Tesla and Uber Unlikely to Survive (Vol. 2)

Tesla and Uber Unlikely to Survive (Vol. 2)

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Heres Johnny

6,947 posts

104 months

Friday 18th December 2020
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Smiljan said:
I've been following the various sites, podcasts etc.. over the last few days and there is such a massive chasm in opinions of what will happen to TSLA over the new few weeks its amazing.

No one seems to know. The Standard and Poor (S&P) 500 is such a confusing index of companies that I can't even work out why its seemingly so important for Tesla to join. What's in it for them?

I'm failing in my Google skills to find out who drops out of the index to make way for them.

Seems like they also decided to force all the trading on 1 day (today) meaning around $72 billion dollars worth of shares will need to be found and traded.

My question is - if the share price is so solid and Tesla fans so sure its undervalued and due to rise in multiples again and again - why would anyone sell them, let alone sell $72 billion worth in one day?

I'm just not grasping how it all works.

I also don't understand how an index can force investors to buy a particular share.

Before all these shenanigans I always thought the S&P Dow Jones was just a tracking index which kept track of a fixed index of companies rather than a club you join and have to abide by their rules.

All very confusing. No wonder the analysts don't have a clue where the share price will head.
Some smart person a few years ago worked out that if you put your money into a mix of the top 100 companies (by market cap) you'd do quite well and about 1% behind what the very best fund managers could do on average. But those fund managers charged you a fee of 1% or so - so after the fees you were no better off.

The tracker funds were born that required virtually no fund management because the share holding was purely predicated on who were the top 100 shares, could charge a tiny fee and would perform as well as the managed funds. Life became much more transparent and plenty of people thought it a safer bet than investing in a fund where the guy running it couldn't really lose because he got his 1% regardless. Similar with people with private brokers etc.

All very easy until these tracker funds got so big they start to influence the market. If you had say 10 billion you had to invest in the stock market where with a view to making that 11Billion in a year (10%) where do you invest? If you buy shares on mass you push the price up if your buying is big compared to the size of the companies.

So now we have the situation that these low cost tracker funds that are linked to the index have to have the shares of that company if it enters the list. But they must also track the index so that can't necessarily buy too early nor too late and equally when do they sell the companies leaving the index?

So any company entering or leaving the relevant indexes can go through a similar cycle.

The buyers (or sellers when a share leaves the index) do not look at the value of the share and decide whether its a good buy or not based on the company fundamentals, they really don't care as thats not the game they are in, they just have to buy because its entering the index and thats the rules they follow. If that index bombs with the share in it, then so should their fund.

With lots and lots of small share holders and Musk and his family that own a sizeable chunk, you've got fewer shares than you would ordinarily expect being traded - ie 60% of the shares aren't going to be sold because the people who own them won't sell whatever the price, there’s a bigger fight over what’s left.


Edited by Heres Johnny on Friday 18th December 18:33

Smiljan

9,623 posts

177 months

Friday 18th December 2020
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Thanks Johnny great explanation.


lost in espace

5,674 posts

187 months

Friday 18th December 2020
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Smiljan said:
Thanks Johnny great explanation.
X2.

Burwood

18,663 posts

226 months

Friday 18th December 2020
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It's a big unknown (Dec 21) because the managers of the funds will have had the option to buy before, on the day and after inclusion. They would also have had to sell down a bunch of other stocks to make room

AstonZagato

11,130 posts

190 months

Friday 18th December 2020
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Heres Johnny said:
Stuff on Index Funds
S&P inclusion is even more insidious than HJ's clear explanation of passive index tracker funds. The "active managers" (fund managers who are not tied to the index) are nevertheless judged against the performance of the main index (so for US large cap managers, the S&P 500 will be their benchmark). They are, in the main, fearful that they will miss a large stock that performs well (like Tesla). So they buy some, even though they don't "need" to and even if they don't like it. They are known as "closet indexers".
Furthermore, you will have a bunch of hedge funds and banks' proprietary trading desks looking to arbitrage the inclusion - betting that the stock will rise on inclusion and the ones being kicked out will fall.
There will also be derivative contracts, issued by the banks, that will need to be rehedged.
This all adds to the potential for it to move.

coetzeeh

2,456 posts

216 months

Saturday 19th December 2020
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Tesla again forced to halt Berlin construction until $100m security is paid.

