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Tesla: A Growth Stock Price Wrapped Around a Bankrupt and Dying Business
There are many facets and angles to view Tesla as a business all of which lead
to the conclusion of this research note’s title, namely of a stock price untethered
from the negative reality of its underlying fundamentals. This particular data set of
U.S. car deliveries in August is a good starting point:
Quarter-to-Date 2019
1From InsideEVs InsideEVs has been traditionally overly pro-Tesla in terms of sales estimates,
and we believe these sales are overstated)
SolarCity Division
SolarCity was the company Tesla acquired in 2016 in a bailout that saved
SolarCity from bankruptcy and saved the investment in SolarCity debt and equity by
Elon Musk and his cousins, the Rive brothers, who controlled SolarCity. This acquired
asset appears on the Tesla balance sheet as approx. $2.7 Billion in Goodwill attributed
to the assets of SolarCity. Since 2016 the installations of solar systems by SolarCity as
measured in KiloWatt hours has declined by approx. 90% and widespread layoffs are
taking place throughout this Tesla division. This failing asset will need to be written
down and Tesla will face an enormous asset impairment charge which will be highly
significant since this so-called asset represents approx. 40% of all Tesla’s equity base.
NTSB
This past week the National Transportation Safety Board,(NTSB), ruled that
Tesla’s AutoPilot self-driving feature was “design flawed," and responsible for the
accidental death of a Tesla motorist in 2018. In addition to this official government
finding effectively “ringing the dinner bell” for plaintiff and class action lawyers,
(there have been 74 deaths to date linked to the use of Tesla’s Autopilot software),
this finding welds shut the coffin of Musk’s outrageous claim the Tesla will have “one
million self-driving Robotiaxis” on the road in 2020, and that all Tesla vehicles will be
“appreciating assets capable of generating a minimum of $30,000 per year in owner
revenues.” Moreover, Tesla has been for years selling as a model option for thousands
of dollars versions of “Autopilot” and “Full Self Driving” software that either does not
work as promised, or doesn’t exist nor can ever be made to perform as promised. The
findings of the NTSB cannot only potentially force a company bankrupting recall by
Tesla, it is certain to draw legal maneuvers by owners to force Tesla to refund millions
of dollars for a defective or non-existent feature.
Summary
There is no possibility or likelihood that anything can turn this dying business
around: no new products, no new markets, no new capital for future investment.
Tesla is done and finished; the only thing that remains is for investor perception to be
detached from the realm of Muskian fantasies, and re-attached to present business
realities. This process, now accelerating at lightning speed, will create a stunning
collapse in Tesla’s share price and resulting revaluation and ultimately Tesla’s
financial restructuring in a bankruptcy procedure. This outcome is inevitable, is very
Kind Regards,
John Scurci
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contains forward looking statements, as defined by SEC Regulation D, and the Investment Act
of 1940, which are the original ideas and best judgments of the authors. The conclusions
expressed herein are not guaranteed, and past performance is not predictive of future results.
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