are the pieces good? Door Panels, Exterior, etc.
    29:00 – Model 3 Battery: Intricate Magic
    42:55 – Doctor Data
    44:55 – Mechanics of the Model 3
    1:11:10 – PHONE CALL: Automation Issues
    1:14:29 – PHONE CALL: Model 3 Build Quality
    1:18:30 – Johan de Nysschen out at Cadillac

    PANEL:
    - John McElroy, Autoline.tv
    - Gary Vasilash, Automotive Design & Production
    - Craig Cole, AutoGuide

    Video and Podcast Link: http://www.autoline.tv/journal/?p=54950

    Have a great weekend! Smiley


    Re: Tesla Roadster

    Generally a pretty positive review of it. A lot of the stuff seemed to stem from "We don't know why they did this?" And it wasn't like they were saying it was dumb or bad, they just didn't really know why. I don't doubt there are simply some bad design decisions somewhere -- no company is perfect -- but I'm guessing there are reasonable answers for a lot of it.

    Build quality like panel gaps etc isn't too much of a worry IMO and will improve over time. It's not like they're really made that many yet.

    The comments about the PCB struck me as kinda weird. He seemed blown away by what looked like just a PCB. I don't think it's that hard to create a dense, well laid out board in 2018. 


    Re: Tesla Roadster

    SciFrog:

    And this talk will vanish in thin air when Tesla hits 5-6000 model 3 a week sometime between June and September...

     

    That's Elon's timeline, but when is the last time he hits his own target?

    No chance for them to do it by June, which is only a month and change away.

    More realistic target would be between Sept-Dec. But then again that' the time when first of their debt are due and in need of money. So they REALLY needed the cash flow coming back in order to pay debtors by then.

    The profit margin hence cash flow will take a hit too with less automation, as more humans are needed and the cost associated, so their initial ROI will need to be recalculated again. 

     

     


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    Re: Tesla Roadster

    Boxster Coupe GTS:

    For those with a genuine interest in Tesla and their design and production of the Model 3, the following discussion provides some interesting due diligence material...

    (NB: Includes both positive and negative aspects; 1hr30 running time)

    "Tesla Model 3: Inside & Out"

    SPECIAL GUEST: Sandy Munro, Munro & Associates, Inc.

    03:00 – Tesla Model 3 Teardown Analysis
    14:55 – The Good Stuff: Model 3 Automatic Drive Modules
    26:46 – Are the pieces good? Door Panels, Exterior, etc.
    29:00 – Model 3 Battery: Intricate Magic
    42:55 – Doctor Data
    44:55 – Mechanics of the Model 3
    1:11:10 – PHONE CALL: Automation Issues
    1:14:29 – PHONE CALL: Model 3 Build Quality
    1:18:30 – Johan de Nysschen out at Cadillac

    PANEL:
    - John McElroy, Autoline.tv
    - Gary Vasilash, Automotive Design & Production
    - Craig Cole, AutoGuide

    Video and Podcast Link: http://www.autoline.tv/journal/?p=54950

    Have a great weekend! Smiley

    Thank you for posting.  Watched the video two times and there is little positive about it, especially the lack of analysis and thought in design.    Was under the impression that issues are manufacturing centered but Munro’s analysis states otherwise.  These concepts of design optimization and robotic assembly have been known for several decades as I wrote my thesis on these very issues for a university near Detroit, back during the Stone Age known as the late 1980s.   This is reflective of a lack of thought combined with a lack of discipline coupled with a lack of related experience.   


    Re: Tesla Roadster

    LOL. Now do you see what I'm saying, Carlos? He literally watched a video where they said how great it was to drive, how great the electric portion is (arguably the most important aspect since it's a freaking EV), how nice the suspension was, and that if they would have got the build right it would have bested everyone.

    His qualms are largely with stuff that are irrelevant to consumers.


    Re: Tesla Roadster

    noone1:

    LOL. Now do you see what I'm saying, Carlos? He literally watched a video where they said how great it was to drive, how great the electric portion is (arguably the most important aspect since it's a freaking EV), how nice the suspension was, and that if they would have got the build right it would have bested everyone.

