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Tesla Stock

A friend just sent me a troublesome report from a private investor newsletter called the Stansberry Digest. Apologies for its length. Because it so inflammatory and contains material omissions (several of which I will post next), I was wondering if Tesla or any of you may have a well-reasoned response to this piece. By the way, I am a proud owner of a fully-loaded 2014 P85D, after trading in my early 2013 P85, and I just signed up for the Powerwall. I post the article here:

The Best Short Opportunity
The best short opportunity, of course, is a fraud. But they are rare and difficult to uncover.
But with luxury electric-car maker Tesla Motors (Nasdaq: TSLA), we have the trifecta: deadbeat, obsolete, and fraudulent.
Billionaire wunderkind Elon Musk and a small group of investors founded Tesla in Silicon Valley in 2003. The goal was simple – to popularize and mass produce an all-electric car that could replace the traditional combustion engine that has ruled the road since Henry Ford's Model T back in 1908.
Coincidentally, in 2008, almost exactly 100 years later, Tesla Motors introduced its first all-electric car, the Tesla Roadster. The Roadster became the first "highway-ready," mass-produced electric car... but it came with a big price tag. For the right to drive this car, you had to fork over more than $100,000. Despite its excessive cost, Tesla managed to sell more than 2,300 of these first-generation cars.
In 2012, it began selling a newer, more advanced luxury car – the Model S (in a nod to Ford's Model T). To date, Tesla has sold more than 70,000 of its Model S cars. Both the Roadster and the Model S are powered by expensive 1,000-pound lithium-ion batteries. The Model S base cost is around $70,000, but it can easily cost more than $100,000 with a longer-range battery and other add-on options. While exact figures aren't known, the costs of the batteries range from 25% to 50% of the cost of the cars. Keep this figure in mind...
Tesla's cars were obsolete before the first one ever rolled out of the factory. The cars will have minimal resale value, because after five years their batteries will be dead... completely dead and not usable.
Normally, a battery works by exchanging electrons from an anode to a cathode. But time, hard temperatures, and repeated recharging cause a battery's electrical and chemical potential to break down. A lithium-ion battery will have more and more of its lithium ions permanently stuck to the anode through its lifetime, gradually decreasing its capacity and limits an electric car's range. As the technology is relatively new, there is not yet consensus regarding the sustainability of lithium-ion batteries. Various studies – and the accounts of the early-adopter owners – provide widely varying results.
Generally, most commentators assume that after three years, a battery pack might be at 80%-90% its original charge, or less in extreme climates. So a 200-mile range might become a 170-mile range. Over the next couple of years, the rate of deterioration will accelerate. So these battery packs will need to be replaced after several years of use. And it won't be cheap for the owners.
Another factor making Tesla's cars obsolete is that they're impossible to use in the way that most people would use a large, fast road car. You can't easily drive the thing from New York to Florida because you have relatively few places to recharge the battery. You would have to plan out a special route. Plus it takes time to recharge them.
It takes a long time to recharge these cars. So I don't know how it could ever become something that you could do on the road or on the fly. It just doesn't make any sense. The way the company is presenting information to investors is highly misleading. We classify this as fraud.
As you recall, when we talk about shorting "frauds," we don't necessarily mean fraudulent in the legal sense. We mean that a company is being willfully misleading... often using complex accounting to obscure what is going on with its finances. In Tesla's case, we believe the numbers published and discussed with analysts – and widely reported by media outlets – are extremely misleading.
For instance, Tesla's CEO Elon Musk, who is a celebrity-playboy type, once said on his conference call with Wall Street analysts that Tesla had no plans to raise any additional debt or equity. And he said that Tesla will be profitable on its operating basis going forward.
Two weeks later, the company announced a huge debt-in-equity issuance. Again, I'm not accusing Musk of doing anything illegal. But if that's not talking out of both sides of his mouth... I don't know what is.
Generally Accepted Accounting Principles ("GAAP") form the legal road map for what publicly owned companies must report. Often though, companies will also report non-GAAP numbers to highlight certain attributes of their businesses.
Non-GAAP numbers are not necessarily a horrible thing. Warren Buffett – the paragon of investor transparency – provides non-GAAP numbers in his shareholder letter, for example. Specifically, Buffett breaks out certain noncash amortization expenses from the income statement. As he explains: "We present the data in this manner because (we) believe the adjusted numbers more accurately reflect the true economic expenses and profits of the businesses."
But what should you do when a company is providing non-GAAP numbers that are... well... extremely creative? We'd advise extreme caution. We have seen, time and time again, management teams that set out to fool shareholders with creative accounting. They inevitably end up fooling themselves and driving a business into the ground.
We believe Elon Musk and Tesla Motors are falling into this trap. Let's look at what they're doing to fudge their numbers and why. This is an example of a practice we consider misleading enough to be considered fraud...
The RVG Lease Program
Tesla offers a "Resale Value Guarantee" ("RVG") that allows buyers of the Model S to sell their cars back to Tesla after 36-39 months, regardless of the buyers' loan term. That buyback price is 50% of the original base purchase price of the 60-kilowatt Model S plus 43% of the original purchase price for all of the add-on options, including an upgrade to the 85-kilowatt battery pack.
