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
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.
>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