Tesla Update & News Deluge
TSLA's "earnings" call was last Wednesday. You can review it by clicking here.
Imagine hiring even a high-schooler to represent your company and this was the result?
You'd rightly be appalled.
CEO Musk sounds like a kid that was surprised in class, having to give a talk on a subject for which he hadn't done the required reading. We soon learn why.
"Quite boneheaded." "Super-dumb." - Elon Musk, describing systems he created.
We seldom agree with the man, however we agree wholeheartedly with this very rare bit of plain and factual talk by Musk.
In short some key accounting treatments are highly unusual, arguably suspect if not fraudulent, and Musk's mumbling nonsensical fantasies are the same promises he's made and broken a great many times before.
Projected CapEx is nowhere near a level that can produce growth or new products, and there's still no credible assurance or stated plan to deal with a nearly $1-billion debt conversion coming due towards the end of February.
"The demand for our Model 3 is insanely high, people just can't afford it." - Elon Musk on this evening's Q4 conference call.
Truly he said exactly that, not in a joking manner, in response to a serious question posed by an analyst.
Given the Model 3 is a lemon with an incredibly high rate of failure and wait time for repairs, and related costs for repair and insurance higher than ever heard of in the auto industry at this price point, we doubt self-respecting buyers would take one home for half its retail price.
In any case, as we're unable to grasp such profound economic genius we'll simply stay short the stock and reiterate that if there were no concerns whatsoever about the products, service, accounting, ridiculously low interest rate provisions, ongoing federal investigations, masive amounts of lawsuits, the abilty of the company to stay solvent, etc. etc. and etc. the stock should be trading at a standard multiple and that'd put it at roughly $20 per share - not a typo, $20 - and that's with barely enough, if even enough, cash to float its debt and a maintenance-level CapEx while having nowhere near enough reserves for warranties or lawsuit settlements.
The best part? Right at the end, after most had logged-off the call or fallen asleep, came a surprise announcement that CFO Deepak Ahuja is quitting.
As you may recall, Tesla is a $60 billion company with no CAO because the last one, who replaced the prior CAO that suddenly quit, also quit after only a month - just enough time to see the books and figure out what's really going on.
Ahuja as CFO was signing off on all of the arguably very creative accounting and filings. Out of the blue he's leaving too, capping off a historic year in executive departures at Tesla including many from the Finance Committee.
This probably explains Musk sounding the way he did during the call. The walls are closing in.
These are not signs of a healthy company on the up-and-up, because when those high-level execs flee Tesla they also leave behind hundreds of thousands, sometimes millions or tens of millions, of dollars in stock & options they won't be able to ever collect or exercise. Given Telsa pays exponentially higher than other auto manufacturers, they are not leaving for greener pastures. They are jumping off a sinking ship. They hope to get out without federal indictments... in our opinion.
The new CFO Zach Kirkhorn is of course from the inside as Tesla cannot risk an outsider seeing the books, and he is grossly unqualified.
Marvel at the coincidences:
Zach Kirkhorn, double major at Penn & Harvard, MBA, no direct accounting experience, named CFO of Tesla at age 34.
Andy Fastow, double major at Tufts Northwestern, MBA, no direct accounting experience, named CFO of Enron at age 37.
Both started their careers at the same firm, McKinsey & Co.
Amazing.
The average age of a CFO in the DJIA is 55, with the youngest at 46 years old (Andrew Campion of Nike).
Arguably experience is exactly not what Tesla was looking for. Someone has to be left holding the bag, after all.
Mr. Kirkhorn should be reminded of the old poker adage; if you look around the (boardroom) table and can't spot the mark, the mark is you.
We trust subscribers are familiar with the Enron story. We reiterate our long-standing prediction that Tesla, like Enron, will end up known as one of modern history's great corporate collapses, with feature films and documentaries in its wake; a hallmark of the top of an epic bull market not just in stocks but in too-easy credit and cult-like gullibility in all aspects of society.
See also: The Theranos Deception and more recently Fyre Fraud. If you follow Tesla closely you'll be astounded at the many similarities.
Witness that public sentiment too is turning, as articles such as the one that follows are unprecedented...
