The "Is Tesla Going Bankrupt?" thread

[sakimano]

Tesla has gone to great lengths to integrate vertically so they can enjoy relatively large margins on their vehicles, and has installed substantial manufacturing capacity and vehicle charging capacity. Other automakers have actually warned their shareholders that the electric revolution will cut their margins, and as such their investments in manufacturing capacity pale in comparison to Tesla. These automakers are also relying on "co-ops" to handle their charging networks, which can only end badly. As such, if the electric revolution catches on in a big way, Tesla is likely to end up with a large share of the vehicle market. And even if non-Tesla electric vehicles are worthy, Tesla's competitors won't have enough manufacturing capacity to satisfy demand, and the experience taking a non-Tesla electric vehicle on a road trip will be anything but pleasant.

OK but where's the math supporting the price you're paying and your anticipated return? Where's the math behind what you anticipate that business earning per share making your $250 investment deliver an acceptable payoff.

Lots of people believe what you outlined above but my concern is those assumptions, if they all turn out to be reality, might be what makes tesla worth $250 in 2028. Paying $250 today for a stock that will be worth $250 in 2028 doesn't make any sense.

That's why I'm asking what people's financial justification for being a Shareholder at today's price is.

My concern is that many people are buying shares without understanding the economics of the underlying business or how to value a business. This comes with little regard for the price they're paying. Same goes for a big part of the market these days. When these companies have largely all gone up for 7 years many people become complacent. A significant market correction of 20% or more (broad market) will likely test those people's mettle.

 

[AZ Desert Driver]

in my conversations with reservation holders most were hoping for a $25,000 Model 3. $35,000 less the tax credit, less state incentives. That car does not yet exist. None of them fully understood the FIT, instead thinking it could be applied at the time of purchase. We know that is incorrect just as the state incentives must be applied for after the purchase. None of the people I have met are able to afford an $800 per month auto expense including insurance. I suspect most will not have a $7,500 tax liability either. Sadly most of the facts were not fully understood until after people placed their reservations thanks to a press corp who also had few facts but continue to tout the "$35,000 Model 3". That probably accounts for many of the 63,000 cancellations as of last summer and many more since then.

As I look at the data base you selected for your opinion - folks hoping for a $25,000 car, folks not understanding the tax rebate, folks not able (not in the income bracket) to buy a quality car, folks who might belong in the only-used-car market. These may not be the folks to use for developing an opinion about the future of a start-up company with tremendous assets and future worth that is not reflected in pedestrian economics.
In my case, I've started several companies and developed them from garage-based quirky ideas into $100,000,000 operations. I cant claim any billion dollar ones, but I can claim several multi million ones. None are car companies. All required risk taking imagination and I had to weed out those that could not make the leap. If I kept someone who was a paycheck-to-paycheck fellow, that vision distance would not have been useful to the enterprise.
I think you need to find a better data base before you decide if Tesla is a $250 stock. Look at what (we) stock holders decided to pay Elon Musk. THAT is the type of vision, imagination, risk taking attitude a startup needs. The stock market analysis you are using is missing the boat by a star-craft launch.

 

[EinSV]

<snip>
Sadly most of the facts were not fully understood until after people placed their reservations thanks to a press corp who also had few facts but continue to tout the "$35,000 Model 3". That probably accounts for many of the 63,000 cancellations as of last summer and many more since then.

Your conclusion (highlighted) is very misleading and as someone who publishes frequently on Seeking Alpha touting your short position on TSLA stock you must know better.

As Tesla explained in August 2017, after counting cancellations (natural over 1.5 years), net reservations had increased to 455,000 from 373,000 in mid-May 2016, an increase of 82,000.

