Tesla Motors (TSLA) Financing Model Mirrors Scams – Devonshire

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Tesla Motors (TSLA) Financing Model Mirrors Scams – Devonshire

Devonshire Research is out with a new short on Tesla Motors. (TSLA) – this is the group’s second report on Tesla – Tesla did not immediately respond to a request for comment

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As of the publication date of this report, the Devonshire Research Group LLC has a net short position in the stock, put options, bonds, and credit swaps of Tesla Motors, Inc. (“TSLA” or “Tesla”) and stands to realize gains in the event that the price of TSLA’s securities declines over the long run, or if investment sentiment improves the appeal of an expected decline in any of its securities.

TSLA – Executive Summary

How closely does TSLA’s financing model mirror the features of common Ponzi, Pyramid, and Matrix schemes?

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  • Numerous cautionary examples share features with TSLA, including hype driven by “visionary leaders.” TSLA has accepted capital from unsophisticated investors with bold claims on return and/or product value
  • If TSLA fails to deliver on these claims it has the potential to enter a death spiral
  • Most common death spirals do not require malicious intent, but rather excessive (even delusional) ambition.

The profitability of the Model 3 depends on TSLA’s ability to squeeze its supply chain; this is a tall order. Sophisticated suppliers (most notably Panasonic) will fight for their share of the profit. Panasonic’s rechargeable battery division is constrained in terms of investment capacity and profit demands

  • Current suppliers of numerous strategic, high-technology components have little IP and export to the US
  • Many Chinese suppliers are vulnerable to patent infringement accusations and could face ITC injunctions. TSLA’s use of tax credits disproportionately benefits the wealthy at the expense of the average taxpayer
  • This inequality is a feature of the luxury-first market penetration strategy
  • The election year introduces significant risk for TSLA’s continued reliance on taxpayer subsidies

Tesla has engaged in aggressive accounting that calls to mind the experiences of Enron and WorldCom; its future is highly uncertain.

Tesla TSLA 2

Takeaway:

Tesla is fragile as a publicly traded company expected to deliver a GAAP cash profit. Tesla is operating many financing business models that other entrepreneurs would be prohibited from operating, as they might be labeled Ponzi, Pyramid, or Matrix schemes.

Tesla is attempting to operate many complex, interwoven, novel financing schemes under one roof, and either will be a successful version of Enron, or will fall victim to similar accounting challenges as it attempts to reconcile its operational complexity to its cash position.

If Tesla is indeed operating a FEPF, it is highly fragmented and overly diversified in its tactics, it should dedicate more of its time to securing loss-tolerant investors.

If Tesla does not successfully secure a larger loss-tolerant investor, the US government should seize the company and convert it into a regulated social good and public service.

Tesla should not be managed, valued, or reported by its ability to generate profit, and consequently it should attempt to seek tax shelter as a non-profit or religious organization as quickly as possible.

If Tesla is indeed operating for profit, it should announce a strategic roadmap to “investors” for earning a profit in the coming decade.

Full report below in PDF

Devonshire Research Group – TSLA – Public Release – Part II

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5 COMMENTS

  1. These jealous shorts who MISSED the move up several times over the last three or four years haven’t seen the light yet, they never seem to learn, they keep bad mouthing Tesla the company, and by bad mouthing in these blogs, typing half truths, or just make up stuff, these people are trying to bring the stock price down so they can buy it on the cheap. How cheap is that? I call it a cheap shot.

  2. Wow! Don’t forget what Value Walk “staff” (I wouldn’t want my name on this either), has written here. The only reason they are able to get away with this trash is because no one holds them accountable. Legally they can write what they want but let your wallets show them what happens when they try to stop innovation in order to keep big oil and the like in the money.

  3. Accusing Tesla Motors and Elon Musk of such things as you did could be construed as libel. The fact that they aren’t making money is irrelevant. They just got one and a half billion in cash to make the Model III a reality. I’m looking forward to part two of their reveal. Tesla has problems yes, but they also have cash, talent, opportunity, and the wherewithal to get the job done. I support them 100%.

    “Current suppliers of numerous strategic, high-technology components have little IP and export to the US”
    Are you assuming that this will never change?

    “Many Chinese suppliers are vulnerable to patent infringement accusations and could face ITC injunctions.”
    So what?

    “TSLA’s use of tax credits disproportionately benefits the wealthy at the expense of the average taxpayer. This inequality is a feature of the luxury-first market penetration strategy.”
    If you make enough money to afford a Tesla Model S, chances are that you’re dumping far more money into the system than the majority of low-life’s who complain on the internet about inequality. If you want money, go get it! Get some student loans, go to school, get good grades, and launch into a lucrative career. This can work even if you’re older. You’re not going to get rich on welfare unless you’re doing something illegal.

    “The election year introduces significant risk for TSLA’s continued reliance on taxpayer subsidies.”
    Well duh.

    You say that Tesla needs to focus on getting investors that are “loss-tolerant.” They already have tons of them. Here is where Tesla stands. They have a ton of people backing them because they have a vision to change the future and were the first and only ones for over a decade to envision and actually build GOOD EVs, beautiful, long-range, high-performance EVs at a time when the world was convinced that all EVs were slow, ugly, funky, impractical, overpriced ecoboxes that only greenies in California actually wanted. Automakers have since tried to perpetuate the Nissan Leaf image by building the likes of the Spark EV, Fit EV, Fiat 500 EV, Kia Soul EV, VW E-Golf, Mercedes B-class EV, and butt-ugly BMW i3.

    Tesla alone has decided to make EVs that people really, really want. That’s why the Model III receive ~375,000 orders in less than a month, representing nearly four years of BMW’s 3-series demand. Now, BMW, Audi, Jaguar, and Mercedes, in addition to Chevy, Nissan, Hyundai, Honda, and even Ford wants to get in on the long-range EV action. If it weren’t for Tesla proving the massive demand for such vehicles, none of this would have ever happened. I’m supporting Texla’s vision of an electric future and so are millions of other people, plenty of them which have lots of money.

  4. You didn’t have to say your a short, your verbiage indicates it without being spoken. Good luck on your short position. I’m looking forward to you getting burned bad. Ponzi scheme, give me a break

Comments are closed.