Tesla Inc “without any doubt, is on the verge of bankruptcy”

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Tesla Inc “without any doubt, is on the verge of bankruptcy”
Blomst / Pixabay

Just a few days ago, shareholders of Tesla Inc. (NASDAQ:TSLA) approved an almost comical pay package for their cult leader CEO Elon Musk that could potentially put $50 BILLION in his pocket over the next decade.

Let’s put this figure in perspective: at $5 billion per year, Musk would make more than every single CEO in the S&P 500. COMBINED

In other words, if you add up the salaries of all the CEOs of the 500 largest companies in America, it would still be less than the $5 billion per year that Mr. Musk stands to earn.

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That’s pretty astounding given that Tesla’s own 2017 4th quarter financial report (page 24) states that Elon “does not devote his full time and attention to Tesla”.

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Or more importantly, that under Musk’s leadership, Tesla’s chronic financial incontinence has racked up more than $4.97 billion in operating losses for its shareholders.

Or that the company has been under SEC investigation (without bothering to disclose this fact to shareholders).

Yet they saw fit to reward him with the largest CEO pay package in the history of the world.

This is precisely the type of behavior that is only seen during periods of extreme irrationality when financial markets are at their peak… and poised for a serious correction.

I’ll close this brief letter today quoting John Thompson, Chicago-based value investor and Chief Investment Officer of Vilas Capital Management.

Thompson is one of the few hedge fund managers who has consistently outperformed the market, and his fund is betting big against Tesla. What follows are some passages about Tesla from Thompson’s recent investor updates:

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. . .

Tesla, without any doubt, is on the verge of bankruptcy.

The company cannot survive the next twelve months without access to capital from Wall Street Banks or private investors.

We estimate that Tesla will need roughly $8 billion in the next 18 months to fund operating losses, capital expenditures, debts coming due, and working capital needs.

However, it appears that due to past SEC investigations and current investigations (which terrifyingly have not been disclosed by the company), it will likely be difficult for Tesla to access public markets.

According to a recent analyst report, there have been 85 SEC requests for additional information and disclosures in the last 5 years.

This compares to Ford Motor Company’s total of zero over the same time frame. This means that Tesla is pushing many, many boundaries.

When a company is under formal investigation, it is difficult, if not impossible, to raise capital from public markets as these investigations must be made public, which generally craters the equity and debt values.

Therefore, Tesla investors better hope there are a number of Greater Fools in China or elsewhere to keep the company solvent.

At some point, the music stops and there aren’t any open chairs.

No matter how good a social investment makes you feel as it is going up, extreme anger will result if most or all of your money is permanently lost, especially when it is due to false and misleading statements by senior company officers.

This is when the [Department of Justice] steps in and escorts untruthful managements to their new living quarters.

. . . 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.

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3 COMMENTS

  1. Tesla also don’t have any of the economies of scale of other auto makers & I just don’t see how they can compete when other established car makers roll out electric cars.

    Tesla currently compete by selling cars at a huge loss. That is not sustainable.

  2. T is for tulip. I’ve always found it ironic that with all the “irrational exuberance” surrounding Tesla motors; that the T for tulip is their logo. That’s a vague reference equating the Tesla Motors bubble to being dangerously close to the famous tulip mania stock bubble collapse in 1637.

    Nichola Tesla is probably rolling in his grave that such greed and cronyism is being done in his name. Tesla motors has done some good manufacturing and design innovation; but the marketing and hype is extremely unethical. Like falsely claiming the Tesla is zero missions, falsely claiming that Tesla batteries are nonflammable, nonexplosive, non-toxic, landfill safe, environmentally friendly and contain no heavy metals.

    The average IQ, mental health, and ethics are very poor amongst Tesla Motors, Tesla owners, Tesla drivers, Tesla fan boys, etc. It is an evil cult. They tend to harass, slander, threaten, retaliate, hack, block, ban, and/or censor those that debunk their lies. Sticking their feet and hands out the wheel when they are driving. Stripping naked and standing on the sunroof opening in the middle of a highway. Arguing with police that it’s not drunk driving when the car is on autopilot. Claiming their cars are extremely safe, strong and crash resistant; yet trying to sue a pedestrian that did major damage to a Tesla for walking into it. Etc. Many of the Tesla fan boys have vested interest in deceiving the public to inflate the stock prices. Many of them are Elon Musk suck ups and some might even be on Putin’s payroll as bots.

    I don’t have a horse in the race, so financially it’s moot to me whether Tesla sinks or floats. If they continue their crooked practices, Tesla should sink. If they repent, I hope they float.

    Much of their technical innovation is good, but it shouldn’t be at the cost of defrauding the public and harming the environment.

  3. This is very American public obsession. American will put all of its money to the rich no matter however irrational or foolish it maybe. Take a look at the debt the American public inherited when all the money transfer to the rich bank account.

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