Whitney Tilson’s email to investors sharing a reply to Kuppy’s email from his friend.
Kuppy is partially correct, but not necessarily for the right reasons.
Seth Klarman Tells His Investors: Central Banks Are Treating Investors Like “Foolish Children”
"Surreal doesn't even begin to describe this moment," Seth Klarman noted in his second-quarter letter to the Baupost Group investors. Commenting on the market developments over the past six months, the value investor stated that events, which would typically occur over an extended time frame, had been compressed into just a few months. He noted Read More
The Model Y will look great and be an intelligently designed compact 3-row SUV. The product will not lack for design or attractiveness. That said, it may be hard to convince people to place deposits given the Model 3 deposit fiasco. As we now learned, placing a deposit -- let alone doing so early -- bought the buyer essentially no time-to-market advantage, and one could argue that it was mostly a way to pay early for a pre-production lemon test car, which needed about 15-18 months of additional testing to reach remotely acceptable build quality.
Tesla won't be able to build the Y in *QUANTITY* until late 2020 at best -- and not with *QUALITY* until 2021 at best. They will likely promise something sooner, though. But will the market believe them? That's unclear.
I could see them getting 100,000 deposits -- not 10,000. But it still won't matter. At $2,500 apiece, that's still only $250 million and not nearly enough to pay for even a third of the tooling cost of the Y.
As a bear, I fear more the unknown -- a sneak peek at the pickup truck, or an announcement of a new "angel" investor ("Larry Ellison has decided to put up $2 billion in fresh equity in the form of a private placement"). Unlikely, perhaps -- but the probability cannot be excluded.
The problem with the company right now is simply the combination of insufficient sales and margins. It's really not all that complicated. The Model 3 sales numbers in Europe are not enough to compensate for weakness in S and X, or in North America -- especially in relation to street estimates, as well as what it will take to keep the company from losing money every quarter. In that context, the Model Y is far away and will not help the company's near-term solvency issues.
It's a tough call whether the entry point for a major short is before tonight's Y reveal, or some time shortly after. But I don't think it's that far after the event. From a short perspective, tomorrow or very shortly thereafter, may be the ideal entry point if today isn't.
In the meantime, Audi eTron deliveries finally begun in Europe less than 100 hours ago, and the car is already outselling Tesla Model S in some countries, for the month of March. Give it another week, and it may outsell the Model X as well. Of course, the Jaguar i-Pace already put a significant dent into Model S and X sales starting 6-7 months ago.