Mark Spiegel – Tesla Motors Inc (TSLA) Is A Zero [Slides]

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Stanphyl Capital’s Mark Spiegel presentation on “Tesla Motors Inc (TSLA) Is A Zero.” from Robin Hood Conference

Mark Spiegel’s Stanphyl Capital is having a killer year up close to 35% NET YTD – see below for an excerpt on Tesla Motors Inc (NASDAQ:TSLA) from their November shareholder letter.  But first… although he is known as Elon Musk’s number one enemy, Mr. Spiegel makes most of his money from killer small cap picks. His under the radar small caps which could pop just based on this piece (if we discussed it publicly) were profiled in ValueWalk’s 2nd edition of our quarterly premium newsletter. See some details followed by the Stanphyl section on Tesla Motors.

Although my presentation is called ”Tesla is a Zero,” I actually think that because of the debt, the equity in Tesla Motors is worth less than zero…

But of course, a stock price can’t be a negative number…

…at least not until Nasdaq is run by Mario Draghi or the Bank of Japan.

3 Broad Reasons Why The Equity in Tesla Motors Is Worth “Zero”

  • Current financials are horrible with NO direct long-range EV competition yet MASSIVE competition is coming
  • Tesla has no meaningful proprietary technology- it open-sourced all its patents (as far as I know no one’s using ANY of them) and its hard assets are worth significantly less than its $6 billion of debt (including SolarCity)
  • A ”bet on Elon” is a bet on someone who can’t be trusted- he has a long track record of making hugely misleading statements

I know Tesla longs think it’s ”all about the future” so here’s just a quick look at the current financials:

  • Q3 GAAP loss excluding one-time ZEV credit sales was $117M
  • GAAP loss per car sold or leased excluding ZEV sales was $4710
  • This loss was NOT because Tesla is in ”growth mode”:
    • Porsche (Musk’s “margin hero”) sells 3x as many cars as Tesla and is a SLOW grower and yet…
    • If we adjust Tesla GAAP loss to Porsche’s per-car levels of R&D & capex, Tesla still would’ve lost $1677/car excluding ZEV sales
  • I estimate Tesla’s Q4 free cash flow will be around minus $1.58. This is because:
    • Q3 payables ballooned & have to be normalized
    • $1.1B in capex was deferred to Q4
    • There will be minimal Q4 ZEV credit sales
  • We should also note that all these horrible numbers were generated before Tesla absorbed the boat anchor known as SolarCity, which itself has nearly $2 billion/year of negative free cash flow

But Teslemmings and Teslarians say Tesla is worth its over $30 billion enterprise value because “it’s all about the future!”

Okay, let’s look at that future…

Over the next few years a massive number of long-range electric cars will be on the market, often at prices subsidized by profits from their makers’ conventional vehicles, an option Tesla doesn’t have. So pricing pressure on Tesla will be intense.

Here’s what Tesla faces…

The new Chevy Bolt- available now- has the same interior passenger space as a Tesla Model S, and it’s $30,000 cheaper than the least expensive Tesla and has 20 more miles of range

See the full slides below.

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