Mark Spiegel’s Stanphyl Capital is famous for its questioning of Tesla but its biggest alpha comes from his picks in small caps, where some of his picks are up over 200% in less than yone year– 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. Below is an excerpt on Tesla stock. see below for an excerpt on Tesla Inc (TSLA) from their September 2017 letter. But first… although he is known as Elon Musk’s number one enemy,
Also see: Tesla Tax Incentives: When Will The Federal Credit Start To Wind Down?
[klarman]
As noted in previous letters, this year’s terrible performance has been primarily due to our short position in Tesla, whereby despite having an overwhelming number of facts on our side (detailed, as usual, below) the stock is up nearly 60% this year. Although as a value investor it’s been tough to find new companies cheap enough to buy in this free-money-driven “everything bubble,” we do have a number of positions (detailed below) that I think will work out quite profitably. So let’s get to the specifics…
As noted above, we remain short shares of Tesla, Inc. (TSLA), which I consider to be the biggest single stock bubble in this whole bubble market—a company so landmine-filled that I think it can implode at any moment regardless of what the broad market does. To reiterate the three core points of our Tesla short position:
1) Tesla has no “moat” of any kind; i.e., nothing meaningfully or sustainably proprietary.
2) Tesla loses a huge (and increasing) amount of money despite relatively light competition but will soon be confronted with massive competition is every aspect of its business.
3) Elon Musk is extremely untrustworthy.
The big Tesla-related news in September was the giant Frankfurt auto show (lot of links below), in which pretty much every major manufacturer on earth announced plans to electrify its model line, with a massive number of new EVs rolling out starting next year and continuing straight through the 2020s. To put this in perspective, Tesla Model S&X sales have shown minimal growth for four straight quarters despite having just one electric competitor with a range of over 200 miles (the Chevrolet Bolt, which often matches Model S sales where it’s available), yet over the next five years Tesla will have approximately one hundred 200+-mile electric competitors, and over 200 by 2025. (Again, please see the extensive links below.) And really, why would anyone buy a Model S when this car is available in just 24 months?
Meanwhile, the Model 3 rollout appears to be problematic, with production slower than Musk promised (nothing new there!) and multiple features unfinished. Regardless of the rollout speed however, the Model 3 will be a huge sales disappointment when reservation holders realize that fewer than 100,000 of them will qualify for the $7500 tax credit and almost nothing can be done in the car without a multi-step process on the touchscreen—not even changing the windshield-wiper speed, adjusting the air vents or opening the glovebox. Thus, operating a Tesla Model 3 may potentially be as dangerous as texting while driving! And of course Tesla will make little (if any) money on the car, as it currently loses a fortune on models starting at twice the price. But hey, at least Musk is laser-focused on getting things corrected!
Also in September, the National Transportation Safety Board partially faulted Tesla for last year’s fatal Autopilot crash, as the system not only allowed the driver to use it in a manner for which it was incapable but Tesla—with “a wink and a nod”—subtly promoted such use. Ironically, Tesla escaped even greater blame because the system it called “Autopilot” designed “as functioned” in that it was incapable of seeing—and thus stopping for—a giant truck turning broadside directly in front of it. In August the Wall Street Journal published a terrific exposé of Tesla’s dangerous and deceptive deployment of Autopilot, and this Seeking Alpha article offers additional color on that, as well as on Musk’s blatant and off-repeated lie that Tesla doesn’t discount its cars. And here’s Autopilot in its latest incarnation… watch out for that school bus!
Finally in September, Tesla’s SolarCity paid a $29.5 million settlement to the government to settle fraud charges. Ever hear of “the cockroach theory” of investing? There’s rarely just one!
In August Tesla released a disastrous Q2 2017 earnings report with record cash burn and—excluding the one-time injection of Zero Emission Vehicle credit revenue—a record loss. You can read this great summary of the quarter from Zero Hedge supplemented by this one from Seeking Alpha as well as this one showing what a disaster the battery storage division remains. Due to massive discounting, unit deliveries for the current (third) quarter (to be released early October) could be somewhat better than the 25,000-unit guidance—perhaps around 28,000. However, due to the aforesaid discounting I- as does this Seeking Alpha author– expect record losses when Tesla reports its financial results.
