Devonshire Research Short Tesla Motors Inc

Vitold · Mar 23, 2016

I found interesting looking Devonshire Research article:

Tesla Motors Inc (TSLA): Devonshire Research Short

At first their analysis looked quite sophisticated, but their reasoning quickly falls apart once you look closely. It made me curious who is behind that 'Research' company? WHOIS shows that their domain, devonshireresearch.com, was created 3/10/2016 (Creation Date: 2016-03-10T15:42:45Z) and the website appears unfinished or rushed (Press Release for example says "hello world" for example).

Moral of the story, be careful what you read on the internet.

Lerxt · Mar 24, 2016

It's almost certainly a part of the Koch brothers campaign to undermine Tesla.

Vitold · Mar 24, 2016

Todd Burch · Mar 24, 2016

If you actually read that report, it's pretty clear the author(s) are morons.

Vexar · Mar 24, 2016

Definitely a shill for someone. Their contact info reads:
"For more information, please contact Devonshire Research Group, LLC on Bloomberg: SURFHACKER"

Their best registration info is:
DomainsbyProxy.com which is a secrecy service business. This means they are deliberately not a legitimate business if they are hiding, which defeats the original purpose of Domain Name Services. I find it disturbing that Domainsbyproxy.com has a "subpoena policy." If anyone has a tip line for the FBI handy, I'd say call this one in as fraud.

Here's what I found:

Domain Name: DEVONSHIRERESEARCH.COM
Registrar: GODADDY.COM, LLC
Sponsoring Registrar IANA ID: 146
Whois Server: whois.godaddy.com
Referral URL: Domain Names | The World's Largest Domain Name Registrar - GoDaddy
Name Server: NS73.DOMAINCONTROL.COM
Name Server: NS74.DOMAINCONTROL.COM
Status: clientDeleteProhibited Resources - ICANN
Status: clientRenewProhibited Resources - ICANN
Status: clientTransferProhibited Resources - ICANN
Status: clientUpdateProhibited Resources - ICANN
Updated Date: 10-mar-2016
Creation Date: 10-mar-2016
Expiration Date: 10-mar-2021

Registry Registrant ID:
Registrant Name: Registration Private
Registrant Organization: Domains By Proxy, LLC
Registrant Street: DomainsByProxy.com
Registrant Street: 14747 N Northsight Blvd Suite 111, PMB 309
Registrant City: Scottsdale
Registrant State/Province: Arizona
Registrant Postal Code: 85260
Registrant Country: US
Registrant Phone: +1.4806242599
Registrant Phone Ext:
Registrant Fax: +1.4806242598
Registrant Fax Ext:
Registrant Email: [email protected]
Registry Admin ID:
Admin Name: Registration Private
Admin Organization: Domains By Proxy, LLC
Admin Street: DomainsByProxy.com
Admin Street: 14747 N Northsight Blvd Suite 111, PMB 309
Admin City: Scottsdale
Admin State/Province: Arizona
Admin Postal Code: 85260
Admin Country: US
Admin Phone: +1.4806242599
Admin Phone Ext:
Admin Fax: +1.4806242598
Admin Fax Ext:
Admin Email: [email protected]
Registry Tech ID:
Tech Name: Registration Private
Tech Organization: Domains By Proxy, LLC
Tech Street: DomainsByProxy.com
Tech Street: 14747 N Northsight Blvd Suite 111, PMB 309
Tech City: Scottsdale
Tech State/Province: Arizona
Tech Postal Code: 85260
Tech Country: US
Tech Phone: +1.4806242599
Tech Phone Ext:
Tech Fax: +1.4806242598
Tech Fax Ext:
Tech Email: [email protected]
Name Server: NS73.DOMAINCONTROL.COM
Name Server: NS74.DOMAINCONTROL.COM
DNSSEC: unsigned
URL of the ICANN WHOIS Data Problem Reporting System: http://wdprs.internic.net/
>>> Last update of WHOIS database: 2016-03-24T21:00:00Z <<<

Vitold · Mar 31, 2016

Hm, looks like Wired is not as good as I thought they were or they got played (whole article based on Devonshire Research, in science section):

Tesla’s Electric Cars Aren’t as Green as You Might Think

SamStevens57 · Apr 2, 2016

I'm interested to hear why you guys are so down on this report. Where did the analysis fall apart for you guys?

By looking at the other report on their website (GoPro) it seems like Matt Stack is leading Devonshire Research Group. The name on the other report is Devonshire Capital Fund, which is linked to the investment arm of XLP Capital. Seems like the team at XLP is the one behind this report.

techmaven · Apr 2, 2016

Most of that article talked about rare earths. In a Tesla, that's the speakers. There are no rare earths in the battery or the AC induction motor. Other EV's do have rare earths in their motors (AC synchronous aka DC brushless)

Vitold · Apr 2, 2016

In short, facts quoted in the report do not support it's conclusions.

