The Massive Sale of Tesla Stock.

are three critically important things we

need to talk about regarding Tesla stock

number one is Elon Musk and the Tesla

lawsuit then we need to talk about

what's going on in China regarding

protests in stores and we've got to talk

about margin and pricing power because

you all know there's nothing I love more

than really large PP so let's get

started hey everyone meet Kevin here

Tesla stock obviously has underperformed

a lot of stocks over the last year you

know when Dave and Buster's is basically

flat compared to Tesla's negative 70

percent

underperforming even Bitcoin you know

you've got a bad day anyway let's start

with this shareholder lawsuit that's

going on and some requests that Elon

Musk is now making and how it could

potentially affect Tesla stock in the

future so there's a shareholder class

action lawsuit that relates to the

tweets that Elon Musk made in 2018

regarding his suggestion that he was

going to take Tesla private at 420

dollars per share leading the stock to

Surge up and of course fall after that

deal fell apart now that legal ruling

suggesting Elon Musk knew he did not

actually have funding secured references

a New York Times article where Elon Musk

was interviewed and suggests that yeah

he didn't actually have a commitment yet

from the public investment fund from

Saudi Arabia now that was a concern for

this judge who ended up ruling hey Elon

you didn't actually have the right to

make the comment funding secured well

now we have a new lawsuit and that

lawsuit relates to the implications

around stock manipulation because Elon

Musk suggested hey we have funding

secured which sort of piggybacks off the

ruling saying nah you really didn't of

course Elon disputes that ruling and

because he realizes he's kind of been on

the track to losing in California now

Elon Musk and his team have filed a

motion to transfer the venue of the

stock manipulation lawsuit from

California the Northern District of

California to the Western District of

Texas that's because they believe that

Elon Musk will be deprived of an

impartial jury in Northern California

specifically they're asking for either

moving to Texas or just delaying the

trial because the Northern District of

California is saturated with negative

and biased news stories about Elon Musk

making finding an impartial jury

potentially impossible specifically

because since October's act well Elon

musk's acquisition of Twitter in October

the local press has been publishing

stories accusing musk of encouraging and

personally participating in the proposed

spread of misinformation on the platform

and that jurors might be unable to

separate this Baseline bias from the

facts in the case that led to Elon

musk's funding secured tweet especially

since there has been a prior ruling

where a judge has declared that Elon

Musk did not actually have the right

basis for making that and guess where

that ruling was of course filed in the

U.S District Court of Northern District

of California so elon's been losing in

the Northern District of California and

now they're looking to use negative

Publications to either delay the trial

or move it to Texas now I think it's

going to be a little hard to move this

to Texas but maybe they can get a

different area of California but let me

tell you this I have been in court

representing myself I know that sounds

crazy you could actually find this video

on YouTube or in my Twitter feed but I

fired my attorney why while I was in

court of Zoom Court during my Governor

campaign and I was defending myself and

I was told by a council that wasn't

representing me it is almost impossible

for anybody who is trying to fight

establishment Democrats because I was

running against the existing Governor to

actually win a court case in the

Northern District of California because

here's what happens the governor who's

clearly of a very staunch Democrat uh

Gavin Newsom who you know I was I was

running against in the recall election

uh he has the power to elevate not only

the position of these judges to

Appellate Court judges but if he ends up

running for president which a lot of

people think he will in California and a

lot of people in California think he

could win to become president then those

judges in the Northern District of

California could potentially get

appointed by the president as federal

judges or maybe even even to the Supreme

Court so you have Northern District

judges that potentially are heavily

biased towards the Democratic

establishment in the Northern District

of California therefore it's not a

surprise that Elon Musk is tempted to

maybe move this to a little bit more of

a conservative or at least politically

uh more in the middle region like

potentially parts of Texas so even

though I can't say with fact that's what

happens but I can tell you with my own

personal experience from what I'm told

yeah it's tough to win against the

establishment Democrats in the Northern

District of California oh yeah uh

spoiler alert I lost

[Laughter]

