Nonsense from John Petersen

[pGo]

A simple request: can we close this thread now?

 

[imherkimer]

Why should this thread be closed? As long as J. Petersen keeps spouting indefensible nonsense, there is adequate reason to debate and rebut said nonsense. When he stops the thread will stop, right?

 

[JRP3]

Yeah, why stop the fun? :biggrin:

 

[gg_got_a_tesla]

Yeah, why stop the fun? :biggrin:

Yeah, I'd actually invite him to post over here on TMC

 

[jerry33]

The main problem is that if threads such as this one cause more people to click on his site, that is just paying him to write more nonsense.

 

[bonnie]

I see this thread as a place to keep all the conversation about JP in one place, rather than popping up in different threads. I hate seeing him get more clicks, too ... but little guy needs the money. His investments aren't doing so well.

 

[blakegallagher]

the penny a click truly is worth seeing the FUD he is spouting .... while his FUD use to actually be damaging to company now I selfishly love it. I do feel bad for those that short based on his advice but that makes me more money .... I know .. .not the best way of thinking but hard not to enjoy his post at this point ....

 

[Julian Cox]

• Tesla's Non-GAAP Fairy Tale [View article]

Dreams are wonderful and should be encouraged whenever possible. Businesses, on the other hand, are valued on the basis of accomplishment rather than aspiration and while Tesla has accomplished a lot, it's not even close to meriting the current market value of its stock.

Whenever management of a company has to fluff up their performance by resorting to the sophistry of reporting corporate borrowings as corporate revenues you know the problems run deep.

Tesla's non-GAAP numbers are a fairy tale that butchers generally accepted accounting principles and several fundamental tenets of accounting theory.
Aug 10 04:47 AM | 2 Likes

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Libel. The company is clearly adhering to a Tech Adoption Curve model and justifies its stock price on that basis. Reporting of results confirms it. Correctly removing the pure technicality of lease accounting from management accounts and NON-GAAP numbers is absolutely correct. It is financially irrelevant. If anything converting a residual guarantee to the recovery of a half-price Model S is a profit event in combination with selling a new car and reselling the old one with value added in the forms of factory refurbishment and upgrades.

• Tesla's Non-GAAP Fairy Tale [View article]

The risks investors assume away as trivial are usually the ones that come back to bite them.
Aug 10 04:43 AM | 2 Likes

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Lease accounting is not assumed away, it can be demonstrated to be meaningless.

• Tesla's Non-GAAP Fairy Tale [View article]

Tesla delivered more cars in Q2 than they did in Q1.

The reason their revenues fell by over 20% is that a big chunk of those sales were under the finance program where Tesla and Musk effectively co-signed the customer's note and promised to assume all the back-end risk on the contract.

When a manufacturer leases a product instead of selling it GAAP requires the manufacturer to recognize revenue as it's received from the customer. Tesla's fairly tale accounting compressed all future customer revenue and about $75 million of their borrowings into the current period and called them both non-GAAP revenue.
Aug 10 04:39 AM | 3 Likes

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This is simply not true. The customer is entirely responsible for his or her obligations to Well Fargo and US Bank without reference to Tesla, unless it be in a short window of 3 months mid contract.

The vehicle is entirely sold in cash to the customer in full and final, and the banks thank Tesla for the referral to them as a finance customer by paying Tesla a finance referral fee. Tesla is not owed a penny by the customer nor does it owe a penny to the banks unless it gets an object of equal or greater value in return for it during a 3 month window. If the object is devalued in any way then the liability for that rests with the customer and his insurers. The statements above are a serious (malicious) misrepresentation of the facts.

• Tesla's Non-GAAP Fairy Tale [View article]

I think you missed the point.

I've never had a short position in Tesla or any other company.

