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At their valuation this would be the perfect time to raise more capital. You don't dilute the shares much. At 600 billion dollar valuation you are assuming rate

At their valuation this would be the perfect time to raise more capital. You don't dilute the shares much. At 600 billion dollar valuation you are assuming rates will be 0 for a while and that tesla will be more profitable than any existing car company by a bit.

deleted 6y ago
[deleted]
grey-area 6y ago
At that valuation of 600B the assumption is that they’ll be more profitable than all the other leading car companies combined! Their current valuation is not justified by even the most optimistic projections IMO, though their holistic view of energy should help (they can become a lifestyle brand, not just a car company), but it’ll take a decade to grow into this valuation. Even Musk thought it was overvalued and said so twice this year when it was worth a lot less. As you say that makes this the perfect time to raise (again).
- bryanlarsen 6y ago
  Most of the other large car companies have debt loads over $100 billion. This means two things: - they have significant amounts of capitalization that don't show up in their market capitalization. "Enterprise Value" (which includes debt) is a more accurate representation of their size. - Their stock prices reflect a significant risk of bankruptcy. If Ford doesn't go bankrupt, it's worth a lot more than $9. If it does, it's worth $0. This analyst rates that probability at 42%: https://www.macroaxis.com/invest/ratio/F/Probability-Of-Bankruptcy https://www.macroaxis.com/invest/ratio/F/Probability-Of-Bank...
  - mdorazio 6y ago
    I'm guessing you purposely left out the Japanese OEMs in your assessment? Their debt to equity ratios are pretty low.
    - bryanlarsen 6y ago
      Correct, I should have put more qualification on "most".
  - SilasX 6y ago
    Hm, wouldn't you want to look at Ford credit default swaps to quantify that? Here's what I found for Ford CDS price history, don't know offhand how to translate that into a bankruptcy probability: https://www.assetmacro.com/united-states/credit-default-swaps-cds/ford-motor-company-credit-default-swaps-f-3y-cds/ https://www.assetmacro.com/united-states/credit-default-swap...
    - lordnacho 6y ago
      Long, long time since I did this, but back then you made an assumption that you'd get 40% of the bond's principle in case of a default. I recently asked a credit guy about this and he also gave me this magic figure. So from there you basically are saying at 100% chance of default, you get 40, and at zero you get 100. That gives you some amount that balances the payment from the CDS with the value of the bonds.
  - grey-area 6y ago
    The largest competitors now are Toyota, VW, Daimler, GM, Honda. Their combined market cap is about 400B. Do those companies have high debt loads? I agree competitors will be in trouble in the coming EV transition and some are discounted, but I do also think Tesla is now vastly overvalued by the market. They've only just started making a profit, and they are still burning huge amounts of cash. I wouldn't be worried about solvency but I would worry that the future return promised by their valuation is extraordinary. Tesla has risen 800% in the last year, that seems to be unjustified by their progress in the same time frame.
    - intotheabyss 6y ago
      The more likely scenario is that the next decades gains are just going to be priced in. Speculators think that Tesla will be a 1T company (in 2020 dollars) by the end of the 2020s, and I don't disagree, but a lot has to go right for that to be true. That means if it hits 1T within the next year, I suspect they'll have a decade of stagnation like the tech companies did after the dotcom bubble. But also, the fact that I have to stress that the valuation is in 2020 dollars should tell us all we need to know about this current market and the valuations we're seeing. Flood the markets with dollars, and you'll have outlandish valuations.
      - grey-area 6y ago
        Yes markets tend to underprice and then overprice, then maybe drift down to a sensible valuation over time as companies grow. So perhaps we'll just see some stagnation in the stock price but there's no sign of it yet. This does feel like a speculative bubble and we've reached the FOMO stage where people think things are overvalued but invest anyway, because everyone else is. 25% of the S&P is in the largest 5 companies (all tech), market cap to GDP is at an all time high of 183.7% for the US. US assets in particular seems overvalued to me at present and heavily distorted by the massive QE programs that have been running since 2008 and gone into overdrive this year.
    - bryanlarsen 6y ago
      Toyota: $18B VW: E200B Daimler: E160B GM: $100B Honda $65B Therefore their combined Enterprise value is about $1T.
onetimemanytime 6y ago
The thinking, right or wrong, goes that Tesla will do more than cars. Like batteries for consumers, utilities, homes, states... IMO it's overpriced but what the hell do I know. I thought Google was overpriced in 2010
- xiphias2 6y ago
  Whether these are overpriced depends on how low rates you can get. Would you say Tesla is a bad trade if you would get a debt with 2% yearly rate that you have to give back in 30 years?
  - staticman2 6y ago
    Whether Tesla is a bad trade depends on how it compares to other Stock. Whether you can buy it on margin has nothing to do with anything.
    - xiphias2 6y ago
      Not really, as bonds are printed and bought quite rapidly, the FED has QE infinity policy at this point, and a big part of the money goes to the stock market
      - staticman2 6y ago
        I don't follow. Why would you invest in Tesla rather than any other stock? The answer has nothing to do with interest rates unless interest rates uniquely effect Tesla.
        xiphias2 6y ago
        Why not all of them? I'm just saying that the discount rate is an important part of why Tesla stock is so high: high growth with extremely low discount rate can get these valuations that look overpriced. As for me personally, I'm not a bank, so I don't have access to cheap loans.

