Tag Archives: Tesla

Elon’s First Fraud Suit, by Eric Peters

Tesla’s undoing may ultimately be that Elon Musk is not a car guy. From Eric Peters at theburningplatform.com:

Elon Musk is being accused of fraud – but not over his cars.

Not yet.

This fraud suit alleges financial flim-flam. That Elon’s very public musings about taking Tesla off the stock market as a publicly traded company were meant to temporarily inflate the value of Tesla stock as a way to generate more Desperation Money (but not by selling cars or making an honest profit) to stave off the inevitable collapse.

The lawsuit – a class-action lawsuit filed in Federal court –  alleges that Musk’s Aug. 7 statements had the effect of “completely decimating” short sellers, people who bet against a rise in the value of  Tesla’s stock.

The SEC is looking into things.

Other things being looked into include sketchy practices to meet Elon’s publicly promised production numbers for the Model 3, the “affordable” Tesla Elon has been touting but failing to deliver for years. Not yet being looked into officially – but arguably ought to be – are Musk’s promises to the thousands of people who put down deposits on the “affordable” Model 3 – the one with the promised $35,000 MSRP – which isn’t being produced.

The Model 3 which is being produced is the much-less-affordable $40,000 model – which has a larger, more powerful battery and more range than the $35k model. But the $5,000 difference makes all the difference to people who cannot afford a $40,000 car – electric or not.

Especially now that the federal tax incentives Elon relied upon to get people to buy his cars are on the verge of going away. This will mean that buying a $40,000 Tesla means paying the full $40,000 – not $40,000 minus whatever the federal government kicks back to the buyer.

But Elon’s biggest sin may not be fraud.

It is incompetence seasoned with a puckish, childish arrogance.

Musk is not a car guy and has no experience in the car business – outside Tesla. Yet he presumed he could teach the car industry a great lesson – with the help of Uncle.

He would show them.

But unlike car guys who do know the car business, Elon made a number of critical mistakes – which have nothing to do with his cars being electric. That just added salt to the wound.

The biggest mistake he made is focusing on sedans at precisely the moment when the market isn’t just moving away from them – it is virtually abandoning them in favor of crossover SUVs. These are now outselling cars and particularly sedans.

To continue reading: Elon’s First Fraud Suit

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Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout, by Wolf Richter

Did Elon Musk lie, and therefore open him to civil and perhaps criminal liability, when he said Tesla had secured funding for a buyout that would take Tesla private? From Wolf Richter at wolfstreet.com:

Two often-cited suspects are axed. So where’s the “secured” funding supposed to come from?

The whole scheme kicked off when Tesla CEO Elon Musk tweeted during trading hours that he was “considering” taking Tesla private, “Funding secured,” which caused the already ludicrously overvalued shares to spike. Later he added, “Investor support is confirmed.” But no details, no names, no tidbits, not even a tease. Two days earlier, he’d tweeted that “even Hitler was shorting Tesla stock.”

We can brush off the Hitler tweet as just one more Musk idiocy gone awry, but “Funding secured” and “Investor support is confirmed” are big-ass phrases for a public-company CEO discussing a buyout that would be valued at $72 billion.

Now some folks, including those at the SEC’s San Francisco office, are wanting to know where exactly this money is going to come from – and if funding was even remotely “secured.”

The Tesla true believers instantly figured that a deal had already been worked out, either with SoftBank or with Saudi Arabia’s Public Investment Fund (PIF), or with both, or whatever.

Turns out, it’s not going to be SoftBank, and it’s not going to be the Saudis, either. They’re not interested in creating the magic to pull this off.

Reuters reported today that a source “familiar with PIF’s strategy,” said that the fund was not, as Reuters put it, “currently getting involved in any funding process for Tesla’s take-private deal.”

PIF had made headlines recently when it came out that it had acquired a stake in Tesla of just below 5% by buying its shares (TSLA) in the market. None of this money went to Tesla. It went to Tesla shareholders that wanted to get out.

PIF has also heavily invested in other tech companies in the US, including a $45-billion investment in the Vision Fund, a venture capital fund that SoftBank, a Japanese holding conglomerate, has put together by pouring $100 billion into it.

To continue reading: Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout

Tesla stock soars on news they ‘only’ lost $717 million, by Simon Black

Tesla is like a reverse religion. Every time it fails the true believers believe even more. From Simon Black at sovereignman.com:

Sometimes I feel like I’m living in an alternate universe… it’s like the financial version of the ‘upside down’ from Stranger Things.

Case in point: last night the infamously loss-making electric car maker Tesla announced its quarterly earnings.

As usual, the numbers were gruesome. Tesla’s net loss was TWICE AS BAD as the previous quarter, a record NEGATIVE $717 million. That’s a LOT WORSE than analysts were expecting.