The Wait for the Tesla Model 3 Just Got A Lot Longer
Tesla has 373,000 Model 3 reservations as of May 15, after 8k cancellations and 4k duplicates

In early February 2018, Tesla provided an update that net Model 3 reservations remained stable through the end of 2017 and then increased again in early 2018 as the Model 3 racked up positive reviews and became available in stores:

Despite the delays that we experienced in our production ramp, Model 3 net reservations remained stable in Q4. In recent weeks, they have continued to grow as Model 3 has arrived in select Tesla stores and received numerous positive reviews, including Automobile Magazine’s 2018 Design of the Year award. http://files.shareholder.com/downlo...A-CB3CDC1B919F/TSLA_Update_Letter_2017-4Q.pdf
​

So as of the latest report, even after reservationists were well aware of both pricing options and delays, net Model 3 reservations were increasing, not decreasing.

 

[jackbowers]

what's your base case for being a shareholder at $250/share? Not sure what your cost was but assume you were evaluating your position today and had to support it in front of the investment committee.

What do you say?

Thanks

Tesla is a 10-year play. It has potential in four major industry segments (autos, industrial equipment, energy and transportation). The auto/truck business could reach 10% market share and earn margins twice that of Toyota, making it worth $350 billion alone. The industrial battery business could rival GE’s power generation business. The solar and ridesharing initiatives are wild cards at this point but they have potential to expand Tesla’s market share in autos/trucks by appealing to customers who wouldn’t normally consider going electric.

Don’t know my exact cost but all of my shares were purchased prior to 2012.

 

[AZ Desert Driver]

Tesla is a 10-year play. It has potential in four major industry segments (autos, industrial equipment, energy and transportation). The auto/truck business could reach 10% market share and earn margins twice that of Toyota, making it worth $350 billion alone. The industrial battery business could rival GE’s power generation business. The solar and ridesharing initiatives are wild cards at this point but they have potential to expand Tesla’s market share in autos/trucks by appealing to customers who wouldn’t normally consider going electric.

Don’t know my exact cost but all of my shares were purchased prior to 2012.

Jack- your my kind of guy. Vision, risk taker, comprehensive evaluation of competition. and fellow shareholder on a 10 year play. Maybe we will both loose our investment, but -by definition - we have to assume things will be better in the future.

 

[Joeski1]

I'm not sure this would even matter to someone leasing.. you don't own the vehicle.. you are renting.. if TESLA goes belly up.. there will still be service facilities available . they may stop making vehicles for a time.. but who cares?
Make your lease payments.. then dump the car back on the bank.
What's to lose?7
A waste of a thread to me.
If there is a good thread debating outright ownership into month 37 and beyond.. and assorted costs after 3 years of leasing... vs. leasing new.. or buying CPO w/100K built in warranty... please LMK..
Best!

 

[Mario Kadastik]

Who would buy them and why? Price would have to be REALLY low and there would have to be actual viable path to profitability, which Tesla hasn't managed a single year of. They've racked up over $4.5 billion in net losses, including their few profitable quarters. Debt levels per their last SEC filing is past $10 billion.

Tesla - Annual Report says "As of December 31, 2017, we and our subsidiaries had outstanding $10.17 billion in aggregate principal amount of indebtedness (see Note 13, Convertible and Long-Term Debt Obligations, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K)..."

Companies don't like to throw good money after bad.

Why do you think the money was bad? Did you think Tesla burned it on hookers and drugs? No they took the money and invested it into factories and production lines. These are tangible assets.

And it's really easy to do the math.

100k S+X @ 25% GM and ASP 100k is 2.5B
500k 3 @ 25% GM and ASP 40k is 5B

That's 7.5B gross profit per annum with S, X and 3 lines running full stint. Even removing SG&A, R&D etc it'll still be billions of profit per annum so that 10B debt is peanuts.

 

[kWh]

Anything is possible but note-
-sometimes, a company can go a long time w/o a profit, like amazon- he is not quoting a law of thermodynamics
- a small hedge fund, $25M
- he is making bets against the Tesla share price, hardly an unbiased observer

 

[mos6507]

The major car companies are already pivoting towards EVs. None of them need to buy the remains of Tesla to continue what they started.