The Washington Post: Musk's High-Flying 2018: What 150000 Miles In A Private Jet Reveal About His 'Excruciating' Year
Bull market heros become bear market villains, making Facebook a great short opportunity too in our estimation.
In mid October we posed the question: Will Tesla even exist in six months?
It remains a very reasonable question, as nothing's changed for the better in the few months since. Quite the opposite.
With the departure of CFO Ahuja in mind, we note that at the time we wrote:
"The executive exodus continues, most recently with the Senior Manager of Manufacturing, the Vehicle Engineering Manager, and the Vice President of Manufacturing, among many others.
This pic of a typical Tesla executive surveying the company bears reposting:
Market Watch: Theranos executives, board members and other insiders go on the record for the first time
L.A. Times: Tesla's chief financial officer quits as Musk addresses demand questions for its Model 3
Bloomberg: Tesla’s Incredible Shrinking Growth Machine
L.A. Times: U.S. sales of the Tesla Model 3 plunge 74% in January, according to outside estimate
WIVB.com: Former Tesla workers paint grim picture of Buffalo plant
[Those are essentially credible allegations of massive fraud.]
WIVB.com: State senator calls Tesla complaints 'disturbing'
L.A. Times: Tesla Model 3s hit Europe, but their Autopilot feature is disabled
[A.K.A. "slaughterpilot".]
Car and Driver: The 2019 Kia Niro EV Is What Tesla Model 3 Intenders Should Be Buying
Bloomberg: Tesla Model 3 Owners Vent About Polar Vortex Affecting Cars
Daily Kanban: Funding for Tesla’s China factory not secured
L.A. Times: Tesla Model 3s hit Europe, but their Autopilot feature is disabled
[Musk stated on the Q4 conference call that "the car is fully certified for sale" in Europe. Many wouldn't hesitate to call that a material fraud, in gross violation of his SEC settlement.]
Bloomberg: Ex-Tesla Executive to Be Questioned Over Claim Musk Duped SolarCity Investors
We are double-short Tesla, and believe it to be a generational shorting opportunity above $300.
Imagine hiring even a high-schooler to represent your company and this was the result?
You'd rightly be appalled.
CEO Musk sounds like a kid that was surprised in class, having to give a talk on a subject for which he hadn't done the required reading. We soon learn why.
"Quite boneheaded." "Super-dumb." - Elon Musk, describing systems he created.
We seldom agree with the man, however we agree wholeheartedly with this very rare bit of plain and factual talk by Musk.
In short some key accounting treatments are highly unusual, arguably suspect if not fraudulent, and Musk's mumbling nonsensical fantasies are the same promises he's made and broken a great many times before.
Projected CapEx is nowhere near a level that can produce growth or new products, and there's still no credible assurance or stated plan to deal with a nearly $1-billion debt conversion coming due towards the end of February.
"The demand for our Model 3 is insanely high, people just can't afford it." - Elon Musk on this evening's Q4 conference call.
Truly he said exactly that, not in a joking manner, in response to a serious question posed by an analyst.
Given the Model 3 is a lemon with an incredibly high rate of failure and wait time for repairs, and related costs for repair and insurance higher than ever heard of in the auto industry at this price point, we doubt self-respecting buyers would take one home for half its retail price.
In any case, as we're unable to grasp such profound economic genius we'll simply stay short the stock and reiterate that if there were no concerns whatsoever about the products, service, accounting, ridiculously low interest rate provisions, ongoing federal investigations, masive amounts of lawsuits, the abilty of the company to stay solvent, etc. etc. and etc. the stock should be trading at a standard multiple and that'd put it at roughly $20 per share - not a typo, $20 - and that's with barely enough, if even enough, cash to float its debt and a maintenance-level CapEx while having nowhere near enough reserves for warranties or lawsuit settlements.
The best part? Right at the end, after most had logged-off the call or fallen asleep, came a surprise announcement that CFO Deepak Ahuja is quitting.
As you may recall, Tesla is a $60 billion company with no CAO because the last one, who replaced the prior CAO that suddenly quit, also quit after only a month - just enough time to see the books and figure out what's really going on.
