"172M Immaterial" Supercharger Error

[byan1232]

Hey guys, I just stumbled upon this article on SeekingAlpha regarding the book value of the supercharger network. On Tesla's most recent 10k, the book value of the supercharger network was $339M whereas it was corrected in a recent 8K statement to $166M. How do you guys think this will effect Tesla in the near future?

I know seekingalpha is full of tesla bears so I want to get a perspective from tesla bulls.

I am currently holding long positions in Tesla and will continue to do so.

Here is the link to the SA article: http://seekingalpha.com/news/3166973-tesla-filing-notes-immaterial-172m-error-supercharger-valuation

 

[LargeHamCollider]

Bears will try to make a big deal of it, but nobody will care.

 

[I_Wanna_X]

Who cares. It was just a text error.

Just saw my first X in the open. Recently made a reservation for an X. Can't wait. Awesome that there is a website dedicated to those who love Tesla.

 

[Curt Renz]

Bears will try to make a big deal of it, but nobody will care.

Indeed, those who are clueless and already have short positions in TSLA will congregate at Seeking Attention and gleefully work at convincing each other that this is something meaningful. The rational portion of the world will ignore them and give its blessings to Tesla Motors for publicly correcting an error that has no effect on its bottom line or its products.

 

[I_Wanna_X]

Shorts add nothing to the debate. They just tear down. I hide their messages because they add zero to the discussion.

 

[Eclectic]

For the first 10 or so years of my legal career I focused on securities transactions and did a lot of work with SEC filings. You have to distinguish the financial statements, which are the actual numbers for the financial condition of the company (and are usually in the "F" page section of SEC filings) with the narrative section in the body of a filing that discusses the financial condition in a plain english manner, known as Management's Discussion and Analysis" (MD&A). MD&A is the CFO's office attempt to give the average person a very high level discussion of what the numbers in the financial statements mean. Only accountants really can understand the financial statements, so MD&A tries to give investors the bottom line meaning of the financials and by definition, it's always going to be an informal and somewhat vague description. What I think happened here is that the number in the financials was correct but the person who wrote the MD&A didn't carry the right number into that narrative when discussing the supercharger valuation.

In other words, the financial disclosure numbers were right, the description of those numbers in the non-financial section of the filing was wrong. It happens. A lot.

 

[byan1232]

For the first 10 or so years of my legal career I focused on securities transactions and did a lot of work with SEC filings. You have to distinguish the financial statements, which are the actual numbers for the financial condition of the company (and are usually in the "F" page section of SEC filings) with the narrative section in the body of a filing that discusses the financial condition in a plain english manner, known as Management's Discussion and Analysis" (MD&A). MD&A is the CFO's office attempt to give the average person a very high level discussion of what the numbers in the financial statements mean. Only accountants really can understand the financial statements, so MD&A tries to give investors the bottom line meaning of the financials and by definition, it's always going to be an informal and somewhat vague description. What I think happened here is that the number in the financials was correct but the person who wrote the MD&A didn't carry the right number into that narrative when discussing the supercharger valuation.

In other words, the financial disclosure numbers were right, the description of those numbers in the non-financial section of the filing was wrong. It happens. A lot.

This was my point of view as well. I dont think a mistake like this says anything about Tesla's future profitability/FCF.

 

[schonelucht]

Like I said in the short term thread. Indeed has no consequences on the financials of the company but it does put a serious dent in the new CFO. This is something, I feel, he personally should have caught.

 

[Auzie]

Like I said in the short term thread. Indeed has no consequences on the financials of the company but it does put a serious dent in the new CFO. This is something, I feel, he personally should have caught.

Agree about the dent on CFO. Hopefully, he will be more detail focused and perhaps get few trusted proofreaders/number cruncher checkers in the future.

 

[deonb]

Indeed, those who are clueless and already have short positions in TSLA will congregate at Seeking Attention and gleefully work at convincing each other that this is something meaningful. The rational portion of the world will ignore them and give its blessings to Tesla Motors for publicly correcting an error that has no effect on its bottom line or its products.

It is material though since it affects the cost of a Supercharger station.

At $166m valuation, the supercharger location averages out to $274'000 - which is right inline with what was originally predicted. Sort'a. Not really - they were supposed to have Solar Canopies at that price. But it's not terribly off.

At $339 valuation however, they would average $561k each - which is a very different story.

So when I want to predict how much Tesla needs to spend on Superchargers going forward, the cost of a Supercharger becomes very relevant. I agree it's immaterial in terms of current bottom line and from a legal perspective. But it's not immaterial information to investors looking forward.

 

[Eclectic]

It is material though since it affects the cost of a Supercharger station.

At $166m valuation, the supercharger location averages out to $274'000 - which is right inline with what was originally predicted. Sort'a. Not really - they were supposed to have Solar Canopies at that price. But it's not terribly off.

At $339 valuation however, they would average $561k each - which is a very different story.

So when I want to predict how much Tesla needs to spend on Superchargers going forward, the cost of a Supercharger becomes very relevant. I agree it's immaterial in terms of current bottom line and from a legal perspective. But it's not immaterial information to investors looking forward.

With the caveat, again, that I haven't gone through the report, there is a difference between how you value an asset on your financials and how much that asset actually costs to procure. A financial statement generally won't predict the cost of procuring an asset in the future, but an MD&A discussion may well talk about that for other purposes, such as the need for future financings, predictions on cash flows, etc.

 

[I_Wanna_X]

Byan1232, I think your assessment is exactly correct. This is a non-issue.

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Some guy on Seeking Attention just tried reporting Tesla to the SEC claiming accounting fraud. Good luck with that one buddy.