Chevy Volt a Failure - GM to Layoff 1,300

1) Yes, I believe the institutional ownership in a stock like this, in particular, is really important. It was about 62 percent of the float in the most recent 13F. I believe those institutions are largely asleep at the switch. A lot of the money is passive. It's why, for example, when Musk used the high stock price of Tesla (and that enabling it to keep raising more cash to keep wasting) to bail out Solarcity, they didn't oppose it, the way they should have. The T. Rowe Prices, Vanguards, Blackrocks, etc. aren't very activist when they often need to be if they were really looking out for their investors. They are rubber stamps. I don't know that any of those institutions alone are likely to take down the stock. There tends to be a herd mentality. When there is a rush for the exists, it will likely be on a particular catalyst, and then they'll all be running for the hills at once. At least that is how those things usually go. But sure, one big holder could have a huge impact if it sells, because of how big the short float is in the stock.

2) What you read probably originated with Mark Spiegel, who is a flamboyant short seller who has been beating the drum really hard on his Tesla short. I actually posted about it a few months ago. And I also checked Spiegel's work, as best as I could. Musk does have a decent sized percentage of his personal wealth tied up in Tesla shares and he has borrowed quite a bit against it to live a pretty large lifestyle. In Tesla's last proxy statement, it changed the terms so that the company's directors and executives were limited to loans in the amount of 25 percent of the value of the pledged stock. When Tesla last did a dilutive stock offering, in March, 2017, Musk owed close to $625 million to various financial institutions, more than half of that to Morgan Stanley. He draws a salary of only $50K. And he is paying interest on his borrowed money. He also poured about $100 million into The Boring Company. So Spiegel's best guess was that he had borrowed closer to $800 million by now. With the new margin requirements, those loans would need to be collateralized by $3.2 billion worth of Tesla shares. The proxy had noted that Musk had pledged close to 14 million of his less than 38 million shares as collateral on his loans. Take the $800 million number (if it is close to being the amount he has borrowed) and given the 25 percent margin requirement, Tesla's share price would need to stay above $232 a share or so before he faces a margin call. The stock dropped into the high $290s today. It has been as low as $245 or so recently. Musk has more Tesla shares he could pledge as collateral to meet a margin call. To put it into total persectitive, if he was willing to go down with the ship, it would probably take a dip below $100 a share (or close to that) for him to be wiped out.

 

I am not sure who you are talking about or what he or she said. Baillie Gifford is really invested in that space, in general, I believe. They are an investor in NIO, the Chinese version (and direct competitor of) of Tesla, too. They are probably not going to sell their shares anytime soon, but I don't know anything about their stake or what they are thinking. They have had a very big stake for a long time. If things get bad, I could see them maybe agitating for a change on the board and finding a CEO not named Elon Musk. But even there, even though they are way up there in terms of their stake size, it isn't quite big enough to get much done on their own.

FYI, this may be way out there, but I saw something after I posted before on zero hedge from Gordon Johnson (has written several critical things about Tesla) speculating that Tesla has gotten a Wells Notice from the SEC, which is why Musk hasn't tried to raised money yet again, despite the amount of cash left getting low. He has no proof. But there was a shareholder law suit filing recently, that seems to say that Tesla admitted lying about its production capabilities and timelines. I am not sure I am following and don't have time to try to figure it out right now.

Vertical Group: "TSLA May Have Admitted To Actionably False Statements In Prior Filings"

Who knows what is true? I know there is a healthy dose of bullshit with that CEO and that company, so nothing would surprise me. The link says that Tesla credit default swaps are now implying 30 percent odds of Tesla defaulting on its debt within 3 years.

 

Tesla Released a $1,500 Surfboard That Sold Out In a Day

I saw this yesterday. Among the chatkes that Tesla was selling on its website, it had a $1,500 surfboard made with the same matte and gloss finishes they put on the cars. It looks like they sold out in a day (only 200 made) and they are already selling on eBay. I'd imagine there are pretty good margins on something like that, and if that is the case, it may be the first thing the company has ever sold profitably. .... well, except regulatory credits, which it gets for free from politicians stacking the deck in their favor.

 

That is the kind of thing you generally want to be really careful with. This stock is trading on nothing fundamental. It's just robotraders. Because there is such a big short float, it is always ripe for a short squeeze. So even if I did short this stock (and I'll reiterate, it is the right stock and has been for years), I wouldn't EVER be giddy. I'd be biting my fingernails. It just takes one guy with deep pockets to squeeze the hell out of the shorts and cause maximum pain. And that has largely been the story of this stock, even as the financials have gotten worse and worse. That's not a prediction about what happens today when they report, but you just always have to be ready for that. It will happen. ... until it no longer happens, and then this stock is going to go down hard. It will likely coincide (or maybe be the catalyst) with a lot of stocks, with MUCH better businesses, but which got way overvalued in this era of cheap money driving up asset values (and in the case of companies like Tesla, creating zombie companies, or put another way, creating a survival of the unfittest environment).

 

Twenty already sold on eBay and 20 more are for sale now. Wish I'd heard of this, I love a quick eBay flip.

 

Don't have time to post about the earnings just now. But they reported a slightly greater loss than estimated, loss of $3.06 per share versus $2.92 estimated. But the estimate was meaningless, because the numbers were all over the place and analysts don't have a clue what is really happening with that company. So nobody should put much stock in that, except for the fact that the company loses quite a bit of money.

They did have two positive things: 1) They slightly slowed the cash burn rate. They incinerated $1.05 billion last quarter. This quarter, they slowed that burn rate to $739 million. Unfortunately for them, I am not sure how much time that buys them. It is still a hell of a lot of borrowed cash to be burning through quarter after quarter. 2) On quick look, the margins looked like they improved slightly. It's not enough to turn a profit, but at least they were losing less per car. 3) As always, you need to take all of that with a gain of salt. They have been known to use creative accounting and alternative facts.

Unfortunately, I won't be able to listen to the call. I have to be somewhere. Should be fun.