The new buyback option removes the risk of obsolescence for a buyer of a new Model S and shifts the obsolescence risk squarely on Tesla. This is a great selling point for its customers since they think they don't have to worry about the battery or if the cars will hold their value. Tesla is guaranteeing it.
Many lauded this program as a groundbreaking way to sell cars. We think it's a great marketing idea and a really smart way for Tesla to motivate otherwise wary buyers to take the plunge. But is it really groundbreaking?
Accountants have a way of getting to the substance of a transaction. And in this case, they realized that – despite the fancy name – the RVG program is really nothing more than a lease. So for GAAP purposes, Tesla must account for these RVG deals as leases.
So assume a customer buys a car for $100,000 under the RVG program, and Tesla agrees to buy it back for about $48,000 three years later. In this scenario, on a GAAP basis, Tesla would recognize the net revenue of $52,000 ($100,000 received minus the $48,000 returned) over a three-year period. That's the period during which the gross profit was earned. And that's all that Tesla can hope to make from the deal.
But that's not how Tesla prefers to calculate it. In its non-GAAP reporting, Tesla treats the RVG transactions as sales, not as leases. In other words, it's taking credit for all of the revenue and profit upfront rather than over time. This treatment is only appropriate if all of the RVG customers decide to keep their cars at the end of the three-year term– which is an absurd assumption.
By making these adjustments, Tesla acts as if it has no further obligations to its customers. But remember, if its customers elect to sell their cars back to Tesla – and we believe almost all will – then Tesla will have to return a significant portion of this "non-GAAP revenue."
This bogus non-GAAP adjustment artificially inflates Tesla's revenue and earnings. In 2015, this adjustment added $1.2 billion (a 31% increase) to revenue and $310 million to net income. Without this adjustment, Tesla would have reported a 2015 non-GAAP net loss of $604 million. But with its accounting magic, it reported a net loss of $295 million.
A couple of things to keep in mind as you watch this RVG program ramp up and the cars start coming back.
First of all, Tesla could eventually have to spend hundreds of millions in cash buying back these used cars. Secondly, once it buys back these cars, it will have to sell them in the used-car market. If Tesla can't sell these used cars for what it paid to buy them back, then it will have to eat those losses.
We doubt Tesla will be able to fetch upwards of 50 grand for a three-year-old car with a depleted battery... especially with competitors like BMW entering the electric-car market with new cars that cost around the same amount as Tesla's used cars.
And then there's this interesting fact: Tesla itself expects to have its own brand-new$35,000 electric car on the market at some point in 2017. Why would anyone pay $50,000 for a used Tesla when the new model is $35,000? Sure, the $35,000 model will probably not be as fancy as the used Model S... but it will reportedly have a new battery that's going to be far better.
Clearly nobody – not us, and not Tesla – fully understands the dynamics of the 2017 Tesla used-car market. That's what makes its non-GAAP reporting so ludicrous and, in our minds, fraudulent. Tesla has no basis whatsoever to estimate the value of these used cars and plenty of reasons to believe it will end up being significantly discounted.
We could detail other "imaginative" things Tesla is doing to mislead shareholders, like using stock options and not accounting for it as an expense. But we think we've made our point on the company and its management's creative activities relating to finances. So, in our view it's fair to say these activities are highly misleading.
We've shown you that Tesla's management can't be trusted. We've shown you its business model is extremely challenged. Yet management continues to pursue growth that can't be financed from its operations, at the expense of its shareholders.
We've seen this act before during the last big tech-stock bubble. Remember the frauds at AOL and MCI WorldCom?
Both companies' management teams, armed with bogus accounting numbers and noncash earnings, convinced investors they were earning huge amounts of profits. In reality, they were spending a fortune on capital investments and losing billions every year. When the music stopped, the damage to shareholders was horrific – losses in the tens of billions of dollars for both companies.
What current investors in Tesla are forgetting is that, eventually, a business has to make money. Real money, not manipulated, non-GAAP earnings. Real earnings allow companies to expand without diluting existing shareholders. But Tesla is expanding by continuing to issue more debt and equity that dilutes its shareholders.
And Tesla's debt load is a whole other issue that we won't get into here. To sum it up, Tesla has plenty of debt no matter how you measure it... It's hard to say what an insurmountable debt load is for a company that doesn't have any real profits. It issued an equity offering to pay off the $400 million it owes the government, which is a sign that it's not really able to afford its debts.
In our view, Tesla (and many of today's high-flying tech stocks) have simply gotten capitalism backwards. Rather than using their businesses to reward their owners (the shareholders), the management teams at these companies use their shareholders to reward their customers and themselves. It's almost a new kind of socialism... shareholders volunteer for it (we believe) because they don't really understand who is holding the bag in the deal.
We recommended selling TSLA shares short in April, 2015 when they were trading for around $190. Unfortunately the share price continued to rise over the next few weeks and triggered our stop. We closed the position for a 21% loss in our model portfolio. But our thesis remained unchanged. And the market eventually agreed. Shares went on to slide soon after our stop loss was triggered. And shares now exchange hands for $166 – approximately 12% lower than our original entry price.