Tesla asked for extension to pay till January.

https://electrek.co/2020/12/18/tesla-forced-stop-c...

Burwood

18,663 posts

226 months

Saturday 19th December 2020
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Bureaucratic nonsense. Some jobsworth hasn't issued a permit which has been agreed.

Smiljan

9,623 posts

177 months

Saturday 19th December 2020
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Burwood said:
Bureaucratic nonsense. Some jobsworth hasn't issued a permit which has been agreed.
Seem more like they're being tardy with paying their bills, why would the German administrator issue a permit when they haven't paid for it?

Probably financial benefits somewhere of sticking this $100 million on next years finances.

It's going to be pretty racy getting cars out of that factory by July! Maybe they'll build another tent to make them in.

Smiljan

9,623 posts

177 months

Saturday 19th December 2020
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Another Model S BBQ in the states

https://insideevs.com/news/460502/another-tesla-mo...

I wonder the cause of this one?

coetzeeh

2,456 posts

216 months

Saturday 19th December 2020
quotequote all
Smiljan said:
Seem more like they're being tardy with paying their bills, why would the German administrator issue a permit when they haven't paid for it?

Probably financial benefits somewhere of sticking this $100 million on next years finances.

It's going to be pretty racy getting cars out of that factory by July! Maybe they'll build another tent to make them in.
They will need to accrue for the liability in Q4 though if they have not done so previously.

NDNDNDND

1,605 posts

163 months

Saturday 19th December 2020
quotequote all
Smiljan said:
Another Model S BBQ in the states

https://insideevs.com/news/460502/another-tesla-mo...

I wonder the cause of this one?
Does it matter? Stock's up anyway and the fanboys keep buying.

What would it actually take for Tesla's stock to fall, short of Elon Musk dying?

Tuna

19,930 posts

264 months

Saturday 19th December 2020
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NDNDNDND said:
What would it actually take for Tesla's stock to fall, short of Elon Musk dying?
I'd very much doubt we'll see a huge 'one off' drop, unless Tesla gets caught up in a market correction that finally takes the wind out of their sails.

Instead, we might see a long slow side into disenfranchisement - where they get squeezed between mainstream manufacturers and the second generation of new companies like Lucid, things like FSD never quite make it to a full release, and sales don't continue to follow the exponential rise that the share price is predicated on.

As it is, it turns out 2020 has been very good for Tesla - a lot of people have been actively looking for promises of jam tomorrow, and the market is so screwed up that rational analysis of what's going on today is almost impossible.

anonymous-user

34 months

Saturday 19th December 2020
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Tsla sets another record - $148bn worth of shares traded in a day. Previous record $118bn

https://twitter.com/ericbalchunas/status/134007377...

AstonZagato

11,130 posts

190 months

Saturday 19th December 2020
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Tuna said:
NDNDNDND said:
What would it actually take for Tesla's stock to fall, short of Elon Musk dying?
I'd very much doubt we'll see a huge 'one off' drop, unless Tesla gets caught up in a market correction that finally takes the wind out of their sails.

Instead, we might see a long slow side into disenfranchisement - where they get squeezed between mainstream manufacturers and the second generation of new companies like Lucid, things like FSD never quite make it to a full release, and sales don't continue to follow the exponential rise that the share price is predicated on.

As it is, it turns out 2020 has been very good for Tesla - a lot of people have been actively looking for promises of jam tomorrow, and the market is so screwed up that rational analysis of what's going on today is almost impossible.
I actually worry that Tesla could turn out to be the catalyst for a market crash in Tech. It is far from being the most egregiously valued stock out there but it is mahooosive, widely owned (institutionally and retail) and is a bellwether for tech names (rightly or wrongly). If they stumble (I don't see that happening in the near-term) the value destruction could trigger a panic. Anyone who is a cheerleader for tech will be heavily invested (financially and emotionally) in Tesla so it could easily cause contagion.

