I just threw a couple percent into some TSLA puts, betting on the end times for TSLA shareholders developing sometime in the next 7 months. If the stock can dip below 35, I’ll make a fat payoff. If not, I lost a couple percent (my account deviates by more than I’m betting).
I’ll start by giving a little bit of good news to you TSLA owners. As it turns out, I know one of the guys who helped build their assembly line. That took some hunting, but he mostly had good things to say about TSLA manufacturing.
1) The line is clean, finished, and should be good for up to 35,000 vehicles per year
2) The line is state of the art and not vehicle specific – retooling is easy for new products, unlike at the big automotive companies
3) Building the line was a clusterfuck and TSLA lost its ass; but it made a good move and fired every supplier, then rehired who was needed. TSLA also started scalping their suppliers of their workers – so the company has built up some good internal manufacturing experience by stealing from their contractors.
My friend is rather proud of the TSLA line, and had nothing but good things to say about it. There shouldn’t be any unforseen calamity coming from their production abilities, unless projections start calling for more than 35,000 vehicles per year in the immediate future (assuming they don’t have time to start up another assembly line).
Now for the bad news. My friends are all engineering car junkies (every conversation inevitably turns to auto…ugh) and we held a little pow wow this weekend. There’s a good bit of doubt that TSLA can continue meeting their sales. Even the guy who helped build the line cracked a joke about them just needing to sell cars now.
One of the bigger car guys pointed out that TSLA is trying to outsell several of the luxury/performance car makers “combined”.
Mind you I started the conversation by bashing TSLA a little. Back in ’08/’09, I told this same crowd of friends that GM was going bankrupt and they almost stoned me. Insulting coveted and beloved automotives in this circle is generally met with outright hostility.
When I trashed TSLA, nobody defended them. I was surprised.
The general feel of the group was that TSLA’s product is beautiful, but they don’t stand a chance of edging out other luxury/performance vehicles at the Model S’ price tag.
Now for the worse news.
AutoData is reporting that TSLA sales dropped 15% in May. TSLA shareholders had better pray that’s a one off, and not demand for their vehicles being satisfied. Because at $104 with sky high price to earnings and intrinsic value near to $10 (after the issuance), any disruption of the dream will disembowel the stock. And since Musk just raised a billion, half from new shares, sentiment against him could turn pretty rapidly if people start to get the idea that he duped them.
If you enjoy the content at iBankCoin, please follow us on Twitter
Bold move, my friend. I like it. You’ve got balls like the King of Bayonne. Good luck.
I like this play, although I personally would have gone out until 2015.
Yes, the reasoning you mentioned could certainly come to pass within 7 months, but if you go out another year you can add additional risk of a general economic slowdown, which would probably crush TSLA.
I haven’t put too much effort into this stock, but it doesn’t look like they have much cost cutting capabilities if the economy slows and general demand for luxury products fall.
I thought about it, but the cost doubled, and I figured that ultimately the big correction will come from disappointing sales figures in the near term.
If it looks like I’m wrong, it doesn’t take much to go buy another round of long dated puts…
Lmao, someone on Twitter trying to hint to me there was a legal violation because a supplier who hasn’t stepped foot in the line since last summer reaffirmed what anyone who bothered to take a tour of the plant could learn in about an hour…
Not to mention what he said actually doesn’t help my short at all.
I brought him up because the guy actually knows what he’s doing and doesn’t have anything bad to say about TSLA’s manufacturing process (rare in automotive). It would have been more useful if he’d told me they were running at 98% capacity trying to hit 20,000 vehicles and were about to hit a brick wall, of course, but you can’t always get everything…
Tesla take a page from amazon.No profits
just increase revenue .Issue shares
for 10 years and Bob’s your
uncle.
That’s exactly why I made a small purchase of puts instead of a large short sale of stock
Great comment, by the way
There have been a few Wall St analysts who have upgraded the stock of late. They would seem to be implicit in any “duping” as well. I don’t know where the stock goes next but would be surprised if it retraces the entire move. But as you said, it’s a low risk, high reward play. Good luck. I sold my shares from 45 today and have to say that the stock will always have a place in my heart (no homo).
Nothing beats “boots on the ground” type insight peering into the internals of a manufacturing company of any kind..
Nice intel Mr Thaler.
Foolishness in so many ways.
Excellent strategy if you think the selloff will occur long before Jan . expiration . American markets have a long record of strong Dec . and Jan. market moves .
I’m patiently awaiting the Oct . options….that is a perfect storm scenario .
AutoData stats are US new registrations. Does not include Canada or outside sales. You still have to wait 6 weeks or 2-3 months to get a car if you order one today. They start shipping cars to Europe about now.