Mboni | February 23, 2016

As promised, posted below are my problems with the report above. As stated, I believe the article makes a number of false assumptions and material omissions. Full disclosure, I am an attorney with experience litigating class actions -- primarily antitrust class actions -- and in the distant past I litigated a few securities fraud cases.

First, to call Tesla fraudulent is to accuse it of knowingly violating the federal securities laws, particularly when the accusation is predicated on GAAP violations. Yet, despite the fact that the article contains no inside or proprietary information, no such securities fraud class actions have been brought, and believe me, the securities class action bar is hungry.

Second, the major omissions are that (1) Tesla owns the largest lithium ion plant in the world, in Nevada, called the Gigafactory. It's R&D is continuously developing better and more efficient batteries; (2) the article completely ignores the fact that Tesla has an 8 yr. warranty on the batteries in the Model S. The average car owner doesn't come close to keeping his or her car for that long, and, further, by then the price, value and efficiency of the battery packs will be far more advanced; (3) the article ignores the fact that Supercharging stations are multiplying like rabbits, and that recharging takes all of 30 min., enough time to grab a bite or coffee in an always nearby restaurant; (4) the introduction of the $35,000 Model 3 will position Tesla in a whole new league. None of these realities are considered in this article (that has no attribution); and (5) the Model S's resale value is higher than the article lets on. It only talks about trade-in value, but not sales on the open market.

Does anyone have additional arguments challenging this article?

Mike83 | February 23, 2016

Thanks for your article and arguments. As you know the stock is already shorted to the max it seems. 30 million shares would require billions to cover. I would expect all kinds of shenanigans to drop the stock. Even on the Tesla forum I have noticed the titles of threads to suggest problems which are suspect. There is a private sharing which works now I believe since anyone can post, even those who are short.
thanks again.