So here is Tesla’s competition in cars (note: these links are continually updated)…
CHEVROLET BOLT EV: THE 2017 MOTOR TREND CAR OF THE YEAR
GM CEO: Chevrolet Bolt Is Our Platform For A Huge Range Of Vehicles
2018 Nissan Leaf debuts: 150 miles for $30,875, 200-plus miles in 2019
Nissan set to reveal electric SUV to join Leaf
2018 Jaguar Electric I-Pace has over 25,000 confirmed orders
Audi Launching Three Pure Electric Cars Beginning 2018
Audi will build EVs in factories worldwide, CEO says
Honda to launch two new electric cars in 2018
2018 Hyundai Kona Electric SUV Will Have 220 Mile Range
Hyundai plans long-range premium electric car in strategic shift
2019 Porsche Mission E Priced Around $85,000; 80-percent Charge in 15 Minutes
Mercedes Announces First EQ Production for 2019
Mercedes Investing $1 Billion in U.S. EV Production
Mercedes (Daimler) Investing $11 Billion In EVs
Mercedes will electrify its entire lineup by 2022
Daimler Rolls Out Electric Truck
Electric Land Rover “Road Rover” to launch in 2019
All new Jaguar and Land Rover vehicles will be electrified from 2020
Volvo’s Polestar brand to build its own electric sports cars
Toyota, Mazda, Denso create company to roll out electric cars beginning 2019
Infiniti Performance EV On Sale In 2019
PSA will launch full-electric Peugeot 208 and DS 3 Crossback in 2019
Seat to launch first electric car in 2019
Volkswagen ID electric car to launch in 2020
VW And Navistar Team Up For Medium-Duty Electric Truck – Launches 2019
50 100% Electric Car Models By 2025 From Volkswagen Group
Skoda Vision E revealed for 2020 production
MG E-Motion confirms new EV sports car on the way by 2020
Dyson looks to launch first electric car by 2020
BMW previews 2021 electric i5 production model
BMW to have 12 electric models by 2025
2022 Toyota electric car to use solid-state batteries
Nissan-Renault-Mitsubishi to have 12 pure electric models by 2022
Honda will offer full-EV or hybrid tech on every European model by 2025
Ford to launch fully electric SUV with range of at least 300 miles & two electrified police vehicles
Ford mulls building electric van in Germany
Electric Kia Stinger GT to rival Tesla Model 3
Bentley plan for electric and hybrid car roll-out is well advanced
All electric Lucid Air to Start At $52,000 After Tax Credit
Maserati executive confirms electric Alfieri
Subaru Considers Electric Versions of Its Cars to Leverage Brand
Borgward BXi7 Electric SUV Flies Under The Radar
Detroit Electric promises 3 cars in 3 years
And in China…
BYD Plans to Expand Daimler Partnership With New EVs for China
Daimler to produce electric cars for EQ subbrand in China
Daimler, BAIC agree to make electric cars in China
Volkswagen To Launch 8 New Energy Vehicles In China
Volkswagen Eyes Third China Joint Venture in Continued Push Into Electric Vehicles
GM plans to launch 10 new energy models in China by 2020
Audi and FAW sign China electric car cooperation deal
Ford to Make Electric Cars in China Amid Green Drive
Ford, China’s Zotye Auto plan JV to build electric vehicles
China’s BYD has overtaken Tesla in the battery and electric car business
SAIC to spend $2.2 billion on EVs, connectivity, aftersales services
Toyota may mass produce electric cars in China in 2019
Renault, Nissan, Dongfeng Motor partner to develop electric cars in China
Renault-Nissan Alliance To Electrify China’s Trucks And Vans
Volvo’s first all electric car will be made in China
Chery Breaks Ground on $240M EV Factory in China
Chery’s second EV plant open in Dezhou
All The Specs Of The NextEV NIO ES8 Electric SUV
New Chinese Car Brand: WM Motors To Bring EVs To The Masses
GAC Begins Construction of $6.5 Billion Industrial Park to Boost EV Business
China e-car venture Future Mobility names brand Byton, eyes U.S., Europe
Honda to debut electric vehicle in China next year
The Singulato iS6 From China Is Aimed At The Tesla Model 3
Quianu Motor aims to grab share of US electric vehicle market
NEVS receives approval for electric car factory with capacity of 200,000 units per year
Wanxiang Gets China Electric Vehicle Permit to Make Karma Cars
Thunder Power electric cars at the 2017 Frankfurt motor show
Here’s Tesla’s competition in autonomous driving…
On autopilot into the future: the Audi vision of autonomous driving
Updated 2017 Mercedes-Benz S-Class – first ride with autonomous technology