not only the election but my case

anyway oh let me also quickly say

because I was running against the

Democrat as a in the middle Dem I could

not get any Democratic attorneys to

represent me except for newbies and I

couldn't get Republican attorneys to

represent me because that would kill me

in the election it's like why do you

have a republican staff right so I was

just like screwed by the system and it's

like well that's politics for you and

it's okay it's like you learn this stuff

and it's like damn but um uh anyway it

does open your eyes up to what Elon Musk

is potentially dealing with much at a

much greater scale of course for Elon

situation now of course when you

reference the New York Times article

what's really interesting is in that New

York Times story it talks about how Elon

Musk thought the value of Tesla at that

time if they took it private was

actually 419 dollars uh but he but but

he says it would be better Karma to

price the deal at 420 dollars per share

he also says he was not on weed to be

clear at the time weed is not helpful

for productivity there's a reason the

word there's a reason for the word

stoned you sit there like a stone on

weed uh all right so this the article

then talks a little bit about how Mr

musk was referring to his potential

investment by the Saudi Arabia

government investment fund extensive

talks about 250 billion dollars in

potential funding however there there

had not been any kind of commitment to

provide cash based on other people who

were briefed on the matter there was

also a consideration that maybe SpaceX

and this is kind of an ironic flip but a

SpaceX would buy out

uh Tesla they also talked about how Elon

Musk was flying around on his private

jet to some of these meetings you know

that's something the New York Times

likes to do uh is is reference that uh

and of course that's a perfect

opportunity for me to reference that if

you'd like to Shadow me for a day in my

jet as we go look for real estate ask me

questions we can chat together make

videos together whatever you want to do

we've got small groups we're doing this

with uh take a look at the link down

below and I'd love to have you okay so

uh how does this potentially affect

Tesla stock well if Elon Musk loses his

stock manipulation lawsuit the

likelihood is that there would be

substantial damages that could have to

be paid to shareholders and it's unclear

if that would be all shareholders at the

time or just those involved in the class

action lawsuit either way uh the larger

piece of damage would likely be uh

penalties from uh from from from any

kind of uh liability abilities that a

judge imposes on Elon Musk beyond the

actual damage that the shareholders

behold so they'll be like damage but

then you'll get penalties on top of that

and I wouldn't be surprised to make a

point in California you'd get some

really large penalties and personally I

think there's a risk that could lead to

Elon Musk having to sell some more Tesla

shares despite a suggestion that he

doesn't see a need to sell any Tesla

shares in 2023 potentially not even in

2024 going all the way out to hopefully

not having to sell again until 2025.