holidayday | February 23, 2016

I got to "battery will be dead in 5 years" and stopped reading. Either they didn't do their proper research on Tesla batteries, or they are lying in order to deceive the reader.
Tesla's batteries have top of the line battery management systems. The battery management system monitors charge, recharge, temperature, and battery state. There is definitely a long-term loss to any battery. Temperature and charge/recharge are the major culprits in the losses. If you completely discharge the battery and recharge it fully each time you use it, it won't last as long as compared to charging to 80% and plugging in at 20%. Normal usage would refer to the 80/20 type rule rather than the 100/0 profile.
Time will tell the amount of charge left over after 5, 10, or 15 years, but it'll still be usable. The degradation curve is initially steep, but levels out over time. (For example, you could lose the first 10 percent in 5 years, then the next 10 percent over 10 years, then the next 10 percent over 20 years. You'd still have 75% charge after 35 years.)
Without reading the rest, I expect the rest of the article to include more misinformation/lies.

Investors should review each investment carefully before investing (I have TSLA shares and plan to keep them over 10 years)

EcLectric | February 23, 2016

Did you ever wonder why short sellers always seem so sleazy? Why should we automatically get this notion? There is good reason, if you think about it for a minute. Investing is about providing people with capital - people with a good idea. One person can't do it alone, so you pool your resources and implement that idea (a company). The people who invest get to benefit from the good result of the idea and the company.

This is not so with a short seller. They might call themselves 'investors', but they are not. They start out by 'borrowing' some shares from a real investor and immediately selling them to someone else. Obviously, if they are a short seller, they don't believe in the project/company - so the people 'shorty' is selling to are considered by him/her as suckers paying too much for a useless asset. The people 'shorty' borrowed the shares from are also suckers, who bought into a bad investment.

Now all shorty has to do is convince everyone that the project (company) is a bad idea. Sometimes to make their money, they only have to convince people for a little while, and then they cash out. So they go around desperately trying to create or convince people of the failure that they have predicted.

So if a barn-raising is the frontier equivalent of an investment, then the equivalent short seller is the low-life who burns down a barn so he can sell fire insurance. These people don't contribute anything to the world, so it's best not to listen to them.

sp_tesla | February 23, 2016

No mention of other current & potential additional income, California's ZEV credits, selling storage batteries for home/business & other Mfg, many returning customers.

madodel | February 23, 2016

And it is not just shorts. The Auto manufacturers, the auto dealers and the oil companies would like to see the company destroyed since they can't buy them off as the oil companies did with the last round of EVs in the 90's. This does go much further in their lies than most of the other shorts, trolls and shills usually do. They all want to stop progress and innovation any way they can.

sp_tesla | February 23, 2016

"madodel | February 23, 2016
They all want to stop progress and innovation any way they can."

They are trying to keep their share of the pie as long as they can.

Mike83 | February 23, 2016

Ironic that greed destroys the greedy with fossil fuels dropping like a rock. Many bankrupt fossil fuel companies on the horizen which may even hurt the big banks who loaned them drilling and exploration funds.

If there is a short squeeze they have unlimited loss potential. Perhaps then they wouldn't buy as many politians.
The dots are beginning to be connected with many people getting angry and hopefully voting for their own interests.

Tesla-David | February 24, 2016

I am with you @Mike83, I am long on Tesla, as an owner for more than 3 years, and investor for more than five. I will be putting reservation in next month on the Model III, and hope to get Powerwall installed soon. Go Tesla!

Mike83 | February 24, 2016

With the way the stock is going I may have money to pay cash for a MX. The shorters do help in a way they can't comprehend. Also waiting for the PowerWall. After 2 years with our P85 I would have never believed a car could be so much fun. No more gas stations, oil changes, smog checks or shady mechanics since there isn't much to service.

sp_tesla | February 24, 2016

Mike83 | February 24, 2016

Be careful with your $$$$, the shorters are pro & they usually win a lot more than they lose.

Mike83 | February 24, 2016

After 30 years investing the so called pros are only human. Sure, shorting RIG or lumber liquidators did well. But if they are wrong they have unlimited losses. Tesla shorts are gamblers in my opinion. Overnight they could go bankrupt.

http://www.businessinsider.com/shortsellers-are-getting-lonely-2015-6

Nexxus | February 25, 2016

I really liked that line "and the batteries will be dead in five years". Shows you exactly how much the writer knows about Tesla Motor Company. Zilch, nada, nothing. Tesla wouldn't warranty them for 8 years if they were going to be dead in 5. And the writer said they "would be completely useless at that time". Hello, are you listening? What an ignoramous. With the battery management system Tesla has designed the batteries might lose 10% charging capability in 8 years. They will still be plenty useful after that for power storage and ultimately being recycled into new batteries. I just love responding to articles like this to show how stupid these guys really are.