This article is all about Teslas's cynical willingness to ignore centuries old accounting standards to make their quarterly numbers look better for naive stockholders who seem willing to accept the sophistry that lease accounting is an optional formality rather than a fundamental requirement. Fairy tale accounting is a very bad thing in a public company, particularly in a public company that's as grossly overvalued as Tesla.
Aug 10 04:24 AM | 19 Likes

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It is an entirely appropriate representation of management data that matters and investment data that relates to cash flow. It is impossible to discern an impact of lease accounting using DCF modelling for example, precisely because it is irrelevant. Repeatedly stating otherwise is to mislead.

• Tesla's Non-GAAP Fairy Tale [View article]

Their warranty provisions are generally in line with the major automakers, which may well become an issue. Unfortunately it's a minor issue in a company that has many larger and far more interesting fundamental problems.
Aug 9 09:00 PM | 4 Likes

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Libel. No such issues exist.

• Tesla's Non-GAAP Fairy Tale [View article]

It's pretty obvious that many commenters disagree with my opinion of the likely resale value of a 2013 Model S three years from now.

I have no interest in debating who's opinion is right or wrong because the resale market won't give a damn what we say in the comment section to this article.

Investing is all about weighing potential gains against potential risks and as long as investors have enough information to make up their own minds, my opinion doesn't matter.
Aug 9 06:06 PM | 2 Likes

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Speculating damage to the business as a result of honouring the resale guarantee is just that. The only thing that could possibly harm the business in this case is that the value of the asset in 3 years is substantially below the residual guarantee, and that a significant quantity of customers will chose to exercise that option. If the value is higher and/or the conversion rate is negligible then the issue is entirely irrelevant. Speculating otherwise with assertion that damage is likely, is dishonest.

• Tesla's Non-GAAP Fairy Tale [View article]

Successful investing requires an honest and skeptical look at all the facts, whether we like them or not. I offer my observations of fact and one man's opinion of what those facts should mean. While I've never been any good at predicting when an inherently irrational market will wake up and smell the coffee, I'm batting a thousand when it comes to identifying stocks that are irrationally over-valued.
Aug 9 05:40 PM | 4 Likes

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Irrelevant, and contradictory to an appalling track record (dump Tesla, buy Exide and Axion is not a source of credibility), whilst arguing with delusion of grandeur against folk with genuine understanding and an exemplary track record: http://www.liionica.com/Julian_Cox_R...A_Analysis.jpg

• Tesla's Non-GAAP Fairy Tale [View article]

Axion's market is irrationally pessimistic to the same extent that Tesla's is irrationally optimistic. In time both securities will find their true value and the long suffering Axion longs will be rejoicing while obnoxiously arrogant Tesla longs are licking their wounds.

In the short term markets act like voting machines and Tesla clearly has voter appeal for an information light audience. In the long run markets act like weighing machines and Axion will so just fine.

The essence of successful investing is buying stocks when they're obscenely under-valued and selling them when they become obscenely over-valued. You might want to give it a try ;-)
Aug 9 05:35 PM | 3 Likes

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This is an opinion that is not aided by the authors track record at all having ridden over valued AXPW from 40 to 14 cents, a loss almost as significant at TSLA gains in the same duration.

• Tesla's Non-GAAP Fairy Tale [View article]

Many thanks for the kind words. I don't generally expect many when I write about Tesla.
Aug 10 11:23 AM | 3 Likes

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And never learn.

• Tesla's Non-GAAP Fairy Tale [View article]

I take a more cynical view of the pricing changes. Their guarantee is 50% of the base price plus 43% of options. So cutting the base price and allocating more to options reduces their exposure on the residual value guarantee. It's not much on a per car basis, but when you start thinking in terms of 1,500 to 2,500 financed cars per quarter every little bit counts.
Aug 10 11:23 AM | 2 Likes

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It is common sense to do what it takes to satisfy customers and banks to make finance available while retaining the ability to generate shareholder value from the residual transaction if any customer is interested during the window of opportunity to use it.


Tesla's Non-GAAP Fairy Tale [View article]
I don't disagree that supply constraints will change prices and give rise to substitutions where possible. I will observe, however, that cost increases from supply constraints flow through the entire value chain and end up being reflected in the final cost to the consumer.

