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Twain's Mustache @TwainsMustache
, 19 tweets, 5 min read Read on Twitter
I, like many that work in the financial markets, had always followed $TSLA from afar over the years. It was always pretty obvious that it was financially unsustainable as a business, but as a religion it never made sense to put my own skin in the game to go short.
Who wants to gamble on shorting a religion? As long as $TSLA had access to capital there was no fixed time limit on how long the scheme could last. That all changed earlier this year when @wolfejosh shared @ElonBachman short thesis about potential regulatory constraints to...
accessing the capital markets. If $TSLA could no longer access the market, this religion was in trouble. I started to dig into the financials, and it was pretty clear that the balance sheet was stretched extremely thin. What I found more concerning the more I dug through the...
SEC statements however was the fact that information required to make an honest assessment of the business simply wasn't available. Tesla, for example, hides any details about the reservation count. The customer deposits line in the balance sheet is obfuscated to the point...
that it is completely meaningless as a guide to the reservation count. It would be extremely helpful to know where the reservation count is, how does it breakdown between semi-truck, solar roof tiles, Model 3 variant, countries etc. Another issue is the gross margin calculations
Tesla unlike other auto manufacturers does not include R&D in it's gross margin calculations. We also see various line items being used to dump various expenses into - see examples of "good will" repairs that seem to end up in the Services & Other expense line.
If you keep a constant rate of warranty expenses and push any overflow into Services & Other that is misleading. SG&A also seems to be scaling with revenues, that's not how operating leverage is supposed to work. Tesla also obfuscates its cars produced and cars delivered totals
From Q3 2012 through Q2 2018 $TSLA has produced almost 29,000 more cars than it has delivered. But the only way to get that figure is to go through company press releases, which when you do it you realize seem to intentionally bury the info. Some quarters for example they only...
give ball parks for production, i.e. we produced about 2000 more cars this quarter than last quarter, or deliveries increased X% in the quarter, or give production in weekly rates etc. Why would they do that? One obvious reason is that it doesn't help the supply-constrained story
to openly disclose that you aren't selling everything you produce. Even backing out the in-transit number as of Q2 2018 there are about 13,000 unsold cars out there somewhere according to Tesla's own numbers. If demand is insane, why not just deliver those cars?
The other thing that really struck me about Tesla's reported figures was that they didn't break down deliveries by country. They show revenue totals for U.S., China, and Other, but no delivery totals. Why would this be? Norway has great registration data, but China does not.
It is easy to be skeptical about the revenue numbers (especially China) because there are no delivery numbers associated with it. It raises a lot of questions as @coverdrive and @GatorInvestor have written about.… and…
This selective disclosure makes me uncomfortable, and it should make Tesla investors uncomfortable. Why not demand an accurate picture of the business from management? The real answer though is, Tesla investors are not buying stock in a business, they are tithing.
It's now been almost a full year since insiders have sold stock outside of a 10b5-1 plan (pretty amazing for a company running ~$600M a year in stock based comp), and it's been over a year since $TSLA has tapped the public capital markets. Why has Musk & Co allowed the company
to get this close to the edge? Was laying off 9% of the work force, asking suppliers for cash back, having suppliers file mechanic's liens, having state & federal governments file tax liens, and under investing in parts & service ALL preferable to doing an equity raise?
It doesn't add up. Hanlon's Razor suggests to not attribute to malice that which can adequately be explained by stupidity. I'm really struggling to attribute all of this to stupidity. @WallStCynic has argued that even as recently as Q1 of this year Tesla was likely running cash
balances down to ~$1 billion during the quarter. Moody's has said $500 million is the bare bones level needed to run the business. While a $2 billion equity raise wouldn't solve Tesla's long term problems (competition, expiring tax credits, profitability) it would relieve a
lot of the near term liquidity pressures. Why on Earth would a $50 billion market cap company not opt for a mere 5% dilution to ensure near term survival? I repeat, it doesn't add up. Musk has settled securities fraud charges with the SEC on the 420 fakeover offer and his
ability to pump the stock is now going to be somewhat more constrained. Heading into Q4 Musk's ability to "promise the future to fund the present" will be challenged even if The Secret h/t @teslacharts that has prevented insider sales and capital raises doesn't exist.
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