Ahuja as CFO was signing off on all of the arguably very creative accounting and filings. Out of the blue he's leaving too, capping off a historic year in executive departures at Tesla including many from the Finance Committee.
This probably explains Musk sounding the way he did during the call. The walls are closing in.
These are not signs of a healthy company on the up-and-up, because when those high-level execs flee Tesla they also leave behind hundreds of thousands, sometimes millions or tens of millions, of dollars in stock & options they won't be able to ever collect or exercise. Given Telsa pays exponentially higher than other auto manufacturers, they are not leaving for greener pastures. They are jumping off a sinking ship. They hope to get out without federal indictments... in our opinion.
The new CFO Zach Kirkhorn is of course from the inside as Tesla cannot risk an outsider seeing the books, and he is grossly unqualified.
Marvel at the coincidences:
Zach Kirkhorn, double major at Penn & Harvard, MBA, no direct accounting experience, named CFO of Tesla at age 34.
Andy Fastow, double major at Tufts Northwestern, MBA, no direct accounting experience, named CFO of Enron at age 37.
Both started their careers at the same firm, McKinsey & Co.
Amazing.
The average age of a CFO in the DJIA is 55, with the youngest at 46 years old (Andrew Campion of Nike).
Arguably experience is exactly not what Tesla was looking for. Someone has to be left holding the bag, after all.
Mr. Kirkhorn should be reminded of the old poker adage; if you look around the (boardroom) table and can't spot the mark, the mark is you.
We trust subscribers are familiar with the Enron story. We reiterate our long-standing prediction that Tesla, like Enron, will end up known as one of modern history's great corporate collapses, with feature films and documentaries in its wake; a hallmark of the top of an epic bull market not just in stocks but in too-easy credit and cult-like gullibility in all aspects of society.
See also: The Theranos Deception and more recently Fyre Fraud. If you follow Tesla closely you'll be astounded at the many similarities.
Witness that public sentiment too is turning, as articles such as the one that follows are unprecedented...
The Washington Post: Musk's High-Flying 2018: What 150000 Miles In A Private Jet Reveal About His 'Excruciating' Year
Bull market heros become bear market villains, making Facebook a great short opportunity too in our estimation.
In mid October we posed the question: Will Tesla even exist in six months?
It remains a very reasonable question, as nothing's changed for the better in the few months since. Quite the opposite.
With the departure of CFO Ahuja in mind, we note that at the time we wrote:
"The executive exodus continues, most recently with the Senior Manager of Manufacturing, the Vehicle Engineering Manager, and the Vice President of Manufacturing, among many others.
This pic of a typical Tesla executive surveying the company bears reposting:
Market Watch: Theranos executives, board members and other insiders go on the record for the first time
L.A. Times: Tesla's chief financial officer quits as Musk addresses demand questions for its Model 3
Bloomberg: Tesla’s Incredible Shrinking Growth Machine
L.A. Times: U.S. sales of the Tesla Model 3 plunge 74% in January, according to outside estimate
WIVB.com: Former Tesla workers paint grim picture of Buffalo plant
[Those are essentially credible allegations of massive fraud.]
WIVB.com: State senator calls Tesla complaints 'disturbing'
L.A. Times: Tesla Model 3s hit Europe, but their Autopilot feature is disabled
[A.K.A. "slaughterpilot".]
Car and Driver: The 2019 Kia Niro EV Is What Tesla Model 3 Intenders Should Be Buying
Bloomberg: Tesla Model 3 Owners Vent About Polar Vortex Affecting Cars
Daily Kanban: Funding for Tesla’s China factory not secured
L.A. Times: Tesla Model 3s hit Europe, but their Autopilot feature is disabled
[Musk stated on the Q4 conference call that "the car is fully certified for sale" in Europe. Many wouldn't hesitate to call that a material fraud, in gross violation of his SEC settlement.]
Bloomberg: Ex-Tesla Executive to Be Questioned Over Claim Musk Duped SolarCity Investors
We are double-short Tesla, and believe it to be a generational shorting opportunity above $300.
posted by C. Guinness @ 5:03 PM
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