deleted 6y ago

[deleted]

grey-area 6y ago

At that valuation of 600B the assumption is that they’ll be more profitable than all the other leading car companies combined! Their current valuation is not justified by even the most optimistic projections IMO, though their holistic view of energy should help (they can become a lifestyle brand, not just a car company), but it’ll take a decade to grow into this valuation. Even Musk thought it was overvalued and said so twice this year when it was worth a lot less. As you say that makes this the perfect time to raise (again).

bryanlarsen 6y ago
Most of the other large car companies have debt loads over $100 billion. This means two things: - they have significant amounts of capitalization that don't show up in their market capitalization. "Enterprise Value" (which includes debt) is a more accurate representation of their size. - Their stock prices reflect a significant risk of bankruptcy. If Ford doesn't go bankrupt, it's worth a lot more than $9. If it does, it's worth $0. This analyst rates that probability at 42%: https://www.macroaxis.com/invest/ratio/F/Probability-Of-Bankruptcy https://www.macroaxis.com/invest/ratio/F/Probability-Of-Bank...
- mdorazio 6y ago
  I'm guessing you purposely left out the Japanese OEMs in your assessment? Their debt to equity ratios are pretty low.
  - bryanlarsen 6y ago
    Correct, I should have put more qualification on "most".
- SilasX 6y ago
  Hm, wouldn't you want to look at Ford credit default swaps to quantify that? Here's what I found for Ford CDS price history, don't know offhand how to translate that into a bankruptcy probability: https://www.assetmacro.com/united-states/credit-default-swaps-cds/ford-motor-company-credit-default-swaps-f-3y-cds/ https://www.assetmacro.com/united-states/credit-default-swap...
  - lordnacho 6y ago
    Long, long time since I did this, but back then you made an assumption that you'd get 40% of the bond's principle in case of a default. I recently asked a credit guy about this and he also gave me this magic figure. So from there you basically are saying at 100% chance of default, you get 40, and at zero you get 100. That gives you some amount that balances the payment from the CDS with the value of the bonds.
- grey-area 6y ago
  The largest competitors now are Toyota, VW, Daimler, GM, Honda. Their combined market cap is about 400B. Do those companies have high debt loads? I agree competitors will be in trouble in the coming EV transition and some are discounted, but I do also think Tesla is now vastly overvalued by the market. They've only just started making a profit, and they are still burning huge amounts of cash. I wouldn't be worried about solvency but I would worry that the future return promised by their valuation is extraordinary. Tesla has risen 800% in the last year, that seems to be unjustified by their progress in the same time frame.
  - intotheabyss 6y ago
    The more likely scenario is that the next decades gains are just going to be priced in. Speculators think that Tesla will be a 1T company (in 2020 dollars) by the end of the 2020s, and I don't disagree, but a lot has to go right for that to be true. That means if it hits 1T within the next year, I suspect they'll have a decade of stagnation like the tech companies did after the dotcom bubble. But also, the fact that I have to stress that the valuation is in 2020 dollars should tell us all we need to know about this current market and the valuations we're seeing. Flood the markets with dollars, and you'll have outlandish valuations.
    - grey-area 6y ago
      Yes markets tend to underprice and then overprice, then maybe drift down to a sensible valuation over time as companies grow. So perhaps we'll just see some stagnation in the stock price but there's no sign of it yet. This does feel like a speculative bubble and we've reached the FOMO stage where people think things are overvalued but invest anyway, because everyone else is. 25% of the S&P is in the largest 5 companies (all tech), market cap to GDP is at an all time high of 183.7% for the US. US assets in particular seems overvalued to me at present and heavily distorted by the massive QE programs that have been running since 2008 and gone into overdrive this year.
  - bryanlarsen 6y ago
    Toyota: $18B VW: E200B Daimler: E160B GM: $100B Honda $65B Therefore their combined Enterprise value is about $1T.

onetimemanytime 6y ago

The thinking, right or wrong, goes that Tesla will do more than cars. Like batteries for consumers, utilities, homes, states... IMO it's overpriced but what the hell do I know. I thought Google was overpriced in 2010

xiphias2 6y ago
Whether these are overpriced depends on how low rates you can get. Would you say Tesla is a bad trade if you would get a debt with 2% yearly rate that you have to give back in 30 years?
- staticman2 6y ago
  Whether Tesla is a bad trade depends on how it compares to other Stock. Whether you can buy it on margin has nothing to do with anything.
  - xiphias2 6y ago
    Not really, as bonds are printed and bought quite rapidly, the FED has QE infinity policy at this point, and a big part of the money goes to the stock market
    - staticman2 6y ago
      I don't follow. Why would you invest in Tesla rather than any other stock? The answer has nothing to do with interest rates unless interest rates uniquely effect Tesla.
      - xiphias2 6y ago
        Why not all of them? I'm just saying that the discount rate is an important part of why Tesla stock is so high: high growth with extremely low discount rate can get these valuations that look overpriced. As for me personally, I'm not a bank, so I don't have access to cheap loans.