Mike83 | February 25, 2016

Can't complain about today. Keeps getting better.

Mike83 | February 27, 2016

FYI over 31 and 1/2 million shares shorted, looks like a new record. Love these gamblers living on the edge.
But looking at their lack of logic it looks like easy pick ins.

Bubba2000 | February 28, 2016

I do believe that Tesla will have an attractive designed M3, without complicated features like pop out door handles, fancy doors, etc. They may use high strength steel with hollow perforated shapes with guides, etc that can be easily assembled. Somebody who likes good looking cars like MacLaren is going to come up with something ugly like the i3 or even the Bolt. Most Important, none of the competition have such a vast network of hi speed chargers. Takes years to develop.

The best part about the stock is that Nearly 30M shares are short or nearly 30% of the float. In reality the AVAiLABLE float is even less. Besides Elon, Panasonic, etc, others like Fidelity can not sell shares easily due to large holdings, filling requirements, etc. If the M3 is attractive, Tesla could have 100,000 reservation worldwide in matters of days. Especially if they give free GPS/Autopilot software for free to the first 100,000, not the mention the race to get Fed and State tax credits of around $10,000 for a paltry refundable deposit of $1,000.

For the price of a 4-cyl Camry, the consumer can get a M3! Not only in the Us, it could be a big seller in Europe. Heck, Norway could buy a big chunk of 100,000 M3! We could see a big squeeze of the shorts soon!

rg22.vanhorn | March 2, 2016

I hope TSLA will give Citron Research a really good short squeeze!!

Bubba2000 | March 2, 2016

http://blogs.wsj.com/moneybeat/2016/03/02/short-sellers-pile-in-to-tesla...

Short Sellers Pile In to Tesla
As demand to short Tesla has been increasing lately, so too has the cost to borrow the stock. Currently, the price to short shares is between 17% and 23% of Tesla’s stock price, said Ihor Dusaniwsky, head of research at financial analytics firm S3 Partners. Last month, it cost between 5% and 6%.

“Shorts are still scrambling to put on positions,” added Mr. Dusaniwsky, who said that there aren’t more than a couple million shares available now to borrow of free float.

http://www.nasdaq.com/symbol/tsla/short-interest
According to the Nasdaq, as of 2-12-2016, there are 31.5M shares short. That was before Citron and others started pilling in. In my opinion, the stock is being held back because MX deliveries slowed to a crawl. Mostly due to the difficulty in installing the windshield seals and glass, probably have to be installed by hand. Those long seals, etc may have to be redesigned for automated installation. Will take time, but it a question of when, not if. I heard that a few plastic items deliveries are running slow, like covers for wiring under the middle seats. Something that can be fixed.

Once the MX deliveries speed up and M3 is shown, bookings run to 100,000 we could have a huge short squeeze. Over 31.5+M shares are short and AVAILABLE float is only a couple of million shares? Cost of borrowing is 17-23%? How long can the shorts pay this kind of interest rate? Even if WSJ is off by a factor of 10, we could have a huge squeeze.

I saw the same thing in late 2012 and early 2013. Citron was involved too. To happen again, it looks too good to be true, at least for longs. What am I missing?

Brian H | March 2, 2016

Enough shares?

Mike83 | March 3, 2016

Besides TSLA my other long term hold is doing well. SCTY. I thank the shorts.

david | March 4, 2016

First, I would not short TSLA because as of the other day it was already over 30% shorted and the possibility of a short squeeze is off the charts dangerous. Neither would I go long on TSLA because it is currently valued at around 60% of GM which is enormously optimistic even given current growth projections. A note on Stansberry though; these guys pretty much prey on novice investors by fearmongering "BUY GOLLLD! RUN FROM GUBMINT FIAT MONNNIES" so use that in a frame for the source of information.