Vexar · Apr 3, 2016

SamStevens57 said:
I'm interested to hear why you guys are so down on this report. Where did the analysis fall apart for you guys?

By looking at the other report on their website (GoPro) it seems like Matt Stack is leading Devonshire Research Group. The name on the other report is Devonshire Capital Fund, which is linked to the investment arm of XLP Capital. Seems like the team at XLP is the one behind this report.

Why would a financial analyst firm use an anonymous domain proxy service? What investment firm holds short positions and is specific in saying so in their reports? I don't see them as legitimate, I see them as a bunch of scam artists, picking some random hamlet in the UK for a name, to add a modicund of prestige. Also, They can short TSLA all they want. $100 a share. Yeah, after the last couple of days? Oh, and welcome to the forums. 1st post was on this topic, of all things.

bhzmark · Apr 3, 2016

Below is their report and commentary:

Executive Summary

What kind of company is Tesla Motors really? Few companies have ever managed such a broad scope of business models. Its valuation multiples (when they can be calculated) lie well above its direct business model comparables
— TSLA is attempting more vertical integration than any auto company has recently tried
— TSLA trades at a higher revenue multiple than any related technology business
— TSLA’s only comparables in terms of multiple are business models that TSLA is not:
— Software companies: TSLA has low / negative margins and heavy fixed asset commitments

[ACTUALLY TESLA GROSS MARGINS ON CAR SALES ARE VERY HIGH. BUT BECAUSE THEY ARE EARLY STAGE AND REINVESTING IN GROWTH THROUGH GIGAFACTORY INVESTMENT AND LINE INVESTMENT AND R&D THEY SHOW A NET LOSS. JUST LIKE AMAZON DID FOR YEARS AND YEARS AS IT CONQUERED AND INVESTED TO TAKE OVER THE RETAIL UNIVERSE. MISSING THIS POINT SHOWS AMAZING IGNORANCE. AND THEY MISS THIS POINT OVER AND OVER BELOW]

— Social media companies: TSLA has no network effects, no platform economics and high scaling costs

[SUPERCHARGER AND DESTINATION CHARGER DEPLOYMENT IS A PROTOTYPICAL NETWORK EFFECT AND A MASSIVE BARRIER TO COMPETITORS. AS MORE PEOPLE USE TESLAS AND MORE SUPERCHARGERS AND DESTINATION CHARGERS ARE ROLLED OUT TO SUPPORT THEM THE BARRIER GETS HIGHER AND MORE COSTLY FOR COMPETITORS. WHAT HS STUDENT IS WRITING THIS REPORT?]

— Biotech or oil explorations companies: TSLA has high marginal costs for every unit it produces

[TESLA GROSS MARGINS ON CARS WERE 25% AND LIKELY TO EXCEED 30% IN 2016.]

Tesla Motors has relied heavily on existing technology in designing a successful EV model, and while it may have generated some valuable IP it now controls little of it and has questionable sustainable competitive advantage in technology

[CHANGE "EXISTING" TO "PROVEN AND REFINED". LITHIUM BATTERY AND ELEC MOTORS AND BIG TOUCHSCREENS AND OTA UPDATES ARE NOT RADICALLY NEW TECH. BUT NO ONE CAN PUT IT TOGETHER AND EXECUTE LIKE TESLA. THE MAIN COMPETITIVE ADVANTAGE IN THIS AREA IS THE LACK OF IMAGINATION BY COMPETITORS TO USE AND EXECUTE ON PROVEN TECH. ]

— TSLA’s patents cover battery-related technology and selected components but not battery cells
— TSLA’s patent holdings are dwarfed by its technology competitors, limiting its freedom to operate in the EV market where its technology position is modest
— TSLA’s engineering talent is thin relative to competitors and many productive inventors have left
— TSLA’s valuable inventions can be readily copied by its EV competitors
— TSLA’s cost position is heavily dependent on its bargaining positions with strategic suppliers who have an incentive to price aggressively for their advanced technologies

[THE LACK OF FACTUAL BASIS BEHIND EACH OF THESE CLAIMS IS ASTOUNDING. VERTICAL INTERGRATION MEANS YOU CAN SAY "F U" TO INCOMPETENT SUPPLIERS; ]

Tesla Motors is not the green company it claims to be, with environmental risks at all stages of the vehicle lifecycle
— TSLA battery production requires the mining and use of numerous toxic chemicals
— TSLA EV production has a heavier carbon footprint than traditional vehicles
— TSLA vehicles consume lots of energy; battery charging shifts CO2 emissions from car engines to power plants
— Disposal of TSLA batteries at large scale will create a heavy toxic burden

[MORE FACTUAL INVENTION -- AMAZING THAT THIS GETS PICKED UP AS NEWS BY ANYBODY]

bhzmark · Apr 3, 2016

The only business model that makes sense for "Devonshire Research Group" is a pretend consulting research company whose strategy is to tell/publish the anti-EV people what they want to hear. Take their money to publish bogus research which looks good to people who are biased against EVs and laugh on the way to cashing their check. I hope that is what the Devonshire team is doing anyway.