    His qualms are largely with stuff that are irrelevant to consumers.

    If the company can’t make a profit, it won’t be able to survive long term.


    Re: Tesla Roadster

    noone1:

    His qualms are largely with stuff that are irrelevant to consumers.

    This is not Consumers Report forum, to me CGX car nut's posts on the subject are very informative and knowledgeable about the car manufacturing business, gives us a great insight into it which I find very interesting. I could not care less if the average joe cares about if it has one or two cupholders as he hogs the left lane on his way to Costco's.

    You may not like his views but they are more informed than yours or mine, and are expressed with maturity and respect to others. Don't see were the problem is.
    --

    ⇒ Carlos - Porsche 991 Carrera GTS

     


    Re: Tesla Roadster

    Carlos from Spain:
    noone1:

    His qualms are largely with stuff that are irrelevant to consumers.

    This is not Consumers Report forum, to me CGX car nut's posts on the subject are very informative and knowledgeable about the car manufacturing business, gives us a great insight into it which I find very interesting. I could not care less if the average joe cares about if it has one or two cupholders as he hogs the left lane on his way to Costco's.

    Thank you.  


    Re: Tesla Roadster

    Carlos from Spain:
    noone1:

    His qualms are largely with stuff that are irrelevant to consumers.

    This is not Consumers Report forum, to me CGX car nut's posts on the subject are very informative and knowledgeable about the car manufacturing business, gives us a great insight into it which I find very interesting. I could not care less if the average joe cares about if it has one or two cupholders as he hogs the left lane on his way to Costco's.

    That's not the point. The point is that he clearly has selective hearing and an axe to grind. He said there was "little positive" about the video which anyone with ears would tell you was completely wrong.


    Re: Tesla Roadster

    CGX car nut:
    noone1:

    LOL. Now do you see what I'm saying, Carlos? He literally watched a video where they said how great it was to drive, how great the electric portion is (arguably the most important aspect since it's a freaking EV), how nice the suspension was, and that if they would have got the build right it would have bested everyone.

    His qualms are largely with stuff that are irrelevant to consumers.

    If the company can’t make a profit, it won’t be able to survive long term.

    That's mathematically untrue. They can actually survive infinitely long just by making exactly $0.


    Re: Tesla Roadster

    noone1:
    CGX car nut:
    noone1:

    LOL. Now do you see what I'm saying, Carlos? He literally watched a video where they said how great it was to drive, how great the electric portion is (arguably the most important aspect since it's a freaking EV), how nice the suspension was, and that if they would have got the build right it would have bested everyone.

    His qualms are largely with stuff that are irrelevant to consumers.

    If the company can’t make a profit, it won’t be able to survive long term.

    That's mathematically untrue. They can actually survive infinitely long just by making exactly $0.

    Debt service. 

    <edited> Questions for Noone1: What is the fair value of equity if Tesla earns $0 indefinitely?


    Re: Tesla Roadster

    Your point is moot. If that is what you believe then all you have to do is offer an informed counterargument, as long as you do it with respect and good manners, that is how this woks... c'mon it's not like you don't like to argue ffs


    --

    ⇒ Carlos - Porsche 991 Carrera GTS


    Re: Tesla Roadster

    CGX car nut:
    noone1:
    CGX car nut:
    noone1:

    LOL. Now do you see what I'm saying, Carlos? He literally watched a video where they said how great it was to drive, how great the electric portion is (arguably the most important aspect since it's a freaking EV), how nice the suspension was, and that if they would have got the build right it would have bested everyone.

    His qualms are largely with stuff that are irrelevant to consumers.

    If the company can’t make a profit, it won’t be able to survive long term.

    That's mathematically untrue. They can actually survive infinitely long just by making exactly $0.

    Debt service. 

    <edited> Questions for Noone1: What is the fair value of equity if Tesla earns $0 indefinitely?

    Ask Jeff Bezos...


