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Given the sizable underperformance of Tesla shares to the benchmark Nasdaq 100 index over the past few days, market chatter congregated around Elon Musk's possible liquidation spree as the most likely culprit for the EV giant's recent share price weakness. That prognostication has now panned out, as per the latest filings of the CEO of Tesla with the SEC.
As we expected @elonmusk sold 22M $TSLA shares (0.8% float) for $3.58B between Mon-Wed, at an avg price of $162.81. During the 3-day period, TSLA fell -12.4% vs NDX +1.5%. Since the TWTR deal closed 10/28, TSLA -29% vs NDX +4%. Elon’s avg price received was $163/share.
— Gary Black (@garyblack00) December 15, 2022
Elon Musk has sold 21.995 million Tesla shares over the past few days, netting $3.58 billion in the process, as per a Form 4 filed with the SEC.
After this week’s sales, we estimate Elon now owns 423.6M shares - 13.4% of $TSLA shares.
— Gary Black (@garyblack00) December 15, 2022
Recently, a consortium of banks that had provided Elon Musk with $13 billion in debt financing for his Twitter takeover gambit floated the idea of replacing $3 billion of unsecured debt, which carries an interest rate of 11.75 percent, with a margin loan of similar magnitude but bearing a lower interest rate. This change will offer crucial cost savings to Twitter, which now faces annual interest costs of around $1.2 billion. Nonetheless, a margin loan does carry significant risks as Musk will be required to post additional collateral by selling Tesla shares should the EV giant's stock price breach the loan's margin thresholds. It is as yet unclear whether Elon Musk's latest liquidation spree is intended to bolster Twitter's liquidity and/or facilitate a transition toward the proposed margin loan.
Of course, as stated earlier, Tesla has been chronically underperforming the benchmark Nasdaq 100 index in recent days. As an illustration, the index is up a little over 1 percent in the past 5 trading days, yet Tesla shares are down nearly 10 percent over the same timeframe. While certain endogenous factors have accelerated the downward pressure on the stock recently, this weakness has persisted ever since Tesla announced its earnings for the third quarter of 2022.
Firstly, back in late October, Tesla slashed the prices of its EVs by up to 9.4 percent in China. At the time, this decision was justified as a shrewd attempt to capitalize on the soon-to-expire 12,000 Yuan subsidy that China offers on all EVs that retail for under 300,000 Yuan. The price cut allowed the Tesla Model Y Standard Range to qualify for this incentive by reducing the model's price to 288,900 Yuan.
Tesla fans from China are reporting that Tesla is now offering an additional 6,000 Yuan discount on top of the existing 4,000 Yuan insurance promotion. So, that's a 10,000 Yuan discount in total ($1,429).
This is for brand new cars just produced that have no buyers yet.
— Troy Teslike (@TroyTeslike) December 7, 2022
However, that expected temporary boost in demand has not materialized so far, judging by the fact that Tesla has now started offering a discount of 10,000 Yuan for new orders. Given China's importance to Tesla's bottom-line metric, this demand weakness is turning into a sizable headwind for the stock.
Hi everybody. Tesla Delivery Estimates for Q4 2022 were as follows on Dec 5:
• My estimate: 428K
• Analyst consensus: 430KMy 428K estimate would mean 42.8% annual growth for the full year. Tesla's target is "just under 50%".
The next update on Twitter will be on Dec 15. pic.twitter.com/hbir5yFWFL
— Troy Teslike (@TroyTeslike) December 13, 2022
Tesla continues to adhere to its guidance of growing production by 50 percent annually for the foreseeable future.
1/
Hi everybody. I want to explain why Tesla China might reduce production this month. Tesla's inventory was already high at the end of Q3. Ideally, they don't want to increase it more. To do that, they would need to deliver all production minus exports.
— Troy Teslike (@TroyTeslike) December 14, 2022
However, many analysts now contend that this guidance remains under threat, especially as the company is looking to curtail its production footprint in China heading into the year's end.
What's the state of Tesla's "Full Self-Driving" initiative? Is it improving? How does it compare to other companies' systems?
Data-driven thread below:
— Taylor Ogan (@TaylorOgan) December 13, 2022
Moving ahead, Tesla continues to face heat on the safety scorecard of its bespoke Advanced Driver Assistance System (ADAS), dubbed the Autopilot. In August, California's DMV accused Tesla of misleading customers regarding the capability of its Autopilot system. The company was also sued by a customer in the same month for "deceptive marketing." Then, in October, reports emerged that the US Department of Justice, as well as the SEC, maintains ongoing investigations into Tesla's Autopilot-related claims. As per a tabulation by Taylor Ogan, CEO of Snow Bull Capital, the "miles per disengagement rate on FSD beta is actually getting *worse*, down -54% Y/Y."
It is hardly a surprise, therefore, that Tesla has now abandoned its current approach of relying solely on a vision-based Autopilot system, which consists of eight high-resolution cameras and a high-tech neural network to interpret the incoming visual cues, and is now working to re-incorporate an HD radar in its suite of sensors.
New: QAnon believers are ecstatic about @elonmusk's flood of far-right memes and grievances. He hasn't just taken over their main battlefield for online info war. He's become a figure of prophecy on par with Donald Trump https://t.co/trNKlYL0WH
— Drew Harwell (@drewharwell) December 14, 2022
Finally, Elon Musk's approach toward free speech on Twitter is tarnishing the Tesla brand, especially when combined with his controversial and politically charged tweets. For instance, on Tuesday, Musk tweeted a message with a rabbit emoji, which was interpreted by many QAnon members as an homage to the movement's foundational icons.
$TSLA survey in Germany.
63% of respondents say that Musk’s behavior has negatively impacted their perception of Tesla.
As a result, it is now the least liked carmaker in Germany (9% like / 69% dislike / 22% neutral).
This is a disaster with EV competition heating up. pic.twitter.com/vW88atR6bB
— Sheep of Wall Street (@Biohazard3737) December 14, 2022
In fact, as per a recent German survey, 63 percent of respondents said that Elon Musk's behavior has negatively affected their perception of Tesla.
2.
Jonas makes $TSLA a Top Pick for 2023: ".. the only company able to sell EVs at ICE-like margins and have an un-presented presence in the battery supply chain. With the introduction of the Cybertruck and Tesla Semi in 2023, the company is expanding its auto product lineup."
— Carl Quintanilla (@carlquintanilla) December 14, 2022
All is not lost, however. In a fresh investment note, Morgan Stanley analyst Adam Jonas identified Tesla as the "only company able to sell EVs at ICE-like margins and have an un-presented presence in the battery supply chain."
#China: Will encourage change of auto consumption, promote electric vehicles, internet of vehicles. Will promote home purchases and related consumption. Will reduce burden for family on raising children, parenting and education.
— CN Wire (@Sino_Market) December 14, 2022
Moreover, with China now actively reducing its zero-COVID policies and working hard to revive its sagging economy, Tesla's current bout of demand weakness is likely to be transitory.
