Tesla

[CaminoRacer]

Guy I work with used to do aircraft brake and landing gear design.  Airlines basically buy a brake contract.

Can I buy brake contract futures?

[MX793]

Can I buy brake contract futures?

I don't think it works like fuel.  IIRC, and it's been a while since it was explained to me, the airline would provide the different brake MFRs parameters (number of take-offs/landings per day, time between take-offs, anticipated weight) and the MFRs would bid a contract based on that.  If the airline ends up being lighter on brakes than they thought, the brake seller profits.  If the brake seller under-estimates how hard the airline will be on the brakes, the brake seller eats the cost.  Basically like auto lease rates based on residuals.  If the residuals are worse than forecasted, the lessee makes out.  If better, the leasing agent makes out.

I'm sure there were some provisions in there for airlines changing the parameters such that they end up eating brakes faster, like if they say a plane will only have 3 landings per day average and end up average 4 or 5, or are running significantly heavier on average than they said they would.

[NomisR]

That industry is all levels of wacky. I'm sure the engine maintenance is nuts too.

A lot of shipping involved with those, that itself is a huge industry. 

[NomisR]

And Boeing has ALL sorts of IP protections and contracts about what an airline can and can't do to 787 or whatever.

There's probably a lot of liability/legal issues involved.

[MrH]

A little Tesla update for those not following as closely:

14 days ago Elon said they didn't need to raise because they will self fund with their own cash flow.  3 days later, the stock spikes to $960+. 

- 2/5/20 Whistle blower case hits the docket.  This is the second case in regards to SOX violations and theft involving drug cartels at the Nevada giga factory   It coincides with a police investigation that was going on involving the same thing too.
- This morning the 10K comes out this morning with the following:
- SEC investigation going on.  Says they're being subpoenaed for "contracts including company's regular financing arrangements".  Gut instinct is the channel stuffing concern that's been floating around ($1B+ in AR for a business that sells vehicles with cash in hand before delivery).
- PWC issues statement about having problems with how they're doing warranty reserve

Just another day in Tesla world

[MrH]

From Probes Reporter:

In the 10-K today, we see a new SEC subpoena and additional DOJ involvement. Run fast, run far! This is big. Let's break it down ... We'll go through the disclosure, tell you what the company's leaving out, and give our suggestions on where investors should focus next.

A new subpoena: Per the 10-K, On 04-Dec-2019, the SEC closed one matter [Huh? Was this disclosed?] and "issued a subpoena seeking information concerning certain financial data and contracts including Tesla's regular financing arrangements ..." What data? Contracts? Arrangements?

There's newly disclosed DOJ involvement. Continuing the above sentence, "... Separately, the DOJ had also asked us to voluntarily provide it with information about the above matters related to taking Tesla private and Model 3 production rates." DOJ implies new criminal exposure.

Let's focus on timing. Two parts. First, SEC subpoenas don't normally just show up. There's usually an informal stage. That suggests SEC questions on this item may have been going on since before Dec-2019, perhaps well before. Ask when it started and date of first subpoena?

Timing, second part: Even if the 04-Dec-2019 subpoena was the first point of contact on the newly disclosed matter, which we doubt, it still leaves open the question of why Old Elon and the gang made the active choice to stay quiet about it, including on the 30-Jan earnings call?

Timing: Implications for analysis: They stayed quiet because that's what Tesla has done forever about its SEC investigations. Time and again we've warned on this at Tesla and SolarCity. In early 2017 we got records on a year-long formal probe into the Model 3 that Elon sat on.

But now they're coming out and telling you about a recently received SEC subpoena in the newly filed 10-K. Why? Well, they did announce a capital raise today. The lawyers and underwriters may have demanded the disclosure be made. Ok, sure ... maybe. We see a greater danger.

*This matters most.* When a company discloses an SEC or DOJ probe, it's typically because management believes it poses a material risk. If Tesla is the one doing the disclosing, the history suggests *it's got to be really bad* for this management to judge it requires disclosure.