In retrospect, the Solarcity buyout (or bailout more likely) was a serious strategic mistake. It stole "runway" from Tesla that could have been saved for the Model 3 ramp. They could have used that buffer to absorb the journeyman mistakes Tesla was bound to make during this ramp. Instead they really didn't have any room for error and since they have stumbled, they're being pushed to the brink. I think hubris is the root problem here, as Musk doesn't seem to anticipate the teething pains, hence his pattern of overpromising and underdelivering. I mean, he only coined the term production-hell quite late in the game.

I think those saying Tesla has no chance of going under are really just as biased as those they accuse of being shorts. The truth is always in the middle of the two extremes. The executive turnover at Tesla is a canary in the coalmine and I think a lot will be revealed about how much they are actually sweating over there, directly or indirectly, in the earning's call.

 

[mos6507]

You are comparing a mature company with mature /depreciating manufacturing to a startup with heavy infrastructure needs. apples/oranges.

Faraday Future is another startup with heavy infrastructure needs. Why aren't those needs being met?

Point is that a startup needing funds doesn't mean they will automatically get those funds. Anyone who has watched Shark-tank knows that investors need to determine whether the money thrown at the startup will payoff or be wasted through mismanagement. A good idea alone isn't worth much. It's about EXECUTION.

There is a strong case to be made now that Tesla has poor execution, thanks to the botched Model 3 ramp and various reports about chronic quality-control issues in and out of the factory (something that was already harming the brand prior to the 3).

Once a company has been given a lot of money and appears to have squandered it this way, it discourages investors from throwing good money after bad.

 

[Joer293]

Here is what happens in a worst case Tesla bankruptcy today. They sell off all vehicle production to Daimler Chrysler. Then restructuring Tesla Energy into Panasonic “virtual power plant”. Tesla energy is worth 3x the profit of transport. We’d lose cars and gain cheap sustainable electric grid.

If Tesla hit bankrupt this year, it basically means they get extended repayment terms on their loans, or new low interest loans become available for them in exchange for losing some control aspects.

 

[Aljohn]

A few years ago, my "Financial Advisor" at a major brokerage company told me I was STUPID for having Tesla stock, because there was no upside to the then $200/share price. I didn't object to her opinion on the stock, but calling me stupid ended the meeting and I had her removed from being my advisor. Since the firm removed her entirely. Since her pronouncement about Tesla stock, I made (actual cash out) $25,000+ with Tesla stock.

I attentively listen to every investor call -- to gain any insight to what may be coming and the discussions with Tesla executives. It is always interesting to hear the various analyst questions and responses. It is clear on these calls that the analyst are ignorant (not in a demeaning way) of manufacturing, supply chain, robotics, etc. They are correctly focused on Sales, deliveries (one in the same for Tesla since they only count actual delivery to customers) and financials as they should be. I recall one that thought if 5,000 Model 3's a week was doable at a profit, why not advertise heavily and ramp to 10,000 a week -- no knowledge of the 10's of thousands of parts and suppliers would also have to double their outputs, shipments, etc. in a "just in time world"--not to mention there is a 2+ year backlog.

There are always naysayers, whether influenced by Big-Oil, ICE manufactures, stock shorters, or portfolio reasons who "trash" Tesla. Take with a grain of salt. I would/will continue to choose Tesla products. My bet is on Tesla !!

 

[Ronist]

Don't forget that Tesla has rescued SolarCity before. I'm not saying SpaceX will buy out TSLA but it has enough cash to help out TSLA with a deal if they want to.

 

[dhrivnak]

Who would buy them and why? Price would have to be REALLY low and there would have to be actual viable path to profitability, which Tesla hasn't managed a single year of. They've racked up over $4.5 billion in net losses, including their few profitable quarters. Debt levels per their last SEC filing is past $10 billion.

Tesla - Annual Report says "As of December 31, 2017, we and our subsidiaries had outstanding $10.17 billion in aggregate principal amount of indebtedness (see Note 13, Convertible and Long-Term Debt Obligations, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K)..."

Companies don't like to throw good money after bad.

