Brief Consumer: Tesla (TSLA): Model Y to Be Unveiled in L.A. On March 14 – What We Know So Far and more

In this briefing:

1. Tesla (TSLA): Model Y to Be Unveiled in L.A. On March 14 – What We Know So Far
2. Nio (蔚来) Lock-Up Expiry – Scattered Pre-IPO Investors to Be the Sellers
3. Rakuten: Lyft IPO Provides Timely Support for Mobile Deployment
4. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing
5. Orion Holdco/Sub Trade: Holdco’s Price Catching up Was Overworked, Time for Sub to Catch Up

1. Tesla (TSLA): Model Y to Be Unveiled in L.A. On March 14 – What We Know So Far

Other than CEO Elon Musk’s tweets, there is not a whole lot that has been announced about the Model Y other than that it will be unveiled at the company’s L.A. Design Studio on March 14.  Here is a brief list of what we know so far about the Model Y:

• Musk indicated during the 4Q earnings analyst call that Models 3&Y will have a 78% shared content ratio (see Tesla (TSLA): 4Q Earnings and First Impressions on the Company’s Strategy ), with media reports quoting Musk also referring to a 75% shared content ratio in other forums (see, e.g., https://electrek.co/2019/02/07/tesla-casting-lines-gigafactory-model-y-production/).
• Musk also had stated during the 4Q earnings call that the Model Y will begin production at the Shanghai Gigafactory 3 which is projected to be completed at the end of 2019.  The company has not confirmed that commercial production of the Y will begin in the U.S. simultaneously.
• There are no changes or additions in Musk’s tweets to previously announced commercialization target dates for the Model Y.  

Tesla’s new product launches historically have been mired in delays.  Assuming management does not repeat its assembly line prototyping mistakes prior to the Model 3 launch there should not be an issue currently with meeting its production target timeline of 1H20.  However, we also believe any such concerns would be legitimate given Tesla’s history.

A Tesla Model Y Teaser Shot

2. Nio (蔚来) Lock-Up Expiry – Scattered Pre-IPO Investors to Be the Sellers

NIO Inc (NIO US)‘s lock-up will expire next week on the 11th of March. Shareholding breakdown suggests that there will be overhang upon lock-up expiry due to the large number of scattered pre-IPO shareholders. 

In this insight, we will look at the principal and pre-IPO investors and analyze who and how many shares would likely be sold upon lock-up expiry.

3. Rakuten: Lyft IPO Provides Timely Support for Mobile Deployment

The publication of Lyft’s IPO prospectus is a clear positive for Rakuten Inc (4755 JP) . As a pure investment, Rakuten’s return on its Lyft investments could be 273-366% or ¥101-136 per share based on the $20-25bn valuation range reported by the press. There has been a lot of focus on the investment gains Rakuten should accrue but the real upside is a timely boost to liquidity plus accounting cover as mobile investment accelerates.  Whether one believes Rakuten can succeed in mobile or not, it has the capital and paper profits to support a splashy introduction and spending is already accelerating.

4. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing

Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports. 

Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.

In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.

5. Orion Holdco/Sub Trade: Holdco’s Price Catching up Was Overworked, Time for Sub to Catch Up

• Orion Holdco/Sub duo is now above +2σ on a 20D MA. They made nearly 2σ jump in just two trading days. Price ratio is currently at a 120D high. Holdco discount to NAV dropped 4%p from 50% to 46% since last time we checked on Jan 24.
• China easing wind began to blow into Korea since late last year. This China expectation had pushed up both Holdco and Sub. Sub had reacted more sensitively to it. Sub has undergone a price correction lately. Holdco has done a lot of catching up during this period. Now, Holdco surpassed Sub in terms of price return. Holdco climbed 32% from its 52W low. Sub went up 30% from its 52W low.
• Holdco is preparing its own business operation, water purifier, in China. This may act as a divergence factor. But at this point, Holdco’s own business in China has no meaningful substance that can shake its NAV radically. They must be reverted back to mean. Their price return got reversed in favor of Holdco. Holdco’s price catching up should be done now. It is time to go long Sub and short Holdco.