I LOVE THE MODEL S. I have one on order I'm waiting for delivery of and I am sure I will love this vehicle every day of its LEASE. I point this out because I am 3.5 years about to turn in my NISSAN LEAF lease for a 3 year TESLA MODEL S lease. When I turn in wanting to my Leaf, the fair market value of my Leaf is half of my "buyout". That is correct, if I wanted to BUY OUT my lease I could buy one for the same mileage used on the aftermarket as what Nissan wants to sell it to me for.

A quick note on LEASES... I worked for a company closely tied to Toyota during the 2008/9 financial meltdown. We had so many Toyotas rolling off lease and so few people wanting to buy them that it almost completely sunk the company. And these are Toyotas with well established residual values that if you could have just held the car for another year you could have sold it for more. It took epic work from shady sales guys and questionable legal tactics to prevent the company from imploding.

I never leased a car before my Leaf. The reason being that it is USUALLY a mathematical folly to do so even if you only intend on keeping the car for 3 years. That said on both the Leaf and the Model S, I anticipated they won't depreciate like cars typically do but instead depreciate more like TECHNOLOGY. No one wants your 3 year old laptop and no one wants to buy your 2013 P80D that has no Ludicrous mode or autopilot. (Someone does, but they will only pay a fraction of a Model S that has these features)

Being in the Market for a Model S (and a huge fanboi of the tech) I was aggressively looking through the CPO options and was hoping to snipe a late 2014/early 2015 S that had autopilot. Then something happened last month. All of the old stock disappeared. Apparently Telsa grabbed all of these to use as loners which is a legitimate use... but it is also a way of propping up the residual value of old models to make the math still work. This is not a trick they can do indefinitely. Telsa is trying to cover up the fact that as this technology advances SO much faster than ICE, it means the residual value of the aging models combined with battery capacity loss is a legitimate problem from a dollars and cents standpoint. There will be a Gen 2 autopilot that I'm sure will be awesome and every Model S that only has Gen 1 will be junk when it does.

Now you ignore this problem for a moment and if you can bridge the financing long enough, the residual value of all of the ICE cars will drop off a cliff because while they improve by tiny increments per year, the electrics lead by TSLA will continue to improve by orders of magnitude every few years then the electrics look better by comparison.

Net net - Model S is an absolutely amazing car, best on the road IMHO and I can't wait until mine gets delivered at the end of the month (I literally wake up in the middle of the night excited for its arrival, I'm truly a sick human being).... all of that said, I will be LEASING my model S because I believe when you are purchasing a piece of tech like this the buyer comes out ahead... which means to the owners of TSLA stock that the future might look less rosy if a bunch of these come off lease worth less than they think.

As much as I love the CAR I just can't love the stock with the residual value concerns and the sky high valuation. That said, I totally believe in Musk. I want to drive my Model S to the nearest hyperloop station where I can take a ride to the spaceport to take off on the SpaceX rocket to Mars.

sp_tesla | March 4, 2016

"david | March 4, 2016
As much as I love the CAR I just can't love the stock with the residual value concerns and the sky high valuation. That said, I totally believe in Musk. I want to drive my Model S to the nearest hyperloop station. "

Well said, +1, Financially Smart

Bubba2000 | March 4, 2016

The main reason Tesla is loosing money is because it over engineered the MX. Spend too much $ and time in design plus setting up the complex factory. I am not sure the GF made sense either. However, Tesla has come down to earth. Model 3 will be a simple design, easy to manufacture at a low cost. Meanwhile, MX manufacturing is picking up.

Like in early 2013, too many short positions, one sided. Any kind of lack of bad news will move the stock up. Yes, very speculative and risky long trade.

Guy2095 | March 6, 2016

Stansberry = crook

DonS | March 6, 2016

Everything the stock does in the short term is a speculative guess into where Tesla is likely to be 3-5 years out. All the short term traders try to "out speculate" each other, so every little detail gets amplified beyond its real effect to the financial statements. Ultimately, there are two camps: Tesla will execute on its plan, or it won't. Pick your side.

