Thread by @AlmingtonCap

1/ Thread:

@Zackfoot has shared a remarkable presentation given by Tom Bachrach to students at @Wharton on the emerging signs of fraud at $TSLA.

Bacharach cites several red flags, which we discuss in a new note: gurufocus.com/news/837436

@Paul_M_Huettner @TeslaCharts $TSLAQ

https://twitter.com/Zackfoot/status/1110234548074434561

2/ Red Flag 1: A cursory examination of $TSLA reveals that it is a co. & stock built on a narrative of rapid growth. $TSLAQ has actually been slashing capex to the bone, casting doubt on its ability to build production capacity & promised new models

gurufocus.com/news/837436

3/ cont.: Last year, $TSLA pulled out all the accounting stops to engineer a blowout Q3. Elon relied on one-offs to orchestrate an unrepeatable result. Meanwhile, evident falling demand & collapsing margins this Q prove 2H 2018 to have been inherently unsustainable. $TSLAQ

4/ Red Flag 2: $TSLA's myriad subsidiaries & opaque business units create a convoluted & byzantine structure that make tracking all the moving parts exceptionally difficult. $TSLAQ

gurufocus.com/news/837436

5/ cont.: Investors rely on a steady stream of disclosures in order to make intelligent decisions. $TSLA makes that effort distressingly difficult. When a firm deliberately obfuscates aspects of its business, whether for malign purposes or not, investors should worry. $TSLAQ

6/ Red Flag 3: A firm experiencing high growth & facing an exciting future tends to attract talent who want to share both in its mission & in its financial rewards. Managers stick around when things are good. Conversely, when things look grim, they tend to jump ship. $TSLA $TSLAQ

7/ cont.: As @Paul_M_Huettner's Trojan work has shown, top $TSLA execs have been running for the hills. 100+ bailed in 2018, including two CAOs. Now Deepak is out, leaving behind a hollowed-out wreck of a c-suite. $TSLAQ

8/ Red Flag 4: Finally, we come to the issue of corporate governance, especially Elon. His fraudulent go-private tweets led to SEC charges & now, having recently offered suspect production guidance, he's again in the SEC’s crosshairs, facing serious contempt charges. $TSLA $TSLAQ

9/ cont.: Elon's fate now rests in the hands of Fed Judge Alison Nathan, who has wide latitude. She could give anything from a slap on the wrist to a D&O ban, Jim Cramer's money is on a D&O ban. We think it more likely that he gets a fat fine & final warning. $TSLA $TSLAQ

10/ Lining up these elements, we see 4 glaring red flags:

- High growth dependent on outside capital
- Complex corp. structure & opaque reporting
- High level of management turnover
- CEO & corp. governance issues

Taken together, the smell of fraud is unmistakable. $TSLA $TSLAQ

11/ Conclusion:

The outlook continues to darken for $TSLA, yet the stock remains inflated. Red flags are glaring & signs of genuine fraud are starting to show. With reality set to bite in the coming weeks, the stock is poised for a sharp tumble. $TSLAQ

gurufocus.com/news/837436