If they really believe the nonsense they publish, at least they will benefit from the further education they are about to receive.

bhzmark · Apr 3, 2016

after more research it looks like they are probably just the fake research arm of a hedge fund that is trying to generate downward stock pressure to make $ on their TSLA short.

Nothing really wrong with short sellers: if they make $ then they created/borrowed needed supply when there was excess demand for the shorted security; or if they lose $ then the longs get some small satisfaction in the short sellers distress (and the securities lending income). TSLA is a roller coaster and if people can play the timing correctly then they can win a lottery. good luck to them.

Meanwhile publishing stupid research to try to convince others to sell doesn't constitute securities fraud -- but their investors, and news outlets looking for a story, should beware.

GoTslaGo · Apr 4, 2016

Excellent sleuthing! Kudos to everyone!

Vitold · Apr 4, 2016

Here's an article that is quoting both, Stanphyl Capital research and Devonshire Research:

Tesla Motors Inc (TSLA) Deception: Stanphyl Capital

And, on Sunday, after the reveal, articles based on Devonshire Research re-appeared. This time in other languages as well:

After successful reveal shorts have big reasons to worry, I would say.

skljsd329832 · May 24, 2016

Vitold said:
Here's an article that is quoting both, Stanphyl Capital research and Devonshire Research:

Tesla Motors Inc (TSLA) Deception: Stanphyl Capital

And, on Sunday, after the reveal, articles based on Devonshire Research re-appeared. This time in other languages as well:

View attachment 170634

After successful reveal shorts have big reasons to worry, I would say.

Devonshire research is AKA " SURFHACKER "

Forget about it. Misdirection time waste. Nobody with money long or short cares about the opinion of a malevolent teenager that was busted in March on the way UP to $265 in April.

Move along (TSLA stock already has).

techmaven · May 24, 2016

Devonshire's slide deck:

Devonshire Research Group - Tesla Motors

Avenger, is that you? There seems to be an unhealthy obsession with Tesla's import volume by weight and motor parts.

There's a lot of time and research done in that slide deck... too bad it's almost all wrong headed. Pull the wrong comps, overly emphasize IP patents, completely blow the understanding of Tesla'a strategic and tactical advantages, go off into the weeds with the weight of imports and Fukuta motor parts, and then finally, have a complete brain meltdown over the environmental impact of EVs, as well as battery constituent impacts of cobalt and lithium.

Anyone that actually believes this crap deserves to lose their money.

lklundin · May 25, 2016

EV-Volumes said:
Devonshire research is AKA " SURFHACKER "

Forget about it. Misdirection time waste. Nobody with money long or short cares about the opinion of a malevolent teenager that was busted in March on the way UP to $265 in April.

Move along (TSLA stock already has).

Well, Investor's Business Daily (which rank fairly high in google searches) failed to follow this advice:
Tesla Short Seller Issues Scathing Warning Of Pending ‘Death Spiral’

I would be interested in comments on this pure speculation (that I cannot take credit for):

Tesla spends no money on advertising, while other car manufacturers (and their dealerships) spend significant amounts of money on advertising.
So all the media that is struggling and trying to secure advertising money are likely to feel direct or indirect pressure to represent Tesla in a less positive light than the traditional car manufacturers (and their dealerships), that they take advertising money from.

So for example, I wonder how much advertising money from the traditional car industry for example the L.A. Times get?

And I have to think that media feeling such pressure is unlikely to forget these superficial and non-sensical anti-Tesla reviews.

Vitold · May 25, 2016

lklundin said:
Well, Investor's Business Daily (which rank fairly high in google searches) failed to follow this advice:
Tesla Short Seller Issues Scathing Warning Of Pending ‘Death Spiral’

I would be interested in comments on this pure speculation (that I cannot take credit for):

Tesla spends no money on advertising, while other car manufacturers (and their dealerships) spend significant amounts of money on advertising.
So all the media that is struggling and trying to secure advertising money are likely to feel direct or indirect pressure to represent Tesla in a less positive light than the traditional car manufacturers (and their dealerships), that they take advertising money from.