I cannot say Tesla is a sure thing, but lots of naysayers have had egg on their face over the last five years. It sure looks more dangerous to bet against Tesla than to bet for them.

TSLA4Tesla | March 8, 2016

Here is a chart of Tesla stock price vs Short ratio. I hope the link works!

https://lh3.googleusercontent.com/-E6XBrbkbBME/Vt9uSeCUmkI/AAAAAAAAl_g/u...

TSLA4Tesla | March 8, 2016

Here is a chart of Tesla stock price vs Short ratio. I hope the link works!

TSLA4Tesla | March 8, 2016

Interesting discussion about Tesla stock price movement with respect to company fundamentals and short selling in TSLA stocks. I added two charts- stock price chart and short ratio in one image above so we can see how short selling and TSLA stock price have behaved over time. See my image above, in the previous post. I don't think Short Ratio is a good indicator for future stock price movement.
Short Selling is mostly noise. It works in less than 1 out of 10 situations. Plus, IMHO short sellers are generally smarter than an average Buy-only investor! I am writing this post here because you are a group that likes Tesla cars and cares about TSLA stock. I am very much like you and I have something to share that you may like!

I traded TSLA stocks without caring for Short Ratio! I didn't pay a single cent on research or fundamentals. I made around 180 trades in TSLA stock over last two years. Incidentally, I have all trades in TSLA stock logged in a blog that I maintained real time! I am sharing this link just to highlight that Short Ratio is Not a useful indicator about future direction of stock price. Same is true about fundamentals. They do not change much but stock price keep fluctuating! (So, I watch stock price movement and trade! I call it Profit From Prices! ) I made a series of trades in TSLA stock with a goal to buy a Tesla car in my project #TSLA4Tesla! . You can glance all trades on this link!

This is to give some real world value to the discussion we are having hear about Tesla company, Tesla cars and TSLA stock ;)

https://docs.google.com/spreadsheets/d/1nypbKO6wAR7bgykhUi5eAstQ1G3q9JPI...

TSLA4Tesla | March 8, 2016

Dang it! Once of the links does not work! If you like to know about project #TSLA4Tesla, use this link:
http://tsla4tesla.blogspot.com/

david | March 8, 2016

Short coverage does matter. TSLA is over 30% shorted which means its likely to catapult and tear higher on any good news which means you'd be crazy to short it. (IE, stock starts to go up a little, brokerages call the shorts requiring them to cover which forces the price higher which causes more calls -> This is how you get a 20%+ move in a day that dissipates after a few days)

It's also valued at almost 60% of GM's market cap... GM sold 3.1M cars last year, TSLA sold 50k cars. TSLA is priced as though it is going to quadruple every year for at least 10 years which is obviously far beyond the company's projections for anticipated growth. Which means you'd be crazy to be long TSLA.

Buy the car, love the car, fear the stock short or long. I wish I could own TSLA because I love the car so much but the stock is just too overvalued to own.

JeffreyR | March 8, 2016

For the right to drive this car, you had to fork over more than $100,000. Despite its excessive cost, Tesla managed to sell more than 2,300 of these first-generation cars.
The language of this article is pretty loaded. I've added the emphasis.

While exact figures aren't known, the costs of the batteries range from 25% to 50% of the cost of the cars. Keep this figure in mind... Tesla's cars were obsolete before the first one ever rolled out of the factory. The cars will have minimal resale value, because after five years their batteries will be dead... completely dead and not usable.
So according to the author the battery [pack] costs $20K-$35K and will last only five years before it is completely useless. If the author's BP costs are correct that would mean the Model ≡ would need to start well above $50K or Tesla would need to cut costs by well over 50%. Also, the warranty covers the battery for eight (8) years and unlimited miles. And, durring the PowerWall presentation Elon sites the fact that cells from automotive battery packs can be re-used in stationary battery packs.

Over the next couple of years, the rate of deterioration will accelerate. So these battery packs will need to be replaced after several years....
Data presented during Tesla Connect 2015 shows that the opposite is true. Battery packs loss of range slows down over time.