    Re: Tesla Roadster

    Who knows what it will ultimately be worth.


    Re: Tesla Roadster

    noone1:

    Who knows what it will ultimately be worth.

     

    0?


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    Re: Tesla Roadster

    Its assets will always have some value > 0.  The brand name alone is worth a lot.

    Lamborghini is most likely not profitable without VAG shared development costs, but it's worth quite a bit still since it could potentially be integrated by many big companies. Tesla is no different. 


    Re: Tesla Roadster

    SciFrog:
    CGX car nut:
    noone1:
    CGX car nut:
    noone1:

    LOL. Now do you see what I'm saying, Carlos? He literally watched a video where they said how great it was to drive, how great the electric portion is (arguably the most important aspect since it's a freaking EV), how nice the suspension was, and that if they would have got the build right it would have bested everyone.

    His qualms are largely with stuff that are irrelevant to consumers.

    If the company can’t make a profit, it won’t be able to survive long term.

    That's mathematically untrue. They can actually survive infinitely long just by making exactly $0.

    Debt service. 

    <edited> Questions for Noone1: What is the fair value of equity if Tesla earns $0 indefinitely?

    Ask Jeff Bezos...

    Putting on the Corporate Finance Professor hat, Amazon and Tesla have vastly different business models that render comparison moot.   Also rendering the comparison moot, Amazon is just a handful of publicly traded companies with a history of low profitability, that is, Amazon is an exception, not the rule.   This, to a large extent, is due to the business model of Amazon with its negative net working capital requirements, mentioned in a previous post, that increases its market fair value.  Dell, historically, was another company with negative net working capital.  These companies receive revenue up front before paying for inventory used to fulfill the customer’s order.  Outside of a handful of Founders’ model deposits, Tesla receives revenue after significant costs are incurred, with corresponding accounts payable.  Dell and Amazon uses that revenue to fund its growth, something that Tesla can’t do without increasing debt, or equity, to cover its increasing CapEx.  

    Why is this important?  The standard enterprise valuation model is the Discounted Cash Flow model.   Periodic Free Cash Flow stream at discounted, using the company’s cost of capital, back to the valuation date.  Free Cash Flow is computed from the company’s NOPAT, net operating profit after tax, minus its net CapEx and its net working capital.  Therefore, negative net working capital needs increases a company’s value, Bezos, as a former investment banker understands this model, and benefit.   Tesla, meanwhile, has increasing net CapEx, as investment costs increase, and increasing net working capital, as inventory increases with increased production.  

    Tesla’ cost of capital is also increasing since its cost of debt, near junk bond yields, is increasing.   Its cost of equity is also increasing as investors demand a higher return for holding riskier equity.  Therefore, a dollar of Tesla’s free cash flow in the future is worth less today and its overal enterprise fair value decreases.

    One apologizes for the less than clarion explanation but time, format, and use of a mobile device have controlled the outcome of this write up but the point is made.

     

     


    Re: Tesla Roadster

    The following has been drafted as a courtesy for those members on Rennteam without a professional grounding in financial analysis... (and is intended to complement CGX car nut's insightful post)

    It is important to keep in mind the difference between Book Value and Market Valuation.

    Book Value is based on a company's Balance Sheet, where in simple terms:

    • Book Value of Equity = Net Assets = Total Assets - Total Liabilities

    ...so Book Equity can indeed be less than Zero, in the case where Total Liabilities exceed Total Assets.

    Market Valuation can be derived from a DCF analysis of discounted future cash flows, or by using multiples (e.g. EV / EBITDA, EV / EBITA or P/E multiples) of comparable companies, which can be current trading multiples or acquisition related multiples.

    When considering Market Valuation, it helps to keep in mind the following:

    • Enterprise Value = Equity Value + Net Debt

    ...implied Equity Value can be less than Zero, in the case where Net Debt exceeds the Enterprise Value. Since the market value of a share cannot be negative, in this scenario the market value of the debt drops below its face value, i.e. the value of debt is impaired and the equity is worth zero.