So for example, I wonder how much advertising money from the traditional car industry for example the L.A. Times get?

And I have to think that media feeling such pressure is unlikely to forget these superficial and non-sensical anti-Tesla reviews.

Tesla in the title makes for great click bite title. I got two full page ads when I clicked on your link to the IBD article.

As to advertising money - you are most likely right although dissecting it by publication does not make sense since same party owns many.

This second Devonshire paper is of lesser quality and cognitive dissonance is quite glaring. Timing of its publication is probably related to Devonshires worry that TSLA is about to break out above moving average.

bhzmark · May 26, 2016

It's actually comforting that the short effort is so transparently amateurish and obviously based on false assumptions and unlikely speculations.

For instance, from Part II of their effort:

"The election year introduces significant risk for TSLA’s continued reliance on taxpayer subsidies"

--Oblivious to the actual statutory terms of the tax provisions.

"TSLA’s use of tax credits disproportionately benefits the wealthy at the expense of the average taxpayer"
-- only because they charge so frickin much for their cars! and people keep buying them. When they have a lower priced car that will get an even bigger subsidy (as a percentage of car cost) until they sell so many cars that it tapers off. Trying to spin the obvious positive (high demand for high priced, high gross margin cars) into a negative.

"Part I of this analysis, released publicly in March 2016, was widely praised as effective and fact-driven."
-- name one! It was picked up by slimey click bait websites. And everyone else wondered when the mother would realize the son in her basement was publishing this nonsense.

"TSLA’s financing model mirror the features of common Ponzi, Pyramid, and Matrix schemes? . . . TSLA has accepted capital from unsophisticated investors with bold claims on return and/or product value"
-- refundable deposits aren't capital and depositers aren't investors. Laughable how they try to spin the massive and strong demand (tested by the quantity of deposits, and the fact of deposits requiring a $1k commitment) into a sign of weakness. The massive indication of demand in the M3 deposit surprise likely sent most shorts running for cover.

"TSLA acting as an unregistered broker dealer" "it is an experimental financial services company and should be regulated as such"
"Tesla’s 400,000+ unsophisticated, unsecured, and unpredictable Model 3 “creditors” contribute to a bank run setup
-- because it took deposits. wow the ignorance is amazing. and for a financial services company too. Trying to spin the obvious positive of massive demand into a negative.

"unorthodox future-earning-based financing"
-- imagine that! financing that is "future earnings based" how unorthodox!

"liability grows as Model S depreciates faster"
-- Last report from NIDA had Tesla with the highest resale value of any car. Higher than any ICE except discontinued Toyota FJ Cruiser.

"Tesla hoards used vehicles to resell under Colorado used EV credit incentive"
-- Tesla fiduciary decisions makers would be violating their fiduciary duties if they didn't take advantage of every available tax incentive to maximize value for shareholders. So amateurish to criticize them for doing so.

Slide 10 -- the laughable probability assessment is the biggest joke. nonsense like: "SEC antagonizes TSLA for improper Twitter promotion (Musk)" and "Factory workforce goes on strike / labor dispute"

Slide 18 -- after a bizarre group of slides arguing that Tesla will be aquiried by the govt and sell EVs to police depts and schools, there is a slide that quotes what is I guess some rap song. clear indication of being written in someone's basement.

"he Gigafactory investment alone accounts for nearly three years of automotive capital expenditure—this is a hugely outsized segment investment"

-- imagine that! a cap ex that requires a few years until it repays dividends. Long term investment is a concept that mom's basement day traders cannot understand.

"Panasonic’s rechargeable battery division is under the corporate microscope already and targeted for margin increases, not compression"
-- Oblivious to the idea that you typically increase margin by lowering costs -- just do so faster than price is lowered.

"If the Model 3 is not profitable, Tesla should establish itself as a public good provider worthy of “prop-up” investment by the government"
"Tesla should not be managed, valued, or reported by its ability to generate profit, and consequently it should attempt to seek tax shelter as a non-profit or religious organization as quickly as possible"
-- So massively oblivious to the reality of how these things work. Suggests it was someone who recently took a social enterprise course (I thought they only taught in business school -- but now apparently in high school as well).

"Tesla is contributing to this inequality, as it is exhausting its tax credits on the luxury Models S and X"
-- again trying to spin an obvious positive into a negaitive. Tesla gets more revenue per car, and thus more revenue per tax credit than anyone else. by multiples. An obvious win for Tesla. GM cannot even fathom selling six digit cars. But Tesla does it in circles around GM.

Ends with quoting Joni Mitchell.

Really bizarre. And gives me comfort that the short case is obviously, transparently, laughably so pathetic.

Devonshire Research Short Tesla Motors Inc

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