Tesla Inc (TSLA) Is On The Verge Of Bankruptcy – Vilas

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Tesla Inc (TSLA) Is On The Verge Of Bankruptcy – Vilas
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Vilas Capital, the hedge fund up 65% in 2017 run by a shrewd manager with an engineering background has a quick FYI on Tesla. In Vilas’ email to investors has an update on Tesla Inc (NASDAQ:TSLA) short thesis – see the full content below

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Also see 2017 letters to investors

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I think Tesla is going to crash in the next 3-6 months, partially due to their incompetence in making and delivering the Model 3, partially due to falling demand for the Model S and X, partially due to the extreme valuation, partially due to their horrendous finances that will imminently require a huge capital raise, partially due to a likely downgrade of their credit rating by Moody's from B- to CCC (default likely) which should scare their parts suppliers into requiring cash on delivery (a death knell), partially due to the market's recent falling appetite for risk, and partially due to our suspicions of fraudulent accounting activities, evidenced by 85 SEC letters/investigations and two top finance people leaving in the last month.  We are doubtful that they can raise a meaningful sum in the face of these material issues.  If the fall happened quickly, it could add substantially to the Fund (+30 to +50%), in part due to our purchase of put options.  Tesla, without any doubt, is on the verge of bankruptcy.

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>As a reality check, Tesla is worth twice as much as Ford* yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss.  Further, Ford has $12 billion in cash held for "a rainy day" while Tesla will likely run out of money in the next 3 months.  I have never seen anything so absurd in my career.

For this reason, and the fact that our main holdings are at give away prices after the market fall, I am personally adding $500,000 to the Fund April 1.  For those who have the ability to and choose to add at this time, I believe high returns will result over the next few years.

*Our estimate of the Enterprise Value of Ford is $30 billion while Tesla is estimated to be $60 billion

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17 COMMENTS

  1. We assume, You didn’t realize we were talking about enterprise value all the time, not market cap!

    Another thing, We are not tesla bears, We just wanted to point out that author pulled his numbers from his a$$.

  2. This article is referring to the Market Cap which has gone up for Ford and down for Tesla since the article was written.

    But congratulations, you are the only Tesla bull that used numbers. Unsurprisingly, you just split hairs and got the numbers wrong as well.

    This is one of the touchstones between bulls and bears. Bulls talk about training programs and how good Tesla’s cars are. Bears talk about how bad Tesla’s financials are and how much money they need to keep the lights on.

  3. No. Your logic doesn’t make sense to me. Long-term Tesla shareholders know what they are doing. They know what happened in the past 8 years, and know what will likely to happen in the next 15 years. Those who have no clue have been on the wrong side, and continue to miss the boat.

    If Tesla’s sales go up many fold in the next 10 years, that means we achieved our mission. You can check Tesla’s mission statement. Meanwhile, if Tesla’s market cap goes up many fold, our investment will do extremely well. I would be pretty happy if both milestones are achieved.

  4. >As a reality check, Tesla is worth twice as much as Ford* yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss. Further, Ford has $12 billion in cash held for “a rainy day” while Tesla will likely run out of money in the next 3 months. I have never seen anything so absurd in my career.
    *Our estimate of the Enterprise Value of Ford is $30 billion while Tesla is estimated to be $60 billion”

    As a reality check, Yahoo finance gives Ford $170 Billion enterprise value. FCAU is $39Billion.

  5. So because Tesla shareholders are stupid enough to endorse a pay package that rewards share performance metrics and dilutes their value, rather than profitability or production, this implies that others are stupid, and Tesla will prevail? Yeah, right.

  6. Tesla doesnt have the capitol to be investing massively in the future. What companies stock are you watching? And without capitol that it doesnt have, it cant get to anything more than about 350k cars a year. So basically, since by your own numbers Tesla needs 500k to be profitable, Tesla will go bankrupt.

  7. Tesla is positioned to lead and dominate. Look at the latest training program. The only thing shorts can hold onto is that Tesla has large debt and still losing money. They will pay a lot to learn a valuable lesson: Business is not math. I will happily add more shares whatever price this stock will be trading in the next 3 or 6 months. I don’t care if it will be at $600 or $60. I just add shares. Shorts are doomed.

  8. Tesla is still in the process of building itself up for future sustainability… this author is fixated on the here and now, which is a mistake. Electric cars are the future…. once battery technology improves to the point where operational ranges are on-par with gas cars, and mass production brings costs down, electric cars will take off into the mainstream, and Tesla will be well-positioned.

  9. This Vilas fund probably is experiencing huge outflow, that’s why they write this kind of weird letter hoping their investors will add more money, and stop pulling money out.

    Tesla will bankrupt? This guy has no clue what he is talking about. Tesla’s shareholders have several trillion dollars asset. They support Tesla without hesitation. Recent 73% vote “For” in light of the “No” recommendation from two shareholder services shows the determination.

    Put that aside, Elon personally can get $20B to support the company. This Vilas fund will likely to bankrupt because it’s so stupid.

    I suspect the rise of Tesla will destroy lots of leveraged bears. Most likely this Vilas fund is one of them. Is it run by Thompson? Then 90% chance it will happen.

  10. Market capitalisation based on optimism and cult following? Like amazon. com?

    Didn’t Musk just get himself a multi billion dollar compensation package, too?

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