Final thought: Two months ago, when a subpoena showed up at Tesla on 04-Dec-2019 [again, when was the first contact?], Tesla did not think it was material enough to disclose. Then an earnings call, with still no disclosure. What changed? Again, this is big - and bad. -end

[MrH]

While China is looking worse and worse, and all the info above.

Tesla is up on this news

This is going to be soooo ugly when it all comes crashing down.

[GoCougs]

Actually, I think Tesla is up on the $2B stock offering.

Only in TeslaSPIN does dilution bump the stock ~5%...

[SJ_GTI]

If they use the stock offering to pay off some high interest debt I can understand why their stock valuation might go up. I don't know much of the specifics on Tesla though.

[MrH]

They just said 2 weeks ago they don't need to raise at all...

SEC, DOJ, whistleblower, auditor warnings, and China completely deadlocked from an economy stand point all come out since then.  There is zero reason why this raise should cause the valuation to go up.

[GoCougs]

Such an offering can also be used to buy some whiz-bang startup, or build a new factory, or who knows what.

Tesla survives on stock price and loans, including government loans, and has never come close to turning a profit, and has no current viable path to do so for the foreseeable future. Let's work on that, Tesla.

[MrH]

The offering can also be used to feed their cash burning business for another 2 or 3 quarters.  Let's be honest, that's what it will really be used for

[r0tor]

When your stock doubles its a fantastic time to do a fund raising and restructure debt

When your stock doubles, you have a bunch of pissed off shorts that will resort to filling erroneous sec charges to try and bring the price back down.

[MrH]

You can't be serious...

Shorts don't get to dictate what the SEC subpoenas from companies.  Nobody decides what the SEC goes after except the SEC.

[Soup DeVille]

You seriously missed the chance to call him Shirley?

[GoCougs]

With Tesla, we're all WELL beyond the joking stage. So sad.

[r0tor]

You can't be serious...

Shorts don't get to dictate what the SEC subpoenas from companies.  Nobody decides what the SEC goes after except the SEC.

SEC complaints are commonly filed by pissed off investors after rapid share price swings... Complaints are Investigated and then more often then not dropped and then usually followed by frivalous class action lawsuits

[Soup DeVille]

Complaints are not subpoenas.

[AutobahnSHO]

At work some guy is "making money" on Tesla... Ouch.

[r0tor]

Complaints are not subpoenas.

Do you think subpoenas just fall out of the sky devoid of any complaint filed?

[Soup DeVille]

Do you think subpoenas just fall out of the sky devoid of any complaint filed?

Do you think the SEC just issues subpoenas based only on complaints?

[MrH]

[GoCougs]

SubpoenaSPIN. 

[r0tor]

Do you think the SEC just issues subpoenas based only on complaints?

I subpoena is based on an investigation... An investigation is launched do to a _____________.

This is not difficult

[MrH]

Yes, the SEC is going around and launching full fledge subpoenas because short sellers are telling them to.

Go read a damn financial statement from this company and then come back and argue they shouldn't be investigated.

[Soup DeVille]

I subpoena is based on an investigation... An investigation is launched do to a _____________.

This is not difficult

So, the investigation, by your own logic, must have produced enough evidence to warrant a subpoena, which means whatever complaints there were had some merit?

You're right, its not hard

Sometimes, its just best to concede a point rather than twisitng oneself around to find some way out of a losing argument.

[r0tor]

So, the investigation, by your own logic, must have produced enough evidence to warrant a subpoena, which means whatever complaints there were had some merit?

You're right, its not hard

Sometimes, its just best to concede a point rather than twisitng oneself around to find some way out of a losing argument.

If that was the case, the market would factor in the risk... They however pretty much called it bullshit and carried on with life

[MrH]

Yes, the market is totally rational.  Another strong argument from r0tor.

[r0tor]

According to Cougs, the market can not be manipulated -coug's shrug-


Billions of dollars are invested in the company.  Fairly certain the large investors have done a fair bit more due diligence then your shorty hit piece of the day have done.

[Soup DeVille]

If that was the case, the market would factor in the risk... They however pretty much called it bullshit and carried on with life

https://www.thebalance.com/irrational-exuberance-quotes-dangers-and-examples-3305937