Will Tesla Shorts Get Squeezed to $200?Presentation Transcript
Will Tesla Shorts Get Squeezed to $200?April 15, 2013Tesla Motors Inc. NASDAQ: TSLA
Disclosure!2 For Investment Professional Use OnlyLongboard Asset Management, LLC (“Longboard”) is an investment advisor to funds that are in the business of buying and selling securi>es and other ﬁnancial instruments. Longboard currently has a long posi>on in Tesla Motors, Inc. (“Tesla”) common stock. We do not own any op>ons on Tesla common stock. Longboard will proﬁt if Tesla stock increases in value and will lose money if it decreases in value. Longboard may change its views about or investment posi>on in Tesla at any >me for any reason or for no reason. Longboard may buy, sell, cover or otherwise change the form or substance of its Tesla investment. Longboard disclaims any obliga>on to no>fy the market of any such changes. The informa>on and opinions expressed in this presenta>on (the “Presenta>on”) is based on publicly available informa>on about Tesla. Longboard recognizes that others may disagree with Longboard’s analyses, conclusions and opinions. The Presenta>on includes forward-‐looking statements, es>mates, projec>ons and opinions. Such statements, es>mates, projec>ons and opinions may prove to be substan>ally inaccurate and are inherently subject to signiﬁcant risks and uncertain>es beyond Longboard’s control. Although Longboard believes the Presenta>on is substan>ally accurate in all material respects and does not omit to state material facts necessary to make the statements therein not misleading, Longboard makes no representa>on or warranty, express or implied, as to the accuracy or completeness of the Presenta>on or any other wriNen or oral communica>on it makes with respect to Tesla and Longboard expressly disclaims any liability rela>ng to the Presenta>on or such communica>ons (or any inaccuracies or omissions therein). Thus, shareholders and others should conduct their own independent inves>ga>on and analysis of the Presenta>on and of Tesla and other companies men>oned. The Presenta>on is not investment advice or a recommenda>on or solicita>on to buy or sell any securi>es. Except where otherwise indicated, the Presenta>on speaks as of the date hereof, and Longboard undertakes no obliga>on to correct, update or revise the Presenta>on or to otherwise provide any addi>onal materials. Longboard also undertakes no commitment to take or refrain from taking any ac>on with respect to Tesla or any other company. As used herein, except to the extent the context otherwise requires, Longboard includes its aﬃliates and its and their respec>ve partners, directors, oﬃcers and employees.
Introduction !3 § In this presenta.on we outline our case for the success of Tesla Motors Inc. and how Wall Street’s current underes.ma.on of Tesla will translate into a substan.ally higher stock price § Tesla is a polarizing story and has aBracted a huge number of short sellers who have bet that the company is just another Solyndra § This short posi.on, combined with our view that Tesla is successfully becoming the next dominant global consumer brand, sets up the opportunity for a very asymmetric trade in the common stock of Tesla Motors Inc. § It is our view that Tesla common stock will trade at $100 per share within 18 Months and $200 within the next 5 years
The Next Dominant Global Brand!§ Tesla is quickly becoming a world class global consumer brand on par with Apple Inc. § Over the next ﬁve years we see Tesla gaining a dominant 80% global market share of the rapidly expanding EV marketplace and fully execu.ng their mass market global strategy. 4 Is Tesla the next Apple?
Why Tesla?!5 § Motor Trend Car of the Year 2013, Tesla Model S has set a new global standard for design and performance § Engineering excellence and the resul.ng lowest-‐cost baBery power train § Brand recogni.on and technology valida.on § World class management team with a proven history of large scale “big idea” execu.on § Successful Sales and Marke.ng Strategy § Early Sales Momentum with Key Inﬂuencer Consumer § Tesla has emerged as the clear winner and is underes.mated by Wall Street consensus views
Short Position Overview!6 § The EV market is a very emo.onal and polarizing debate with strong views on both sides § Tesla is one of the most heavily shorted stocks in the market § 44% of the free trading ﬂoat is currently short § Short sellers view Tesla as just another Solyndra on its way to failure “Losers” -‐Sarah Palin, in reference to Tesla Motors, Inc. April 2013
Tesla is No Short Circuit!!7 Here is an outline of what the short sellers are missing… § Very High Global Consumer Demand Curve for Model S § Mul. Billion Dollar Tesla Brand Equity § Market Share Dominance § Management Leadership and Execu.on Skill § Brilliance of the Sales and Marke.ng Strategy
Model S Consumer Demand!8 § Global market demand for the Model S is dras.cally higher than currently an.cipated by Wall Street consensus es.mates § Model S sales have achieved “escape velocity” and the viral nature of consumer adop.on has set oﬀ a global chain reac.on that will con.nue to compound sales growth. § The more Model S vehicles on the road in the hands of the key inﬂuencer demographic the more demand is created for all Tesla products. It’s a virtuous circle. Model S
Brand Equity!9 § Wall Street analysts es.mates are dras.cally underes.ma.ng the value and power of the Tesla brand. § Innova.on, PR and social trends have created mul. billion dollar Tesla brand equity § Tesla is viewed by global consumers as a highly respected brand with high quality innova.ve products on par with Apple Inc. § Incredible emo.onal appeal with the global key inﬂuencer consumer market