The dynamic you're arguing is antithetical to popular urban legend respecting plummeting battery cost and skyrocketing performance.

I don't care what you choose to believe but you should make sure your beliefs are logically consistent.
Aug 10 11:20 AM | 5 Likes

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The kind of desperate nonsense that is not worth dignifying with a response.

Tesla’s pricing is purely demand-lead. As is the pricing for the Volt and Leaf, the latter being discounted past the point of losses because unlike Tesla, the premise for their existence is flawed.

• Tesla's Non-GAAP Fairy Tale [View article]

Non-GAAP adjustments have historically been used to eliminate the impact of non-cash expenses like stock options and depreciation.

They have never before been used to classify corporate borrowings as corporate revenue. Fairy tale is the kindest word I can imagine to describe my view. When the stock price tanks and investors who bought at $150 based on fairy tale numbers file a lawsuit, the class action lawyers will use far less polite terms.
Aug 10 11:15 AM | 6 Likes

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Libel. Tesla is not a borrower in connection to Tesla Finance, it is merely a second in line guarantor of a residual value that is in the first instance guaranteed by the customer to the bank. Nor is there any cause for TSLA to tank because it is progressing without mis-step along an exponential Tech Adoption Curve.

• Tesla's Non-GAAP Fairy Tale [View article]

The GAAP numbers were most certainly in the Form 10-Q Tesla filed with the SEC. Oddly enough, the fairy tale non-GAAP numbers were not in that report. I guess the non-GAAP fairy tale is only good enough for press releases directed at the hopelessly naive.
Aug 10 11:06 AM | 6 Likes

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You have to admire it, why go looking for trouble with the IRS. If the GAAP lease accounting rules are so poorly written that it is not possible to exclude businesses that neither lend assets nor money, then why not take the tax loophole that is forced upon you.

• Tesla's Non-GAAP Fairy Tale [View article]

I assume nothing. Tesla is loudly trumpeting their planned Gen3 car that will sell in six digit annual volumes at a price in the $35,000 range with only minor sacrifices in size, range and appointments.

The issue on the table is what will the resale value of a 2013 Model S be in 2016 if EV technology advances quickly enough to make the Gen3 a reality? If it happens the 2016 Model S will be awesome, the Gen3 will be semi-awesome and the 2013 Model S will be oh so yesterday.

I don't care what you choose to believe, but make sure your beliefs are logically consistent.
Aug 10 11:04 AM | 4 Likes

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The awesome advances will be in peripherals (such as the battery) that are just as applicable to the 2013 Model S as it is to the 2016 Model S. It’s the same car, suggesting otherwise is misleading past to point of dishonesty.

• Tesla's Non-GAAP Fairy Tale [View article]

The last time I checked the guarantee it was 50% of base plus 43% of options. The guarantee runs to both the purchaser and the bank that's providing the financing and it's backed up by both Tesla as an entity and Mr. Musk individually.

When Tesla properly uses lease accounting it recognizes a little better than 50% of the vehicle price spread over 36 months. The rest of the revenue will be realized when Tesla sells the used car.

The non-GAAP report moved all 36 months of customer revenue into the current quarter and threw in the balance Tesla hopes to receive in three years when it sells the used car and repays the lenders.

Under the circumstances I think "Fairy Tale" is a generous description.
Aug 10 06:55 PM | 0 Likes

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Of course. Tesla receives all of the revenue immediately. One can speculate whether or not anyone will sell Tesla a car at 36 months, if they do and then Tesla sells it on at par – then at all times Tesla had all the money including the profits on it on day 1, and the turn around of the residual deal is of no value or relevance. The only likely relevance is that Tesla will actually turn a profit on the residual deals and also sell a lot of new cars at the same time.

• Tesla's Non-GAAP Fairy Tale [View article]

Many thanks for the kind words. They're few and far between when I write articles like this one that tell the unvarnished truth.
Aug 10 06:49 PM | 2 Likes

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Unadulterated horse **** more like.

