Tesla has changed strategy multiple times this past year and communication has been erratic, especially around Elon Musk’s tweets, putting him at odds with the SEC. Recent events concerning the distribution of Model 3 has raised questions about Tesla’s ability to make vital decisions. Last year, Elon Musk boasted that production bottlenecks were being solved, which they clearly have not, and also predictions that the company would remain cash flow positive and not need capital.
Before announcing yesterday’s capital increase, Elon Musk staged a show called Autonomy Investor Day (which we covered last month
). This seemed like one big sideshow to divert attention away from obvious issues with demand for its cars. It’s now clear why Tesla pivoted its strategy to now pursue being an autonomous-driving technology company that also happens to produce the actual cars (hardware) on top of the self-driving software. Tesla has now announced that it does not expect to be massively cash flow positive until its autonomous fleet of cars is deployed. Meanwhile Tesla is now also shifting strategy in its solar business which it acquired from SolarCity in 2016 for $2.6bn. Since getting into the solar business, Tesla has seen installations going down, losing market share from the biggest player to number four in the industry in the US.
As if all these things were not enough, increasing analyses show that minerals used for Lithium-ion batteries could be massively constrained on supply over the next decade, pushing up production costs. The reason is that every carmaker in the world is launching its own EV production line to compete with Tesla. As we have said many times before, we believe EV will transform the transportation sector but it will take longer than expected. But even more importantly for investors, it will not be the carmakers that make the fat profits but the suppliers further down the supply chain with miners and battery makers taking the largest share of profits. Beyond Meat soars 163% on first day of trading
Yesterday’s IPO of Beyond Meat and its first day of trading must be one of the most successful IPOs in recent times. Shares were IPO’ed at $25 per share and opened 84% higher and impressively continued for the rest of the session closing 163% above the IPO price. Turnover was massive at $1.37bn which is a lot for a company that IPO’ed with a market value of $1.46bn.
What's the big deal with Beyond Meat? The company produces and sells plant-based meat substitute for burgers, sausages and beef crumbles, which puts it right in the middle of a big health trend of lower meat consumption and more plant-based protein intake. Famous individuals such as actor Leonardo DiCaprio and Microsoft's Bill Gates have sprinkled their star dust over the company giving it some celebrity status. Beyond Meat share price (1-min chart):