Now, if most/all of the debt were wiped out and what's left could be profitable.... Or, maybe you're thinking that the buyer would just scrap anything to do w/vehicle manufacturing and development and just be a servicing/support company for existing Teslas?

Maybe I am missing something but it seems like Tesla has three best in class vehicles, a state of the art manufacturing plant that is now able to churn out over 150,000 top notch cars a year and a state of the art battery plant. So I believe there debt to be investments in a future. My cash flow was very negative when I bought my house but years later the house turned out to be a solid investment.

 

[CuriousSunbird]

Who would buy them and why? Price would have to be REALLY low and there would have to be actual viable path to profitability, which Tesla hasn't managed a single year of. They've racked up over $4.5 billion in net losses, including their few profitable quarters. Debt levels per their last SEC filing is past $10 billion.

Tesla - Annual Report says "As of December 31, 2017, we and our subsidiaries had outstanding $10.17 billion in aggregate principal amount of indebtedness (see Note 13, Convertible and Long-Term Debt Obligations, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K)..."

Companies don't like to throw good money after bad.

Now, if most/all of the debt were wiped out and what's left could be profitable.... Or, maybe you're thinking that the buyer would just scrap anything to do w/vehicle manufacturing and development and just be a servicing/support company for existing Teslas?

BYD and BAIC would be interested, but I think they wouldn't pay more than about $10-15 billion, so you would have to go through Chapter 11 to get rid of a lot of the debt.

 

[CuriousSunbird]

Anything is possible but note-
-sometimes, a company can go a long time w/o a profit, like amazon- he is not quoting a law of thermodynamics
- a small hedge fund, $25M
- he is making bets against the Tesla share price, hardly an unbiased observer

They can go without profits, but not without cash.

 

[CuriousSunbird]

Here is what happens in a worst case Tesla bankruptcy today. They sell off all vehicle production to Daimler Chrysler. Then restructuring Tesla Energy into Panasonic “virtual power plant”. Tesla energy is worth 3x the profit of transport. We’d lose cars and gain cheap sustainable electric grid.

If Tesla hit bankrupt this year, it basically means they get extended repayment terms on their loans, or new low interest loans become available for them in exchange for losing some control aspects.

But still the shareholders would be wiped out.

 

[pdq]

Okay so I get called a Tesla fanboy all the time here but... I'm seriously concerned about this article I just read and I realize I don't know enough about what I'm reading to know if it's FUD or real...

Tesla is just months from a total collapse, says hedge-fund manager

My Model S lease is up in November, I only have a few months left before I have to order my next Tesla... Is there going to be a Tesla in a few months or am I grossly overreacting to one article?

Thanks,
Jeff

Jeff:

Those concerns aren't limited to just that one hedge fund manager. And, for the record, I don't own the stock and I haven't shorted it, so I've got no dog in that hunt. But, 6 months ago the stock was in the 380s, and now it's in the 260s. Moody's just downgraded their bonds to junk status, which is going to make it tougher and more expensive when they need fresh cash, or have to refinance existing debt.

I've worked in the financial services industry my entire career, had Series 7 and 63 Broker licenses for many years and have done corporate acquisitions, so I'm pretty comfortable at analyzing a company's financial reports. Wall Street and Moodys are simply reacting to Tesla massive cash burn rate, ballooning debt, and embarrassing production delays of the M3. They are losing money. I know people don't like to face that reality, but it is what it is -- just cold hard numbers.

Those guys don't get caught up in the charisma of Elon -- they are in it to make money in investments and avoid losses. Period. Do I agree with the article saying they are a few months from a collapse -- no -- I think that's ridiculous. Do I think that's a possibility 12 - 18 months from now as other car companies bring many new cars to market and they have competition and pricing pressure? Yes.

Whether Tesla as a company succeeds or fails, Elon's greatest legacy will be his revolutionizing the auto industry and forcing every car manufacturer on the planet to go all-electric. Incredible accomplishment.

 

[lunitiks]

Tesla BANKRUPT?

 

[gregd]

Tesla BANKRUPT?

Um, no. Read the thread. It's Click Bait...