• Axion Power Concentrator 259: August 10: Two Axion Forbes Articles By Tom Konrad; John Petersen On The PIPE Mechanics And Incentives [View instapost]

And a steamy afternoon on the Florida gulf coast.
Aug 10 05:48 PM | 1 Like

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Irrelevant.

• Tesla's Non-GAAP Fairy Tale [View article]

At June 30th Apple had $199.9 billion in assets, $76.5 billion in liabilities and $123.4 billion in equity. Their market cap was $412.9 billion.

To calculate BS to Book you subtract equity from market cap ($412.9-$123.4) which gives you a blue sky value of $289.5 billion. When you divide blue sky by stockholders equity, you get a BS to Book of 2.34.

I sure hope this calculation matches the one I did earlier.

EDIT: The two numbers are off by a couple tenths of a point but it's not a big enough difference to make me eager to run down the error.
Aug 10 05:43 PM | 1 Like

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Put the intellectual property and brand value on the books and the situation changes rather dramatically. A company like this runs profitably and lean on its core cash generation cycle, while spending hard on things that add value instead of piles of inventory. That is the whole idea.

• Tesla's Non-GAAP Fairy Tale [View article]

A few paragraphs up I told you:

"I don't know the intricacies of accounting between automakers, dealers and financiers, but unless other automakers are effectively signing the customer's note as a co-maker where the customer is responsible for paying the first three years and the automaker is responsible for paying the balance and selling the used car, then the issue doesn't exist for them."

In my response to Don I was talking about manufacturers of durable goods as a class, not automakers in particular. If an automaker is doing what Tesla is doing then they're using lease accounting to report their results.

What nobody else on the planet is doing is presenting non-GAAP numbers that assume away essential accounting principles, compress future lease revenues into the current period and magically convert corporate borrowings into revenue.
Aug 10 04:53 PM | 2 Likes

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This is a poor performance even as a bean counter. If one cannot understand that the money is in the bank on day 1 and that the back end of the lease account can be recycled for an irrelevant zero-sum-gain (at worst most likely), then one has truly missed the point.

• Tesla's Non-GAAP Fairy Tale [View article]

Stock prices are like pendulums that swing slowly back and forth between under-valued and over-valued. In very rare cases the swings are so massive that they're fairly classified as irrational bordering on psychotic. Tesla is at that borderline between irrational and psychotic over-valuation. Axioin is at that borderline between irrational and psychotic under-valuation. In the fullness of time Tesla's price will collapse to an objective fair value and Axion's will rocket to an objective fair value.

In the interim I'll have to continue to endure digressions from fanboys who refuse to address the subject matter of this article; Tesla's Fairy Tale non-GAAP earnings.
Aug 10 04:46 PM | 2 Likes

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Petersen has such a poor track record of forecasting the behaviour of stocks that he should be constrained from commenting on the subject. The question of non-GAAP earnings is answered.

• Tesla's Non-GAAP Fairy Tale [View article]

My all time high is over 1,000 comments so I know that it can happen. Since I haven't worked with any mining clients for over 20 years I'd be real reluctant to wade into the morass of their accounting.
Aug 10 04:40 PM | 3 Likes

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Irrelevant.

• Tesla's Non-GAAP Fairy Tale [View article]

Tesla's business model falls squarely within the requirements of the leasing rules which recognize that the customer has responsibility for the first three years of payments and the manufacturer has responsibility for the balance of the loan and disposing of the collateral. It's nothing new. Manufacturers have done it for years. The only thing different about Tesla is the fiction that it can ignore the requirements of lease accounting and treat everything as a sale.

The SEC doesn't throw flags like a football referee. They take their time to read and ponder before acting. Unless they're completely brain dead, this will be a topic of conversation in the office of the SEC's Chief Accountant.
Aug 10 03:36 PM | 2 Likes

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The obvious point is that the Sale for cash is factual and the uptake on the residual is in the realms of pure speculation.

