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1/ Here are my thoughts on the Q4 2018 update from Tesla ($TSLA) ir.tesla.com/static-files/0… In the analysis below I silently assume Tesla will not be able to raise money from new equity.
2/ I checked whether the first digits of $TSLA's Q3 and Q4 2018 numbers conform Benford's Law. P-value is 0.27, low but far from low enough to reject the hypothesis that the first digits satisfy this distribution. So not worries numbers are made up. en.wikipedia.org/wiki/Benford%2…
3/ I agree with @markbspiegel $TSLA's accounts receivables ($949M) is suspiciously high. Who owes $TSLA money? New cars are mostly bought by retail clients and therefore paid in advance. Customers pay for repairs and charging almost immediately. Big fleet sale at end Q4?
4/ I think @Keubiko offered a good explanation for the customer deposits ($793M). These deposits could be for the full self driving feature. I find it misleading in combination with other disclosure. Being vague on reservations in the Q4 call is suspicious seekingalpha.com/article/423691…
5/ Gordon Johnson from Vertical Group thinks $TSLA postpones payments to suppliers, artificially boosting cash. He is not alone. Main argument: based on received interest average cash should be only slightly more than $1B, during Q4 2018. bloomberg.com/news/audio/201…
6/ I don't see why Tesla could not postpone payments to suppliers. Note the allegation is consistent with reports $TSLA postponing registrations, not having paid small bills, and not spending enough on service. I think however they cannot postpone payments more than 3 months.
7/ So how much would Tesla have to pay to suppliers during Q4 2018, for car production? In Q4 this is equal to automotive cost of goods ($4.7B) minus labor costs. Suppose labor costs is 1/3 of COGS. Then Tesla pays about (1-1/3)*4.7 = $3B to suppliers just after Q4 2018.
8/ That means currently the cash balance would be $700M, more or less consistent with the low interest received. Also less than the upcoming $920M convertible debt repayment, Hence the speculated internal debate about whether they can pay or not.
9/ I think $TSLA will be able to pay the convertible debt in March 2019. After all it can still continue delaying payments to suppliers. I might be wrong with this analysis. But with these assumptions they would have a big liquidity problem from March 2019, leading to bankruptcy.
10/ A good point (forgot who mentioned it) is whether the debt repayment would unreasonably harm other stakeholders, such as suppliers and employees. Would it be legal to make a big debt repayment knowing the company will be bankrupt in a couple of months?
11/ So even if $TSLA has the money it may still not repay the convertible debt in March 2019. And what will happen after repaying the debt? If these assumptions are true it could be game over near the end of Q2 2019. /END