this is something that he personally

says but then again many times in the

past he said I'm not planning any more

sales and then he ends up planning more

sales so no obviously things can change

and and hopefully we can take him at his

word but let's just put it this way

retail investors would have had to buy

50 more Tesla shares in 2022 just to

offset the selling pressure of Elon

musk's sales so don't kid yourself like

volume doesn't absorb hodler sales being

sold when a hot cells it hurts the

long-term share price it's not actually

a fundamental move it's actually just an

order book move so Tesla's depressed

price is is really more of an issue in

my opinion of a depressed order book but

that then brings us up to this idea of

price Cuts in China so obviously uh

there there were some a second round of

price Cuts conducted in China somewhere

between seven to thirteen percent in

price Cuts this comes after uh the three

to six percent subsidies expired in

China from the Chinese government at the

end of the year those government

subsidies expired uh and then they

basically doubled those subsidies with a

seven to thirteen percent price cut

total price is now for vehicles after

two rounds of cuts the first at the end

of Q3 in the beginning here at q1 the

second round prices for cars and Tesla

or Tesla China cars now down 13 to 24

percent that's pretty remarkable and so

this has led to uh you know oh the q1

protest or uh q1 price Cuts have led to

protests take a look at a couple tweets

here where you could see uh people

walking into Tesla stores do keep in

mind that you can order Tesla's online

in China so you don't actually have to

go into a store to order uh Teslas and

so some people initially were thinking

oh this is a sign of demand people are

so excited to go buy Teslas but what's

actually happening is people coming are

coming in with big posters and they're

protesting Reuters broke down some of

these protests we've got another one

over here again a lot of people saw

these as uh as as actual like excitement

like as demand but the reality was this

wasn't excitement or demand this was

this was anger uh and so protesters

according to actually come on I'm on

Twitter there we go protesters according

to Reuters handed over a list of Demands

to Tesla including demands like uh

lifetime subscription to self-driving

Services three-year extension of car

insurance and potentially 4 free

electric charging at superchargers

Reuters made it very clear that

individuals were protesting Tesla lied

to customers Tesla needs to protect

consumers legal rights so a lot of

negative press off of off of these price

Cuts here which on in some sense you

know people are like oh Tesla doesn't

have an advertising department and even

though this seems like a negative press

it's kind of like everybody hears about

these protests and it's like oh Tesla

cut prices you know it's like it's like

an ad in itself which is kind of

remarkable but Tesla China responded to

this and suggested that look uh here the

Tesla's vice president for external

Affairs said in a social media post on

Friday that cuts relied on quote

engineering Innovations and said that we

answer the call of the country to

stimulate economic growth and unleash

consumer potential so kind of a little

bit of an empty statement there but

there's a little bit of nuance that

maybe we can pick up that oh okay is

this a suggestion that maybe margin in

is actually better to the point where uh

Tesla can cut prices and still maintain

profit margins an interesting idea and

I'm going to look at margins in just a

moment but I want to reference this

there is an old video clip in in which

tomsu the Tesla China boss who's now

helping over with Austin Giga Austin

scaling that commented on uh Tesla's

price Cuts in the past and and suggested

that quote as long as the optimization

of supply chain and the Improvement of

production efficiencies brings down

costs we will pass on the savings to

Consumers this principle has not changed

and this uh it kind of makes sense

because if you go jump on over to what's

been happening with commodity prices

we've actually been seeing commodity

prices in a pretty solid decline here's

an example of the Bloomberg commodities

index in Decline from its Peaks around

March roughly in line with the levels

that we saw at the beginning of 2022. uh

now this is going to have some really

interesting implications for margin and

we're going to look at uh at uh the

earnings reports that try to have some

some projections here I do want to

remind you that if if you like

fundamental analysis and you want to

learn more about fundamental analysis or

just watch me do fundamental analysis

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gets access to the course member live