After adjusting for various capital investments, Tesla’s total cash burn for the quarter was MINUS $740 million… which is a bit better than what analysts were expecting. Congratulations.

Oh yeah, and Tesla cult leader CEO Elon Musk mustered an apology to all the analysts he insulted on the previous quarter’s earnings call (where he derided them for asking “boring” and “bonehead” questions).

And now the stock has soared 12%.

Is this really what capitalism has come to?

Companies are richly rewarded for posting record losses that are worse than anyone expected because the grown men who pilot them can refrain from publicly hurling childish insults at financial analysts while managing to ‘only’ burn $740 million of shareholder capital?

Give me a break.

In total, Tesla has burned through $5 billion of its investors’ cash.

And nearly half of the money it has left in the bank is in the form of customer deposits, which are often refundable. So that money’s not even safe.

Most likely Tesla will have to raise billions of dollars over the next few years just to stay afloat.

And yet, despite these losses, and despite the fact that their CEO is sidetracked making flamethrowers, limited-edition Tesla surfboards and promising to solve Flint, Michigan’s water crisis. . .

. . . and despite the fact that he seems more concerned with Twitter spats than running the business (the Wall Street Journal ranked Musk as the second-most active tech CEO on Twitter behind Salesforce.com’s Marc Benioff, with 1,256 tweets this year through mid-July) . . .

. . . shareholders still granted their CEO the largest executive compensation package in the history of the world earlier this year (worth a potential $50 billion). . .

To continue reading: Tesla stock soars on news they ‘only’ lost $717 million

Tesla Posts Record Loss – and Stock Price Goes up! by Eric Peters

Someday people will look back and say that Tesla and Netflix were symbols of our age: companies that went deeper and deeper into debt, never made a dime, and were rewarded with outrageous stock prices. From Eric Peters at theburningplatform.com:

Elon Musk’s crony capitalist con operation just posted its biggest loss to date – $430 million in three months – but Tesla stock prices climbed 10 percent after the announcement.

What to make of this?

It’s like being in a nursing home, beside the bed of your blind, dementia-addled 94-year-old grandmother and the doctor just told you she probably hasn’t got much time left – but you decide to go out and buy her a new car.

With the difference being that you’re buying grandma the car.

In Tesla’s case, it’s taxpayerswho are buying the cars – for the affluent virtue-signalers who “buy” them at massively subsidized but massively high prices.

Even so, Elon still can’t make a buck on these things.

Not that it matters.

The conga line of suckers seems endless. In part because of Elon’s Rasputin-like ability to bedazzle the media, which reports every promise with the gush of a 16-year-old girl effusing over her prom date and never reports that her date raped her after the prom.

Mum is always the word when it comes to Elon.

For example – and most recently – the media gushed over the arrival (sort of) of the “affordable” Model 3, sticker price only $35,000! Which is only $15,000 more than a well-equipped Honda Civic sedan, which does the job of getting from A to B vastly better, if the metrics are cheaper and easier and more conveniently.

But the media has not told you that the “affordable” $35,000 Model 3 isn’t available.

Only the $40,000 Model 3 currently is.

And it’s only twice as expensive as a well-equipped Honda Civic.

But what’s $20,000 between friends, eh?

Keep in mind, too, that both the $35,000 Model 3 and the $40,000 Model 3 are really more like $50,000 Model 3s – if you take away the subsidies and price them such as to account for their true cost to manufacture and sell at a profit – as opposed to giving each away at a loss, as Elon has been doing for the past 15 years.

To continue reading: Tesla Posts Record Loss – and Stock Price Goes up!

Tesla Is The New Theranos (With A Curious Nazi Twist), by Kuppy

Is Tesla destined for the same ignominious fate at Theranos? From Kupppy at adventuresincapitalism.com:

I originally started following Tesla (TSLA – USA) as I felt it was a structurally unprofitable business nearing a cash crunch as hundreds of competing products were about to enter the market. As I’ve studied Tesla more closely, I’ve come to realize that Elon Musk appears to be running a Ponzi Scheme disguised as an auto-manufacturer; where he has to keep unveiling new products, many of which will never come to market, in order to raise new capital (equity/debt/customer deposits) to keep the scheme alive. The question has always been; when will Tesla collapse?

Tesla’s Bullshit Conversion Cycle is the key financial metric underlying this scheme (from @ProphetTesla)

As part of my research on Tesla, I decided to read Bad Blood by John Carreyrou, the journalist who first uncovered the Theranos fraud. It is the story of how Elizabeth Holmes created Theranos and then lurched between publicity events in order to raise additional capital and keep the fraud going, despite the fact that the technology did not work. The key lesson from Theranos for determining when a fraud will implode is that there are always idiots willing to put fresh money into a well marketed fraud—so you need a catalyst for when the funding dries up.