To expand on this for the avoidance of all doubt:

The obvious point is that the Sale for cash is factual, Tesla is never the recipient of any lending, the debtor is the vehicle customer and the customer is the owner of the security on which the bank has a lien. Not Tesla (you cannot look through the customer or double count this). Secondly uptake on the residual is in the realms of pure speculation. At the limit it is possible that nobody sells a vehicle back to Tesla. In addition to these obvious points, the financial relevance of the residual is more than likely to be nil to positive in Tesla’s favor. It is therefore irresponsible to promote it as fact that damage will result when that is not true.

 

[Julian Cox]

" SA FAN,

" To cite a GAAP liability without full disclosure of the speculative nature of that having any relevance in terms of percentage of execution and without full disclosure of the fact that in each instance there is an equal and opposite asset (if not a profit to be made) is fundamentally misleading. "

PLease expand on what you are trying to say here. The asset is the cash received, offset by a liability for cash received which may have to be paid back to the lessee. Please expand on what you are saying. At this point, I'm not getting what's "fundamentally misleading". "


Someone just asked this question on JP's thread and I think it gets to the heart of the confusion JP is trying to create.


1. Tesla sells car for 100% cash and the customer owns the car 100% (with a lien to the bank).

2. Tesla set's up a contingent liability for circa 50%.

3. Regards "may have to be paid back to the lessee" - Yes, but of course contingent upon the customer giving the Asset of the 3 year old car that he owns to Tesla.

4. Unlike a normal lease, it is not a case of Tesla owning the car until it is paid in full. As correctly identified in Non-GAAP, the car is sold to the customer on day one at full whack.

 

[tslafan123]

Julian, SA FAN lost write access on SA.

 

[Julian Cox]

Julian, SA FAN lost write access on SA.

Yup, like that wasn't going to happen. Please note I did not put him up to it and I did try to warn him. Having said that I am sure he knew what he was doing - and I salute him for it.

Hopefully they will switch him back on in a week if that is what he wants.

I find it absolutely incredible that Seeking Alpha would risk its reputation supporting Petersen to the extent of banning folk who correct him.

 

[Julian Cox]

John Petersen Comments (23680)

I assume nothing about the future and neither do Tesla's auditors.

They look at legal rights and duties that control economic relationships and the hypothetical behavior of a customer three years in the future is meaningless. 11 Aug, 07:29 PMReply

BTW this is the check mate:


NON-GAAP purchase = Actual auditable behavior of a customer.
GAAP repurchase = Hypothetical behavior of a customer three years in the future (faced with a 3 month window of opportunity half way through a 72 month lease to sell to the market's lowest bidder).

NB: "I assume nothing about the future": Really? Then why the attempt to persuade others to do so.

 

[sub]

I find the comment sections on Petersons SA articles to be highly entertaining. At this point, he has nothing more to lose so why would he admit he was wrong? Better to stick to his opinion and hope one day a miracle happens and he is proven even slightly correct so he can gloat.

 

[Electroman]

Unfortunately JP is going to have the last word, because he is having a monologue.

At this time I am fairly convinced that he himself is sure that no one takes his views seriously and all the page hits and hundreds of comments are the prime motivation for him to churn out the gibberish month after month. Seeking Alpha is happy as long as they get the people to spend time on their forums and get their platform a more
wider reach. In short JP is just trolling and baiting by making a mountain out of a molehill.

Remember the nonsense he wrote in Q4 on how the $40k Sig deposits are double counted and the SEC is going to come heavily on them and the house of cards is going to fall !!

 

[Discoducky]

So when is the last time a company conspired with SA to push another company to file a defamation suit? Turns out it was March 13th of this year: Longwei Petroleum Files Defamation Lawsuit in Federal Court in Response to the Geo Investing Report - Yahoo! Finance

 

[electrictorque]

He keeps supporting AXION power. Looks like as per his Linkedln page, he used to work for AXION and may have some stock and it tanked.

