Tesla’s Accounting

Tesla’s Accounting
Blomst / Pixabay

During his recent interview on The Acquirers Podcast with Tobias, Jamie Powell, reporter at FT Alphaville discussed Tesla Inc (NASDAQ:TSLA)’s Accounting. Here’s an excerpt from the interview:

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q2 2021 hedge fund letters, conferences and more

Tesla's Accounting

Jamie: I think that was a good one. I’ve also been following Tesla for a long time but not so much on the new side of it although the new side of it is super fun but more on the accounts, like what they do in their accounts, how come this business– last quarter, how did Tesla’s margins go up 300 basis points while shipping costs and raw material costs were going up exponentially?

Mohnish Pabrai On Uber Cannibals And Henry Singleton

At the end of October, the value investor Mohnish Pabrai gave a presentation and took part in a Q&A session at Boston College and Harvard Business School on the Uber Cannibal Investor Framework, which he has developed over the past decade. Uber Cannibals are the businesses “eating themselves by buying back their stock,” the value Read More

Tobias: How did that happen?

Jamie: I don’t know, but it’s worth asking the question. The good thing is an Alphaville story might just be like, “How did this happen?” That is just all. You ask anyone, any auto analyst, auto margins shouldn’t move that much quarter on quarter. For Tesla, they move a lot. Yeah, you can ask the question as well, which is one of the good things about writing a blog versus– That’s not a news story. In a news story, there’s Tesla reported better gross margins than expected, which helped them beat their earnings per share. But Alphaville story will be like, “Well, how did that happen?” I’m still skeptical of the business, but obviously, it’s been completely ruinous for those who have had money on that direction. But it’s a weird one though.

I always think that story is still ongoing, and it’s not finished. It’s endlessly fascinating. We know now in 2017 that the company was two weeks away from going bankrupt. No one was actually really wrong about that. It’s just that there was no [unintelligible [00:46:36] about that at the time, but Elon was going around having dinner saying that. It’s a fascinating one, and obviously, you get a lot of fan mail about that company, which is always quite fun as well.

Tobias: It’s a very polarizing company.

Jamie: Yeah.

Tobias: With people, just friends and family who have put a lot of money into it, and I understand their perspective on it but saving the world, it’s an EV all of this and then, Elon’s a visionary and all of us sort of things, I just have difficulty reconciling the account from quarter to quarter that’s sort of my stumbling block. But I have gone back to collapse from the 80s and looked at journalists interviewing the people who were perpetrating the fraud at the time and listened to some of the questions that they have asked. It’s interesting that they might ask 10 questions, and 6 or 7 might be just, what’s your relationship to Pinochet in Chile? Yeah, he’s a bad guy, and that’s a bad thing happening.

But that’s not what’s going to ultimately destroy this company. It’s the payments between the related party transactions and debt that’s going to sink this company and the fact that it’s a fraud that’s being perpetrated. When you’re on these stories where the powerful people who are bad dudes and they’re interested in protecting their fraud, they want that to continue going on, they don’t want to get caught.

You can find out more about Tobias’ podcast here – The Acquirers Podcast. You can also listen to the podcast on your favorite podcast platforms here:

For all the latest news and podcasts, join our free newsletter here.

FREE Stock Screener

Article by The Acquirer's Multiple

The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of acquirersmultiple.com. The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at acquirersmultiple.com, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”
Previous article Dollar General (DG) Dividend Stock Analysis
Next article Novavax Is Not a Sure Thing, But It’s Getting Closer

No posts to display