The other salient fact was that most senior employees actually knew that something wasn’t quite right, but feared losing their jobs or getting sued if they did anything about it. Therefore, employee turnover was off the charts but no one was willing to risk their career by saying anything publicly. However, when Theranos started risking customers’ lives, the secret got out pretty fast. This is because most people are inherently ethical—especially when they know that their employer is doing something immoral, like releasing flawed lab results to sick patients. Eventually, some employees felt compelled to become whistle-blowers and started to reach out to journalists and regulators. This started a cascading event.

First, one intrepid journalist took the career risk to write about the Theranos fraud. Then other whistle-blowers felt emboldened to step forward and contact this first journalist, as they also wanted their story told—especially as they had already reached out to government regulators who were too scared to investigate a politically powerful company.

Once a few good articles had been written about Theranos, the dam broke open and the feeding frenzy began. Other journalists, smelling page-clicks rapidly descend on Theranos; more workers spoke out, more incriminating evidence came to light and then there was a sense of voter outrage. Finally, the regulators who were first contacted by the whistle-blowers many months previously, felt compelled to act—at which point the fraud collapsed and the money spigot shut off.

To continue reading: Tesla Is The New Theranos (With A Curious Nazi Twist)

Elon Needs More Money (Again), by Eric Peters

SLL has no particular animus towards either Elon Musk or his company, Tesla. We just think they are the perfect symbols for crony socialism in our era, so we post a lot of articles about them. From Eric Peters at theburningplatform.com:

Last month, I wrote about Tesla CEO Elon Musk’s contemptuous and breezy dismissal of questions asked by financial analysts about the cashflow situation at Tesla. Would the company need yet another infusion of money to remain afloat? Lame! Next question.

That was Musk’s response.

As it turns out, it’s Tesla that’s lame.  The company – Musk – just laid off several thousand employees, about 9 percent of its workforce – which is one way to raise cash (by not spending it on worker salaries) when you don’t want to admit you need another infusion from investors – or realize you might not be able to get one because those investors are becoming gun-shy about giving money to Elon.

I’ve been pointing out for years that Tesla is a net money-losing operation, despite all the crony capitalist advantages – including electric car quotas in states like California, which force other car companies to either build EVs they can’t sell (or sell at a loss) or buy “credits” from an electric car manufacturer (Tesla) which the electric car company then uses to offset its losses.

Even so, Tesla has lost something on the order of $5.4 billion dollars so far, according to most estimates. Yet – until quite recently – most media coverage of Tesla has focused on what amounts to financial Fake News of the most egregious kind, such as the hype-driven value of Tesla stock. It’s true the stock price zoomed upward like a bottle rocket on the 4th of July. But what was driving this?

Not anything of value.

Analysts refused to analyze the fact that Tesla loses money on every car it sells. That it remains in business only because of investor infusions and deposits given on cars that never seem to materialize.

Well, the electric chickens may finally be coming home to roost.

At some point, you either make money – or you don’t. If you don’t, you have to find people willing to give you more of it. When you can’t do that anymore, you are forced to scale back. You let people go in order to husband what resources you’ve still got, in the hope that maybe you’ll be able to ride it out.

Elon is running out of money. His operations aren’t sustainable.

To continue reading: Elon Needs More Money (Again)

“Boring… Next”, by Eric Peters

For a guy who’s been losing money for years, Elon Musk is awfully cocky. From Eric Peters at theburningplatform.com:

When financial analyst Toni Sacconaghi of Sanford C. Bernstein asked Tesla CEO Elon Musk about the money-losing electric car company’s capital requirements going forward (Tesla has burned through – cue Dr. Evil – one billion dollars in three of the last four quarters) Musk replied: “Boring, bonehead questions are not cool. Next?”

Fo sheer effrontery, this tops even The Chimp’s I am the Decider!

Neither man gives a damn about the damage – human or financial – imposed on others. Nor that others are made to pay for it all. They don’t even give lip service to pretending  anything they do bothers them in the least. All that matters is the Great Dream – whether it’s “regime change” in some resource-rich country which hasn’t attacked us (a war crime, once upon a time) or this equally demented business of manufacturing electric cars that almost no one would freely buy absent the subsidies and mandates.

Raise your hand, ask a reasonable question – and it’s dismissed as “boring” and “boneheaded.”Sacconaghi was also lectured by Musk to not “make a federal case” out of Tesla failing to achieve the ludicrous 25 percent gross profit margin on sales of the Model 3 it claimed it would make. A reasonable question, given most legitimate car manufacturers – those whose cars sell on their economic merits, without needing taxpayer-financed propping-up via subsidies and mandates – earn about 4 percent or so.

“That’s something that we’ll solve like within three months to six months later,” Musk said.

The sun will come out, tomorrow…

The guy is a crony capitalist Rasputin. He bewitches and seduces. Whatever the ersatz Iron Man says is taken as holy writ, not to be questioned.

 

To continue reading: “Boring… Next”