 

[dsm363]

Even comments simply saying JP picked the wrong stock and gave bad advice are considered a violation of the policy there and get deleted.

 

[Julian Cox]

He keeps supporting AXION power. Looks like as per his Linkedln page, he using to work for AXION and may have some stock and it tanked.

That is actually the whole point. He got a large holding in Axion Power when he worked there and hung on to it as it declined while heavily promoting that others should consider it a buying opportunity. Particularly egregious is the 3 year (maybe more) use of the BMW name as a prospective large customer for the technology with a deal perpetually "almost in the bag".

Axion is a State-Grant funded play to develop PBC technology for use in automotive, it is effectively a lead acid battery technology with enhanced fast charging capability, the neat trick is that carbon plates can be substituted on a lead acid battery manufacturing line effectively not requiring a novel manufacturing process. The downsides are low energy density, self-discharge and not particularly good cost per KWh. Of these, self discharge makes it unsuitable for anything that needs to work after a user's discretionary period of rest. For example a car. The competitor to PBC is Lithium Ion and anything that makes Lithium Ion look like a better choice for automotive than PBC. It is a typical case of asking the wrong question, instead of asking what is the best way to power an EV, PBC is a solution in search of a problem it can solve. There may be other examples but to my knowledge the Laser is a pretty unique example of a technological solution that went on to find a market for problems it could solve in that order.

That brings us to Tesla. Tesla did ask the right question, they looked at supercaps, supercap LiIon combinations, prismatics (soft pouch cells) and round-cells and they chose wisely in the form of first generation Lithium Cobalt 18650s for the Roadster and second generation NCA 18650s for the Model S, the latter offering a stunning combination of price, power density, energy density, cycle life and manufacturing capacity. The 18650 is a form factor that lends itself to automation in production as well as pack assembly and is much easier than prismatic cells to incorporate into a point-source fire-suppression matrix because each cell has a physical structure that does not require more than two points of mechanical support within the pack assembly. Owing to the standardization of 18650 assembly lines, there is supply chain flexibility and price competition in the market and process automation lends itself to consistency of product properties and quality. Cost efficiencies are gained in prismatic cells towards the limits of cell size before yield-loss and variability become the constraining factor. It is also the case that ever-present manufacturing yield-pressure in the production of prismatics lends itself to an unhealthy dynamic between the manufacturer's production-line management and outbound QA pushing for the geographically distant customer to accept product that did not quite meet the intended specification and inbound QC requiring the manufacturer to accept the expense of yield-loss for faulty batches as well as liability for business delays and costs associated with customers waiting for goods built with cells that should have been perfect but were found not to be. The end result is a never-ending management task to resist supply chain pressure to pass the risk of reject-discovery on to the customer where reputation stands to be lost, not of the cell manufacturer but the EV producer. Six-Sigma methodology is served by automated cell production and low cost of discrete rejects, not large cells with low internal prevalence of problems with high degrees of economic pressure to pass them to the end user.

I digress. Tesla is a demonstration that Lithium Ion soundly trumps PBC in a commercial EV setting. That is what the whole JP fuss is all about. I think the best one can hope for is that AXPW actually folds and the catalyst for that is most probably BMW publicly stamping out the abuse of their company and brand name for luring investors into loss making investments in AXPW stock, something I am confident John Petersen does not have BMW's blessing to do.

 

[Dan5]

Julian,
I think you forgot something... AXPW also has competition with lead-carbon batteries too.

Have you ever heard for Firefly energy?

http://fireflyenergy.com/

Also AXPW went into PIPE funding and JP tried to spin it like it's a good thing. I would not consider a 10% chance of a death spiral a good thing.

 

[clmason]

What goes around comes around, Peterson is accruing quite a load of bad karma if you ask me. If he is not careful with his actions, a boat load of Teslanaires may buy up controlling interest in his coveted AXPW for pennies and liquidate the company just for the fun of it. Stranger things have happened.