    Hence, while it may seem logical that a share in a company with assets must always be worth something, that is not correct. If the company has liabilities that exceed total assets, or net debt that exceeds enterprise value, the value is likely to break in the debt during a financial restructuring, in which case the equity is worth zero.

    So what might cause a company with functioning operations, revenues, customers, orderbook, brand, etc to end up in a financial restructuring?

    Such an event could be caused by insufficient liquidity where the company can no longer fund working capital, service interest on debt, fund capex, pay employees, pay suppliers, pay taxes, etc.

    A company that faces a liquidity crisis can still have a significant Enterprise Value, but that can also be below the value of total liabilities, where the equity would be worth zero.

    A financial restructuring could also be caused by a breach of financial covenant or a payment default in a debt agreement, leading to an event of default. If the company is not able to remedy such a covenant breach or payment default and cure the event of default, the debt holders are likely to take control of the company and force a financial restructuring. In such a scenario, the shareholders are indeed often looking at a zero and the share price will usually react accordingly.

    One final question: how might an amateur investor, a customer, or indeed a supplier understand when a company might be getting close to such an unfortunate event as a financial restructuring? Keep a close watch on the public credit ratings. Read the rating agency reports to understand the highlighted risks. What factors might result in a downgrade? How good is the management at meeting the projected financial performance that a credit rating is based on? Rating agencies have little interest in the equity upside or the share price. The rating agencies will be focused on understanding the "credit" and the downside risks.

    Hence, an investment grade company (e.g. VW is rated A3/BBB+) will usually have a great deal more financial flexibility (and ability to survive a downturn in financial fortunes) than a sub-investment grade credit like Tesla.

    To fully appreciate the financial profile of a company, it is important to understand the business and industry, along with both sides of the Balance Sheet, the Profit and Loss statement and the Cash Flow statement.

    For reference, Tesla Inc will report 2018 Q1 financial statements on 2 May 2018.


    Re: Tesla Roadster

    Thanks for the effort to type out the explanations in simple terms most people can understand.

    Just to add something to the financial restructuring in even simpler terms. 

    One should look at the cash on hand, which includes actual cash, and untapped credit line. Another look at the cash incoming, like account receivables, also the cash out going, which is like expenses including the cost to service debt, aka interest payments, loans due, in addition to regular expenses like salary and whatnots.

    If the 3rd number is greater than the 2nd number, then take a look at the cash balance to see how long that bleeding can be sustained. If the final balance can't be sustained for more than 1 or 2 quarters, that company is in great trouble. 

    These are public numbers, so even if a lender is brave enough to lend extra money, the cost to service that new debt will be much much higher than normal in order to cover the risk of default. Which, is the meaning of the credit rating from the credit rating agencies. 

    Tesla's Q1 report will be closed examined for sure, to see how much cash is left on hand, and how much they have lost the previous quarter.

     


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    Re: Tesla Roadster

    FWIW, we should all be rooting for Tesla to succeed. Good for the competition, jobs, economy and environment. Musk may be a blowhard but he is a smart one. I do want them to survive and would support a government bailout if needed.kiss


    --

    Where the willingness is great, the difficulties cannot be great.


    Re: Tesla Roadster

    nberry:

    FWIW, we should all be rooting for Tesla to succeed. Good for the competition, jobs, economy and environment. Musk may be a blowhard but he is a smart one. I do want them to survive and would support a government bailout if needed.kiss

     

    If it's run properly? Yes.

    Right now Elon is stuck, he had inflated the Tesla bubble. There is no way to gracefully to exit. He is extremely successful in inflating the stock prices, hence valuation. But it is really worth that much? He is smart and realize that for the longest time, hence the constant need to do smoke and mirrors show to keep the stock price up, and hope eventually a miracle happens and his production can ramp up quick enough to sustain their cash flow.

    A fair valuation of Tesla, consider it's production volume/capacity, assets, growth potential, good will, should peg it at around $15B. Which is less 1/3 of what it is now. Now that would put it's stock price to around $88 or so. A very far drop from the $290 closing last Friday.

