Business

JOE, Tesla, AIM, Tidewater And More

Thought I’d answer some questions I’ve received lately. Sorry for the Tesla overload. After this, I’m back to my normal routine of small cap and macro (ie. less Tesla)…

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Q2 hedge fund letters, conference, scoops etc

Thesis On Tesla
Blomst / Pixabay

https://www.zerohedge.com/news/2018-07-11/elon-musk-launches-bizarre-public-spat-thai-hero-rescue-chief

Musk seems really upset he couldn’t use his little Thai submarines. Why can’t he just shut up and be happy the kids are saved? Besides, doesn’t he have a failing giga-tent to focus on?

Musk is the greatest stock promoter since Ivar Kreuger, but lately he cannot seem to stop talking about himself and increasingly forgets who he lied to about what. His twitter feed has become just a rambled collection of cocaine filled nonsense. It’s like watching P. T. Barnum get Alzheimer’s.


How do you buy those Tidewater Warrants? Seems so illiquid.

I’ve actually gotten quite a few of them this year. Some days I get no fills, other days, just a few hundred. Patience is needed when something is illiquid.


Do you believe the increasingly bullish prospects for offshore oil that you describe in your latest post should also be bullish for shuttle tanker operators like KNOP and TOO?

Higher oil prices are bullish for everyone offshore. KNOP and TOO have projects that are already contracted with longer-term contracts, hence an increase in the price of oil will not have much of an impact short-term in these companies, but higher oil will guarantee that projects continue to operate and that new demand comes along in the future–which will help contract renewal rates. I wanted something with a bit more torque to an increase in oil prices as part of my basket. This is the reason that I recently added ESV and NE.


Kuppy, Your site is hilarious. I cannot believe that Hitler already did the same fraud as Elon Musk.

A lot of bad people have built Ponzi Schemes in the past. Remember, all forms of fraud are a sub-form of a Ponzi Scheme. More money goes in than comes out…


Is this the Last Supper? or a typical TSLA board meeting?

Looks like the org chart to me. Haha Everyone else has fled except Deepak.


What would change your thesis on Tesla and make you bullish? 

I don’t think there’s anything that can change my thesis and make me bullish. The government set up a program to incentivize US auto makers to produce EVs at a loss or have to purchase EV credits. Therefore the US auto-makers are going to produce EVs at a loss as customers cannot afford them at a price point that is profitable with current technology.

Additionally, there is a tax benefit for the first 200,000 vehicles from each auto-maker. Tesla will exhaust this incentive in Q1/2019. Therefore, Tesla will be producing un-profitable cars at a $7,500 sales price disadvantage vs. other US auto-makers also producing money losing EV cars. However, the other US auto-makers have profitable ICE divisions and are mostly just producing EVs as it’s cheaper than buying EV credits–hence they will be flooding the market with cars that are priced to sell with an additional $7,500 price advantage. Tesla couldn’t make money when they had the lead. Now they are structurally at a disadvantage and that disadvantage will grow based on serious strategic mistakes that Elon Musk made. It’s a 100% bankruptcy. It just is a question of when the funding cuts off.

Everything else going on at Tesla is just noise compared with the above. However, this noise has the potential to kill a lot of innocent people.


https://www.washingtonpost.com/technology/2018/07/11/former-tesla-employee-blasted-by-elon-musk-takes-battle-sec-filing-whistleblower-complaint/?noredirect=on&utm_term=.660cadbb2407

Big guns coming

Yes, and on contingency. Guys who have a history of winning huge whistle-blower awards don’t take on a case like this, unless they think they’ll win.


Kuppy

Have you spoken with Tesla bulls? What are they thinking here? Everything seems negative. 

I’ve tried to find bulls. There really aren’t any who can have a real conversation beyond “Elon = God” or “Have you driven the cars?” This is a cult and not a business you can discuss and analyze.

If you are a serious long investor who wants to discuss Tesla using facts and numbers and thinks you have a functioning financial model that shows how the company is a bargain today, based on some sort of future production, please email me at kuppy@AdventuresInCapitalism.com as I’d like to test my thesis.


When is part II of JOE coming?

Quite honestly, I’ve been busier with other ideas. I think JOE is amazingly cheap and starting to inflect higher after decades of doing nothing, but I don’t feel like it’s about to run away from me and I’ve focused on writing about other ideas lately. I also worry about the overall stock market and think there may be a better entry price than today. Don’t worry, I haven’t forgotten about it.


Have you been following the fusterkluck that is the Tesla service centers? It’s a debacle and totally overwhelmed.

Yeah, Teslas are always breaking b/c they’re built without standardization or common sense. Just wait til the tent cars hit the streets next week. You would have to be insane to buy one of these things.


What do you think ultimately kills Tesla. Valuation and common sense don’t matter. 

All Ponzi schemes die the same way; more money comes out than goes in. This one is already bleeding badly through sheet incompetence. Watching Musk ramble around the globe to try and raise capital is hilarious and depressing. Shows how much of the whole company is a ‘seat of the pants’ experience. When he cannot raise money or the money comes on bad terms, that’s when it dies. No sooner or later. I really don’t expect the govt to put a stop to it, even if someone can prove conclusively that he’s intentionally used defective parts for some publicity stunt.


You’re being too hard on Musk. He is sleeping on the factory floor and working his ass off for humanity.

Look, his own poor time management is his problem. Real CEOs help devise multi-year procurement and production plans, then manage those plans with a skilled team of executives. When your senior management flees and you change your mind each week, you end up on the factory floor with a rivet gun at 3am. This isn’t something to be proud of. Especially when you spend half your time tweeting at enemies.


Any updates on AIM. You’ve been quiet on that for a while

Shareholders succeeded in getting one of the worst CEOs in financial history to leave the company. There are now 3 adults on the board out of 8. I have not had a chance to meet with the new CEO, but a few friends have spoken with him on the phone and come away impressed. I suspect we’ll know a lot more about the future business strategy after earnings are announced on August 3.

There are still 3 trading days left this week. What other stunts will Musk pull?

I don’t know, but it guarantees to be entertaining…