Cadillac Super Cruise™ Sets the Standard for Hands-Free Highway Driving
GM might beat its competitors to driverless car production
GM’s Cruise Automation does a 90-minute urban drive with no intervention
Nvidia and Mercedes-Benz to bring an AI car to market within a year
NVIDIA and Toyota Collaborate to Accelerate Market Introduction of Autonomous Cars
Audi and NVIDIA team up to bring fully automated driving accelerated with artificial intelligence
Volvo and Autoliv team up with Nvidia for self-driving cars
NVIDIA Partners with Bosch for System Based on Next-Generation DRIVE PX Xavier Platform
Bosch and Daimler join forces to market fully automated, driverless taxis by 2020
Volkswagen and Mobileye sign agreement to develop autonomous driving
Toyota, Intel and others form big data group for autonomous tech
Autonomous Nissan Leaf Video
Nissan and Mobileye to generate, share, and utilize vision data for crowdsourced mapping
Subaru, Nissan hit highway with affordable self-driving
BMW, Intel, Mobileye & Delphi Developing Autonomous Driving For Multiple OEMs
Intel collaborates with Waymo on self-driving compute design
Fiat Chrysler to Join BMW, Intel and Mobileye in Developing Autonomous Driving Platform
Continental Joins Autonomous Driving Platform from BMW, Intel & Mobileye as System Integrator
Continental Sees Huge Growth in Automated Driving, Unveils Mobility Tech
Ford expands fleet of self-driving test cars
Hyundai Presents Autonomous IONIQ Electric Prototype at 2017 CES
Google Plots to Conquer Self-Driving Cars
Lyft and Waymo Reach Deal to Collaborate on Self-Driving Cars
Lyft teams up with NuTonomy to put ‘thousands’ of self-driving cars on the road
Magna’s new MAX4 self-driving platform offers autonomy up to Level 4
Bosch Creates a Map That Uses Radar Signals for Automated Driving
Honda Targeting Level 3 Automated Driving By 2020, Level 4 by 2025
Groupe PSA’s safe and intuitive autonomous car tested by the general public
Baidu Steers Into Self-Driving Car Venture With Partner
JD.com Delivers on Self-Driving Electric Trucks
Lucid Chooses Mobileye as Partner for Autonomous Vehicle Technology
Cook Says Apple Is Focusing on Making an Autonomous Car System
Samsung enters autonomous driving race with new business, funding
BlackBerry to open autonomous vehicle hub
Mitsubishi Electric Develops Automated Mapping For Autonomous Driving
Hitachi demonstrates vehicle with 11-function autonomous driving ECU
DENSO and NEC Collaborate on Automated Driving and Manufacturing
Who Leads the Autonomous Driving Patent Race?
Here’s Tesla’s competition in car batteries…
LG Chem targets electric car battery sales of $6.3 billion in 2020
Samsung Introduces New High-tech EV Batteries
SK Innovation to produce EV batteries with 500 km range in 2018
Daimler’s battery gigafactory begins Europe challenge to Tesla
Daimler builds battery factory in Beijing
General Motors China To Open Battery Factory In Shanghai
Panasonic Opens New Automotive Lithium-Ion Battery Factory in Dalian, China
China to build many gigafactories’ worth of electric-car battery plants
China’s BYD takes aim at Tesla in battery factory race
Contemporary Amperex’s Chinese battery factory will be bigger than Tesla’s Gigafactory
Contemporary Amperex building an EV battery/drivetrain facility in Europe
Energy Absolute Plots Asian Project Rivaling Musk’s Gigafactory
ABB teams up with Northvolt on Europe’s biggest battery plant
BMW Shows Off Its Battery And Electric Motor Production Facility
FORD ACCELERATES ELECTRIFIED VEHICLE BATTERY RESEARCH AND DEVELOPMENT
Volkswagen will invest $3.7 billion in battery cell & electric drive plant
Hyundai Motor developing solid-state EV batteries
Jaguar holds talks with Ford and BMW over building a giant battery factory
Ultrafast-Charging Solid-State EV Batteries Around The Corner, Toyota Confirms
Wanxiang is playing to win, even if it takes generations
UK provides millions to help build more electric vehicle batteries
Rimac is going to mass produce batteries and electric motors for OEMs
Elon Musk Has A New Battery Rival (Romeo Power) Packed With His Ex-Employees
Here’s Tesla’s competition in storage batteries…
Panasonic
LG
AES + Siemens (Fluence)
Mitsubishi
Saft
EnerSys
SOLARWATT
Sharp
Tesvolt
Kreisel
Leclanche
Lockheed Martin
UniEnergy Technologies
electrIQ
Green Charge Networks
Renault
Blue Planet
Clean Energy Storage Inc.