    But TSLA the stock won't survive the correction. Their nail in the coffin is the convertible bonds, they simply don't have the cash available to survive. 

    Only way out is a Chapter 11 restructuring, it would wipe out the unrealistic valuation and put Tesla back on path to succeed. Like the old GM new GM thing. 

     


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    Re: Tesla Roadster

    Whoopsy:
    nberry:

    FWIW, we should all be rooting for Tesla to succeed. Good for the competition, jobs, economy and environment. Musk may be a blowhard but he is a smart one. I do want them to survive and would support a government bailout if needed.kiss

     

    If it's run properly? Yes.

    Right now Elon is stuck, he had inflated the Tesla bubble. There is no way to gracefully to exit. He is extremely successful in inflating the stock prices, hence valuation. But it is really worth that much? He is smart and realize that for the longest time, hence the constant need to do smoke and mirrors show to keep the stock price up, and hope eventually a miracle happens and his production can ramp up quick enough to sustain their cash flow.

    A fair valuation of Tesla, consider it's production volume/capacity, assets, growth potential, good will, should peg it at around $15B. Which is less 1/3 of what it is now. Now that would put it's stock price to around $88 or so. A very far drop from the $290 closing last Friday.

    But TSLA the stock won't survive the correction. Their nail in the coffin is the convertible bonds, they simply don't have the cash available to survive. 

    Only way out is a Chapter 11 restructuring, it would wipe out the unrealistic valuation and put Tesla back on path to succeed. Like the old GM new GM thing. 

     

    Correct and one appreciates the significant contributions made to these posts.  I realize that not everyone has the same relative knowledge in finance, which compounds issues in the the debate.  Combine this with passions, not matter how well intentioned, chaos is bound to take over, as it has with a few.

    A few years ago, one had the displeasure  working with disgraced tech analyst Jack Grubman.   However, one learned much about the animal spirits of the markets through Jack.  He often speaks about the story stocks, companies with incredibly huge valuations compared with their current financial state.  It was always a race, utilizing cheap capital, to invest to meet the market’s expectations, but so few companies ever reach that goal.   One concern, for example, is insider trading activities.  If a company is growing, there is no incentive for insiders to sell.  At Tesla, for the past twelve months, insider sales greatly exceed acquisitions.   


    Re: Tesla Roadster

    CGX car nut:
     At Tesla, for the past twelve months, insider sales greatly exceed acquisitions.   

    That says it all.


    Re: Tesla Roadster

    If they are trading on inside information, their going to jail.enlightened


    --

    Where the willingness is great, the difficulties cannot be great.


    Re: Tesla Roadster

    nberry:

    If they are trading on inside information, their going to jail.enlightened

    Understanding that your company’s market cap is overvalued isn’t necessarily worthy of 10b-5 enforcement.  Insider trading only occurs if that seller sold before the release of materially significant news.   Believing that the stock is worth less than what the market believes doesn’t constitute insider information as insider transactions are made available to the other market participants.  


    Re: Tesla Roadster

    nberry:

    If they are trading on inside information, their going to jail.enlightened

     

    That's the naive way of thinking. And only the dumb ones get caught.

    Right off the top, I can think of 10 different ways to sell without getting into trouble.

    For example, filing early for scheduled sales is one way to get the Feds off their back. One can simply looked at all the quarterly finance information and gather a complete picture without using insider information. Then filed the sell order regularly during the year, to reduce stakes. This may not maximize the profits but it also won't get one into trouble either. 

     


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    Re: Tesla Roadster

    The immediate danger is depressed stock price, Elon is going to be very desperate to talk up the stock price in order for the convertible bonds to convert into shares, instead of real money. 

    First set of bonds worth $205mIl is due June 1st 2018. This set is 'free'. The convert price is $124.52, so basically these will turned into stocks.

    Next set is worth $920mil and is due March 1st 2019, this carries a conversion price of $359.87, and this is the one that might not hit the price target.

     

     


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