What do you think – should Tesla issue debt to do a stock buyback this year? Or should they wait?
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100% agree with Dave on this. Now is not the time for buybacks.
100% agreed here too
They are heavy on cash, I’m proud they have mine, and I don’t want it back right now. They need to keep growing, keep financing awesome projects like Dojo & Optimus, and all others we don’t even know about yet. No time for pandering to WS or insecure investors during a recession.
Agree too.
Totally agree with you Dave. I think a share buyback is short-term thinking right now. I doubt it would have as much impact as people think given many are risk off. I’m wondering is it possible Tesla can use their cash reserves to help people finance cheaper car loans for Teslas to keep demand strong given higher interest rates these days?
That’s actually a very intelligent comment. They have so much cash that they can undercut high interest car loans significantly but still make a profit.
Christopher Dyanand: Exactly. Plus, IF things get REALLY ugly re the global economy / macro, they could always gradually do that once the Tesla stock prices gets REALLY ugly, like 150 or 100.
No company goes bankrupt without debt. No point taking such risk until the picture looks MUCH better for risk/reward.
Tesla investors (vs. speculators) should both be in it for the longer term (say, 5 years or more), and also be ready for EXTREME TSLA volatility, given its history and the nature of the car business.
100% agree, do not go into debt! Use the FCF to fund AI, giga factories, new business ventures. I am not concerned with the immediate stock price, I am focused on the 10-20 year horizon and want tesla to solve the transition to clean transportation, clean energy, robotics, ai, etc. Don’t sacrifice the future for short term gains!
Future cashflow will be large.
They cant spend money any faster. You are asking for Tesla to throw away money for no reason. Doing nothing would be preferable.
Why is it so hard to understand that buybacks don’t happen until AFTER they invest everything they can reasonably invest without wasting money.
@J They have already done that. The cash pile is growing faster than they can spend without wasting.
Obviously they shouldn’t sacrifice that they need for growth. Only what’s left over.
Me being a long I don’t care the only scenario that make sense to buy back is
1. Tesla uses cash flow to buy back without touching the 20billion cash back up
2. The current PE is very juicy and invested money would yield great returns
Agreed. Buybacks when they’ve got $50 billion on the books and the next 2 factories are making cars.
Elon said he could do buy back when tesla has so much capital that they don’t know where to spend it. I don’t think it will happen soon with 7 to 9 new Giga factory to build ( 10-12 ) not counting Freemont.
@gaetan guimond sounds good to me!
Exactly it’s time to horde and hold cash for the comfort of stock holders at this time! Building a cash cushion till you have nothing more to do with the cash
Cash is king and low debt going into hard world economic times 😊
Dave is a gem to the Tesla community❤
Dave is one of the Tesla Superheroes. He helps to protect us all with his superpowers (information).
Steve Mark Ryan is the OG. Dave is decent. Didnt personally agree with this take at all for numerous reasons.
I agree. The motive behind the retail investors reasoning is the desire to stop the drop in
the price of shares. This would be a temporary solution that would threaten the long term viability of the company to survive during a serious collapse of the macro economy.
Thanks for this. This is great educational content for people who believe a buyback is warranted.
Yes and they almost had me convinced too, that 5% interest is a good investment in self when growing at 50%. But being debt free and cash heavy is just too important.
after 1/1/2023 there’s a %1 tax on stock buybacks, so it would be more costly next year. it’s very likely they are about to issue a bond, unsure what it will be used for, but that’s very likely the reason for the S&P rerating.
Agreed. That extra debt will give Tesla haters more tools to hammer Tesla’s stock price shortly after the stock buyback followed by lowering the credit rating by S&P. We need to weather these awful time in our long term investment in Tesla.
It may be that taking on a *little debt* is playing the game with the rating agencies that profit off it, that Tesla will be rated higher bc of it as ironic as that sounds on the surface.
Excellent view on this issue. The recession is stressing people out and short term stock price is not the most important thing, building and innovating is. Thank you Dave!
Great video…. Being debt free is important in times of turmoil such as this
100% agree. In the present environment a share buyback even with available cash would be totally irresponsible, with debt would be madness…
100% agree too. Additionally on a market cap of 650 to 1 trillion, 10 or even 20 billion is just a drop on a plate at this point. Even more, as a shareholder i like Tesla to expand the scope of his production into energy, like ie the Texas Megapack Power Plant. The return on such an investment is huge and creates also shareholders value while the investment is very very low.
I agree Dave. No need to do this just to prop up the stock price. If it makes sense for some other reasons for Tesla to do it then I would be for it, but short term stock prices don’t matter a whole lot.
Dave thanks for addressing these volatile times with solid reasoning and a plan for the next 12-18 months. Tesla should hold on to their strong position while the economy adjusts to higher interest rates. Lots of people are acting emotionally during these challenging times. Waiting for a buyback gives Tesla more time to work through scaling up Texas/Berlin and 4680 production line while having 18 billion set aside.
Whatever Tesla decides to do will be the right move. I have total confidence that Zach and team knows way more than we do, and will act accordingly 👍🏼
Can’t fault your thinking on the stock buy back, personally want to see them full on developing the projects they are working on fsd AGI and bot this last one will be a huge cash cow 👍👏👏👏
I agree, I truly don’t think that a $5-10B SBB will move the TSLA very much (~$20.00 maybe) in this f*up market. I say we hold strong, ride this wave , accumulating more shares as it falls (truly a gift .. if not in margin and if you don’t need the money in the next 12 months)
That being said, I am DCA’ing to my goal 5k shares 🙏
Absolutely with you on this, Dave. Stock buy-backs sometimes signal a problem which Tesla definitely does NOT have.