Gabe Hoffman Profile picture
May 2, 2019 24 tweets 5 min read
Tesla shelf is out. A couple thoughts (disc: short $TSLA) sec.gov/Archives/edgar…
1. Clearing up Elon Musk’s SEC matter & filing this shelf takes care of 2 outstanding items, which I have previously outlined as necessary for a common equity offering
2. On Page 2, note there is no mention of 2 big previous Elon Musk promises, which appeared to be obvious, unachievable lies

A. China mass production by year end 2019

B. Robotaxis (FSD) in 2020
3. There are 3 implied delays in the language

The pipeline is described in date order

Model Y in 2020

“Future”, which implies after 2020

For semi-truck, new roadster, pickup truck
4. A multi billion $ common equity offering requires a bulge bracket I-bank as lead

To get a big bank to take the underwriting risk

Musk needs to

A. Walk back ALL timeline & other projections, which appear to be obvious & unachievable lies

B. Give realistic guidance
5. I-banks have paid tens of billions in govt fines & legal settlements 4 underwriting bad securities

2 get a lead bank

= avoid “knew or should’ve known fraud” potl future liability

= Musk will have to quit lying

= Worst thing for $TSLA stock

= necessary 2 keep Tesla afloat
6. $TSLA downgraded to Peer Perform at Wolfe Securities this morning

Somehow they estimate Tesla will earn $8.50 in 2020 LOL
7. Insurance

Another recent & dubious Musk promise to investors

Not mentioned in the shelf description

Tesla is walking back their lies & hype

Tesla cars cost more to insure due to structural reasons they can’t change, such as aluminum body
8. Tesla just filed to offer $650 million of stock & $1.35 billion of convertible bonds

Assuming the 15% shoes are filled

$747.5 million of equity & $1.55 billion of convertible bonds
9. $747.5 million of equity is woefully inadequate given Tesla's financial condition, and the likely shortfalls ahead in Q2 and Q3

Tesla has > $9 billion debt

only $1.45 billion of non-customer deposit cash belonging to them at 3-31

will burn alot of $ in Q2 and Q3
10. The strategy is simple:

Regular debt wasn't a realistic option, TSLA 2025 yielding >8%

Convertible bonds are typically hedged by institutions

Much lower future legal liability risk to I-banks than common equity
11. I-banks underwriting the deal are clearly hoping:

The smaller than expected equity slice

Will cause $TSLA stock to perform well enough, for long enough, to avoid future legal liability
12. Elon Musk is borrowing ANOTHER $10 million from the banks to invest in the deal

He was over $600 million in margin debt 2 years ago

The filings don't disclose his total margin debt now

It's likely close to $1 billion

This is MADNESS by Elon Musk
13. Tesla will not come remotely close to fixing its financial woes with this offering

The relative sizes of small equity vs mostly convertible debt are a "hail Mary pass" attempt to keep $TSLA stock from completely cratering
14. It will be VERY INTERESTING to learn

A. During the deal roadshow, will the underwriters force Elon Musk to quit the obvious lies?

I believe yes, though not completely

B. Will resetting expectations in A hurt Tesla stock?
15. What will the convertible deal terms look like?

Most importantly

Tesla will almost certainly want some sort of mandatory conversion language in the deal, e.g. if the stock trades over a certain price, Tesla can turn the converts into common equity

Will Tesla get this?
16. Assuming there is a mandatory conversion price for the converts,

e.g. $TSLA trades >$300 for 20 consecutive trading days

Can Elon PUMP $TSLA hard enough after the deal is done

B4 awful early July Q2 delivery #s

This will be Elon's strategy
17. Both offerings are overnight. Pricing tonight, trading tomorrow.

My bet would be that they will eventually upsize the equity component somewhat
18. There is a group investor call at 11am to pitch the deal.
19. Tesla has $566 million of solar related bonds due 11-1-19, plus some other odds and ends

If $TSLA raises $2.5 billion

Delivers 70k vehicles in Q2

50k in Q3 (another $1,875 tax credit expires 7-1)

Tesla will have enough cash through 2019, and that's it - barely
20. Thus, I believe this offering won't help Tesla's stock price longer term

When they report Q2 deliveries in early July, the stock will be meaningfully lower

Q2 EPS will be another disaster

Q3 deliveries in early Oct will be horrible, and $TSLA will go much lower still
21. My 2 main forecasts for year-end 2019 remain the same

$TSLA will be under $100 per share

Elon Musk will be forced to dump stock in a margin call

(disc: short $TSLA)
22. Gene Munster of @LoupVentures was totally wrong on Q1 during our debate

He is misleading investors on CNBC right now

Tesla DOES NOT have $2.2 billion in cash!

They have $1.45 billion in cash - the rest are customer deposits, which don't belong to Tesla

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More from @GabeHoff

Feb 7
Did you know?

Last week, the US Court of Appeals for the 4th Circuit revoked 2 federally approved permits to complete the critically important Mountain Valley Pipeline project

which is already 94% constructed

2 judges nominated by Obama, 1 by Clinton doomberg.substack.com/p/contortion-n…
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Hi @jennycohn1

For the past 4 years, I’ve witnessed @JackPosobiec use his platform to speak out against REAL WORLD anti-Semitism hundreds of times

When terrorists attacked Israel, Jack debunked many MSM lies

What have you done besides recycle SPLC garbage?

Signed, a proud Jew
@jennycohn1 @JackPosobiec Seriously @jennycohn1

The real Jew haters on the Internet constantly attack Jack Posobiec for defending Israel & speaking out against anti-Semitism

They falsely allege he must be working for Mossad, Israel’s intelligence service

Do a simple Twitter search & write about that!
Did you know?

When the SPLC falsely smeared Jack Posobiec last year,

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He even posted their fundraiser 4 days ago

@jennycohn1 didnt write about that!
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BLM activist @marclamonthill is a host on @BET and professor at @TempleUniv

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algemeiner.com/2021/02/09/act…
Hill repeated the long-discredited claim that Israel is responsible for US police violence against minorities, saying, “US police are being trained in Israel and some Israeli police are being trained in the United States.”
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Jan 21, 2021
Hi @willwilkinson! Why did you call for former Vice President Mike Pence to be lynched?

@nytimes,@katiekings, any comment on your "contributing opinion writer" calling for violence against a public official?

@TwitterSafety & @SecretService should know
Hi @jerry_jtaylor @JoeyCoon!

Does @NiskanenCenter permit employees like @willwilkinson calling for violence against former Vice President Mike Pence, calling for him to be lynched?

President & legal counsel inquiries:
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Something I said, Will?
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