Market Share Dominance!10 § Tesla has taken a dominant market share posi.on by sefng a new quality and performance standard with the Model S § No other pure compe.tor exists, Tesla is in a class by themselves § The iPhone release in 2007 disrupted the mobile phone industry and led to an 80% market share of the new smart phone market created by Apple § Tesla Model S has disrupted the high performance vehicle industry which will lead to an 80% market share for the new market created by Tesla “Tesla will dominate their consumer market, like Google does with search.” -‐Cole Wilcox CEO Longboard Asset Management
Management Team Execution!11 § Management team execu.on is among the best in the world § Big ideas are not uncommon but the ability to take a big idea, create a product, create an early market and posi.on a company to scale into a dominant global brand is incredibly diﬃcult and very uncommon § Elon Musk and his team have done all of the above while also simultaneously doing the same at Space X, successfully building and launching private liquid fuel rockets § Managements strategic acquisi.on of the NUMMI facility has given Tesla the plakorm to incrementally scale manufacturing produc.on to 500,000 vehicles annually and achieve the full breadth of the Tesla vision
Sales and Marketing Strategy!12 § As he did at Apple Inc., George Blankenship is building Tesla branded consumer experience stores around the world located in high traﬃc retail loca.ons § The stores allows the mass market global consumer to experience the product and talk with Tesla specialists § This long term strategy is selling cars today while simultaneously paving the way for millions of future customers by building incredible latent demand for next genera.on mass market products
Short Squeeze Thesis!13 § We see a combina.on of factors leading to a substan.al upside revalua.on of Tesla’s market capitaliza.on § Wall Street is currently dras.cally underes.ma.ng the probability and magnitude of Tesla’s success § 44% of the free ﬂoat is short in a stock that is .ghtly held and increasingly in demand § Short sellers are trapped in a wrong way bet with a stock making new all .me highs. The increasing diﬃculty of ﬁnding shares to hold their short posi.on combined with the acute pressure of moun.ng ﬁnancial losses will force the shorts to cover into a run up in price Is This The Future of Tesla Stock? $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 Jun-‐10 Sep-‐10 Dec-‐10 Mar-‐11 Jun-‐11 Sep-‐11 Dec-‐11 Mar-‐12 Jun-‐12 Sep-‐12 Dec-‐12 Mar-‐13 Jun-‐13 Sep-‐13 Dec-‐13 Mar-‐14 Jun-‐14 Sep-‐14 Dec-‐14 Mar-‐15 Jun-‐15 Sep-‐15 ?
14 “The shorts are in it to the hills. I think it is very unwise to be shor>ng Tesla. There is a tsunami of hurt coming for the short.” -‐Elon Musk CEO Tesla Motors, Inc Tesla tsunami?
Short Squeeze Catalyst!15 § Tesla is a very polarizing story and is one of the most heavily shorted stocks in the market § Limited ﬂoat and .ghtly held shareholder base creates share scarcity § Wall Street current consensus es.mates grossly underes.mate the power of the Tesla Model S global consumer demand and probability of Tesla success § New Tesla Model S owners are wealthy and will become shareholders and create addi.onal share scarcity § Analysts consensus es.mates on market share, consumer adop.on speeds and earnings power need to be revised drama.cally higher § These upside revisions will aBract growth equity mutual funds to the stock crea.ng addi.onal share scarcity § Wall Street loves a great story and the success of Tesla will make it a must own stock for fund managers § The momentum of these events will create a self reinforcing feedback loop and aBract addi.onal momentum funds and media aBen.on and create addi.onal share scarcity
!16 § Wall Street consensus views massively underes.ma.ng the brand value and market share dominance of Tesla Motors Inc. § Tesla Model S is the equivalent to the global car industry what the IPhone was to the global mobile phone industry in 2007 § Consumer adop.on of the Model S has been purely based on product design and performance not economic incen.ves § This pure free market consumer adop.on is the key signal to support our thesis that Tesla is well on its way to becoming a dominant global brand and succeeding in their long term vision § The successful Tesla retail store strategy is crea.ng brand iden.ty and massive latent demand for next genera.on products § We see the catalyst for the rise of Tesla as the next great global brand and the downfall of short sellers currently befng against that rise § It is our view that Tesla common stock will trade at $100 per share within 18 Months and $200 within the next 5 years Conclusion!
About Longboard!17 An alterna>ve approach to naviga>ng the investment ocean Longboard is an asset management ﬁrm specializing in trend following strategies. The ﬁrm’s principals have been inves.ng in and researching trend following strategies since the late 1990s. We manage both private investment funds and mutual funds applying our trend following investment style. “Trends come like a series of ocean waves, bringing the high .de when things are good and, as condi.ons recede, the low .de appears. These trends come unexpectedly, unpredictably, and they have to be weathered with temperance, poise, and pa.ence-‐ good or bad.” Jesse Livermore, Reminiscences of a Stock Operator
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