Tuna

19,930 posts

264 months

Saturday 19th December 2020
quotequote all
AstonZagato said:
I actually worry that Tesla could turn out to be the catalyst for a market crash in Tech. It is far from being the most egregiously valued stock out there but it is mahooosive, widely owned (institutionally and retail) and is a bellwether for tech names (rightly or wrongly). If they stumble (I don't see that happening in the near-term) the value destruction could trigger a panic. Anyone who is a cheerleader for tech will be heavily invested (financially and emotionally) in Tesla so it could easily cause contagion.
Agreed, though I don't see a "stumble" event on the horizon - Musk is smart enough to keep all promises vague and in the future. The points of risk are where new products are released and the promises tested in the cold light of day. For the next year or so, it's mainly business as usual with the existing line up.

There again, who ever predicts how someone will trip up? If it's obvious, we take steps to avoid it.

Burwood

18,663 posts

226 months

Saturday 19th December 2020
quotequote all
Tuna said:
AstonZagato said:
I actually worry that Tesla could turn out to be the catalyst for a market crash in Tech. It is far from being the most egregiously valued stock out there but it is mahooosive, widely owned (institutionally and retail) and is a bellwether for tech names (rightly or wrongly). If they stumble (I don't see that happening in the near-term) the value destruction could trigger a panic. Anyone who is a cheerleader for tech will be heavily invested (financially and emotionally) in Tesla so it could easily cause contagion.
Agreed, though I don't see a "stumble" event on the horizon - Musk is smart enough to keep all promises vague and in the future. The points of risk are where new products are released and the promises tested in the cold light of day. For the next year or so, it's mainly business as usual with the existing line up.

There again, who ever predicts how someone will trip up? If it's obvious, we take steps to avoid it.
Agreed, I thought just that 2 days ago. My aim was all cash by dec 18th. My wife’s pension fund has return 51% in 12 months. 31% avg for 5 years. I did choose it but I’m now out of my comfort zone. It does not own any Tesla biggrin

hyphen

26,262 posts

70 months

Saturday 19th December 2020
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NDNDNDND said:
What would it actually take for Tesla's stock to fall, short of Elon Musk dying?
VAG releasing new battery tech/self drive that eclipses Tesla. Tesla share price would collapse.

Burwood

18,663 posts

226 months

Sunday 20th December 2020
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hyphen said:
NDNDNDND said:
What would it actually take for Tesla's stock to fall, short of Elon Musk dying?
VAG releasing new battery tech/self drive that eclipses Tesla. Tesla share price would collapse.
Far less than that. Many things. No growth. Another loss. Vag selling more and making money from ev, which they do without any tax credits

gangzoom

4,875 posts

195 months

Sunday 20th December 2020
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Smiljan said:
Another Model S BBQ in the states

https://insideevs.com/news/460502/another-tesla-mo...

I wonder the cause of this one?
Tesla knows the reasons but they wouldn't say it, others know too but Tesla have camped lawyers out on their door steps.

The only 'cure' I suspect is brand new battery packs for all 85 pack cars, that's a lot of batteries to replace. So Tesla is playing for time, trying to limit incidents so officials don't pay too much attention and waiting till the 8 year warranty is up.

Pretty high risk, it wouldn't take too many things to line up for one of these fires to cause a fatality, and than Tesla will become the next Boeing.

TeaNoSugar

1,024 posts

145 months

Sunday 20th December 2020
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hyphen said:
LimJim said:
Sounds like a 2030 kind of problem.
Indeed.But I posted it for the "evs will be cheaper to run" brigade

The fact is that government will realise maintenance costs are lower for evs, and so along with lack of fuel tax, will also find a way to make up the lost revenue and jobs from tax in garages and parts.

Its not going to be cheaper long term.
I don’t understand this line of thinking. The government has set down the path of phasing out ICEs in favour of low/zero carbon emissions fuels. They won’t want any drift back to ICEs, so surely with the levers of taxation and legislation they have available, it’ll always be cheaper than running an ICE car - unless/until ICE cars are legislated off the roads.
Not saying it’ll always be basically free to run an EV like it can be now, but whatever increases in taxation are levied on BEVs, the corresponding taxes on ICE cars will be ratcheted up at a faster rate to ensure the incentive to run a BEV remains in place. In other words; EVs will gradually become expensive to run, but ICEs will become prohibitively expensive and eventually economically unfeasible in the same timeframe.
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