Younicos
Powervault
ViZn Energy
Schmid
24M
And here’s Tesla’s competition in charging networks…
ELECTRIFY AMERICA UNVEILS FIRST $300M OF $2B INVESTMENT IN ZEV INFRASTRUCTURE
EVgo Installing First 350 kW Ultra Fast Public Charging Station In The US
BMW and Volkswagen Take on Tesla Motors With a New U.S. Fast-Charging Network
Tritium’s First 350-kW DC Fast Chargers Coming To U.S.
Porsche is bringing its ultra-fast electric car charging stations to the US
Nissan and EVgo to build i-95 Fast-Charge ARC connecting Boston and Washington D.C.
BMW, Daimler, Ford, VW, Audi & Porsche JV for 350kw Charging On Major Highways in Europe
Porsche’s latest electric car chargers put Tesla to shame
Chargepoint Europe Gets $82 million in new funding from Daimler
ChargePoint – InstaVolt partnership; more than 200 UK rapid charge systems
ChargePoint Express Plus Debuts: Offers Industry High 400 kW DC Fast Charging
Fastned building 150kw-350kw chargers in Europe
DBT unveils the 1st 150 kW universal ultra-fast charging station
5 European fast charging networks form Open Fast Charging Alliance
Shell starts equipping petrol stations with electric chargers
BP in talks with electric carmakers on service station chargers
Total planning EV charging points at its French stations
Yet despite all that deep-pocketed competition, perhaps you want to buy shares of Tesla because you believe in its management team. Really???
With Misleading Messages And Customer NDAs, Tesla Performs Stealth Recall
Who You Gonna Believe? Elon Musk’s Words Or Your Own Lying Eyes?
How Tesla and Elon Musk Exaggerated Safety Claims About Autopilot and Cars
When Is Enough Enough With Elon Musk?
Musk Talked Merger With SolarCity CEO Before Tesla Stock Sale
Tesla Continues To Mislead Consumers
Tesla Misses The Point With Fortune Autopilot Story
Tesla Timeline Shows Musk’s Morality Is Highly Convenient
Tesla Scares Customers With Worthless NDAs, The Daily Kanban Talks To Lawyers
Tesla: Contrary To The Official Story, Elon Musk Is Selling To Keep Cash
Tesla: O, What A Tangled Web We Weave When First We Practice To Deceive
I Put 20 Refundable Deposits On The Tesla Model 3
Tesla: A Failure To Communicate
Elon Musk Appears To Have Misled Investors On Tesla’s Most Recent Conference Call
Understanding Tesla’s Potemkin Swap Station
Tesla’s Amazing Powerwall Reservations
So in summary, Tesla is losing a massive amount of money even before it faces a huge onslaught of competition (and things will only get worse once it does), while its fully diluted market cap (assuming 177 million shares “all-in”) now exceeds that of Ford and is roughly equal to that of GM despite a nearly two-billion-dollar annualized net loss selling just 100,000 cars while Ford and GM make billions of dollars selling 6.6 million and 9 million cars respectively. Thus this cash-burning Musk vanity project is worth vastly less than its approximately $70 billion fully-diluted enterprise value and—thanks to its roughly $10 billion in debt—may eventually be worth “zero.”