stream so now let's go ahead and talk

about PP this is my favorite thing to

talk about and that's pricing power for

Tesla so first it's it's really worth

maybe depicting this on on paper here

well digital paper but a lot of folks

believe that pricing power basically

means okay price goes up right that is

uh very very true in a macro cycle that

is increasing right so as the economy

improves and increases up it makes sense

for pricing power to imply increasing

prices and increasing margins right so

price is up margins up so let's write

that down macro up prices up margins up

okay that really needs to be contrasted

with when we're in economic decline

should have really inverse these colors

here but oh when we're an economic

decline what you could see is a

typically prices well let's do macro

down prices down margins

stable margin stability while prices are

falling to compete is a form of relative

pricing power now obviously if while

macro is going down there's a company

that can raise prices and increase

margins oh boy okay well they obviously

have more pricing power than this but if

everybody is reducing their prices which

company is able to keep their margins

stable or higher relative to others it's

all a game of Relativity right that's

what pricing power is it depends on

where in the macro cycle you are and

eventually the fundamentals of pricing

power in my opinion win out over

short-term Trends short-term Trends are

like going from uh you know oh going

into recession okay let's go from growth

to you know uh energy and uh and

Consumer Staples that is it's totally

devoid of fundamentals that movement

that is a trend movement and so what I

like to do do is I like to look at the

earnings forecasts and the earnings

reports so uh first what I think is

remarkable is we want to try to

understand what we expect for margins in

Q4 and the last set of margin that we

got for Tesla was in Q3 and a Q3 margin

actually came in below expectations

here's the Q3 earnings report so in Q2

we had Shanghai depressing the Shanghai

closures depressing margin to 27.9

percent note this does include EV

credits but it's a big decline from what

we saw in q1 where prices were at the

highest for cars and material costs were

still on the Lower Side here you had

Shanghai shutdowns reducing margin

because Shanghai has very good

efficiency it's probably one of the

cheapest places to manufacture these

cars next to like maybe India where

labor is even cheaper than in China but

Tesla doesn't manufacturer in India yet

all but anyway then in Q3 we were

expecting Tesla to come in with a 28.4

margin but we actually got 27.9 and so

that was a little disappointing since

Shanghai was up again I called it Chang

hell here uh and and since Shanghai was

open again the fact that these margins

stayed stable suggested that really

commodity prices hadn't yet really come

down to help increase margin again and

so there's hope and remember hope is not

an investing strategy but there is hope

that maybe

just maybe some of the relaxation and

commodity prices May finally flow

through to Tesla in Q4 remember that

Bloomberg commodity Index right so if

you look at Q3 August September October

you're really looking at sort of this

this bump there in the middle of the

screen coming off of the high on the

left and there is a lag for when

commodity prices fall when do you

actually realize those in your supply

chains because you've you've signed up

for a lot of contracts at higher prices

right there is a belief that maybe just

maybe in Q4 we're going to be able to

realize that sort of July plummet in

pricing because we'll just have we'll

just start hitting that four to six

month delay or lag in when we start

seeing those material contracts roll

over and we renegotiate them at lower

prices and now maybe we could see that

margin push through pushing margin for

Tesla up at that next earnings report so

very very hopeful obviously for that

again hope is not an investing strategy

but there's a lot of Hope For That so uh

if if if if that is true that Tesla's

going to recognize some more of that a

margin productivity uh we're operating

leverage uh then we could actually have

a very good earnings report for Q4 now

do keep in mind you had price Cuts in

China at the end of Q3 and the beginning

of q1 beginning of q1 is not going to

affect Q4 but the September price cut in

China will but if those were maybe the

first six to ten percent price cuts and

commodities are down 20 percent who

cares the same is true for that three

thousand seven hundred and fifty dollar

subsidy which then ended up turning into

a seven thousand five hundred dollar

subsidy towards the end of December in

America now a three if the average

revenue per vehicle is about fifty two

thousand dollars a three thousand seven

hundred fifty uh dollar

subsidy represents about seven percent

but the cost of a fifty two thousand

dollar car uh is is actually for Tesla

take off about twenty five percent is

actually about thirty nine thousand

dollars so a thirty seven hundred fifty

dollar incentive uh represents about

nine point six percent of the production

cost of a Tesla so you're taking about

ten percent off a margin there right but

if input costs are able to fall twenty

percent on Commodities and maybe the

Commodities represent about half of the

input costs the other half being labor

potentially maybe maybe you could have a

stable margin with that form of subsidy

now if commodity prices fell more or we

had more operational efficiency because

maybe Shanghai was online more maybe

exports or exporting Vehicles was

cheaper because we've seen like for

example the cost to ship containers

plummeting over the last six months

maybe just maybe that could give Tesla

operational boost to margin

and so that's where we can look at the

current forecast provided by Wall Street

the current forecast provided by

wallstream are that we will sit at

margin of

28.4 which is interesting because it's

exactly the same as the estimate we hit

last quarter when we actually missed and

got 27.9 uh 27.9 now that we're sitting

at 28.4 again people are scratching

their head going

maybe we can beat that number this time

we're also expecting about

2.826 billion dollars of free cash flow

in this quarter if Tesla can beat on

free cash flow and on margin oh boy

Tesla might might be able to prove that

in a recessionary time it has the

pricing power we've all been waiting for

Tesla to prove it has we'll see but it

comes on the backs of even deeper cuts

into the trust and safety team handling

content moderation at Twitter dozens of

more cuts at Friday night this Friday

night here uh in Dublin and Singapore

offices and those Twitter fears do

create more fears that Elon Musk is

going to have to sell more Tesla stock

to keep Twitter afloat keep in mind he

pays somewhere around or needs to pay

somewhere around 1.3 to 1.5 billion

dollars in debt per year uh in debt

service payments just to keep Twitter

afloat speaking of keeping things afloat

the real estate market is suffering and

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obviously no this video is not a

solicitation that private placement

memorandum is that offering is open to

accredited investors at the moment then

in the future we'll be opening that to

non-accredited investors hopefully

within the next couple months we'll be

publishing at the same time our audit

once we do the reg a and then you can

see exactly sort of how the valuation

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building a phenomenal company over the

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sick I really hope to IPO that company

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obviously that's not guaranteed anyway

keep out uh keep an eye out for

companies with pricing power I really

think that's what's going to help

survive this recession thank you so much

for watching this video and folks we'll

see in the next one goodbye