Tesla's cars obsolete is that they're impossible to use in the way that most people would use a large, fast road car. You can't easily drive the thing from New York to Florida because you have relatively few places to recharge the battery. You would have to plan out a special route. Plus it takes time to recharge them.
While very long trips are not always easy, several posts on multiple thousand mile long road trips are easily found on this forum and TMC. Some posts laud the time spent charging as being a way to recharge the driver's "batteries" too. Also, don't forget that you no longer need to spend time, day-to-day filling up at the gas station. I've seen some estimates that this saves hours over the whole year.

It takes a long time to recharge these cars. So I don't know how it could ever become something that you could do on the road or on the fly. It just doesn't make any sense. The way the company is presenting information to investors is highly misleading. We classify this as fraud.
The lack of understanding demonstrated by the author is so egregious, I classify this article as libel. See Tesla's Supercharger page for the facts on road trip charging. Some people will need to wait a year or so before they will be able to easily go where they want, but several areas are well covered already.

conference call with Wall Street analysts that Tesla had no plans to raise any additional debt or equity
While I don't claim to know the facts about this reference. The fact that no exact reference to the call in question is given, lends me to believe this was at best a misunderstanding of Elon's comments. The last Quarterly Call, Tesla mentioned that they have ready access to loans.

...when a company is providing non-GAAP numbers that...set out to fool shareholders with creative accounting. We believe Tesla Motors is...fudg[ing] their numbers and...This is an example of a practice we consider misleading enough to be considered fraud...
Tesla reports both GAAP and non-GAAP numbers. Tesla focuses on non-GAAP numbers for several reasons. Listen to the last Quarterly Report for in-depth reasons. The basic reason is that Tesla receives payment for these cars, and the the car has historically shown to hold its value.

Tesla offers a "Resale Value Guarantee" ("RVG") that allows buyers of the Model S to sell their cars back to Tesla after 36-39 months, regardless of the buyers' loan term.
There has not been an issue w/ RVG buy backs. The CPO Program inventory is being managed to keep value of used cars firm.

In its non-GAAP reporting, Tesla treats the RVG transactions as sales, not as leases. In other words, it's taking credit for all of the revenue and profit upfront rather than over time. This treatment is only appropriate if all of the RVG customers decide to keep their cars at the end of the three-year term– which is an absurd assumption.
Do you really need 100% of owners to keep their car for this to be considered a reasonable assumption? How about the vast majority? As long as Tesla is able to re-sell the cars that are turned back in, at a profit, shouldn't that be good enough?

By making these adjustments, Tesla acts as if it has no further obligations to its customers. But remember, if its customers elect to sell their cars back to Tesla – and we believe almost all will – then Tesla will have to return a significant portion of this "non-GAAP revenue."
Why do they believe that almost all will return the cars? Tesla's CPO Program has shown a healthy used car market exists as well.

We doubt Tesla will be able to fetch upwards of 50 grand for a three-year-old car with a depleted battery
The author continues to harp on the depleted battery nonsense. I believe the biggest risk for used cars will be Auto-pilot, not age of the battery. Still CPO cars have held their value well.

Why would anyone pay $50,000 for a used Tesla when the new model is $35,000? Sure, the $35,000 model will probably not be as fancy as the used Model S... but it will reportedly have a new battery that's going to be far better.
One word—size.

Clearly nobody – not us, and not Tesla – fully understands the dynamics of the 2017 Tesla used-car market.
While this statement is true, the implication is that in 2017 Tesla will have trouble selling three-year-old Model S cars. This seems to be a stretch. Don't forget they can easily upgrade the battery packs and re-use the cells in Powerwall units. The Gigafactory has space devoted to recycling for just this purpose. They have not needed to upgrade packs for CPO 60-kWh cars though.

We've shown you that Tesla's management can't be trusted. We've shown you its business model is extremely challenged. Yet management continues to pursue growth that can't be financed from its operations, at the expense of its shareholders.
Tesla has said that they are making 25% gross margin on the Model S, and that they expect that to go up by the end of the year. They also expect the Model X to reach 25% soon. While Tesla may be quickly expanding the Supercharger network, building the Gigafactory, and ramping up the Model X, they are also preparing for the Model ≡ reveal. Clearly w/ the $1000 reservation cost, they are expecting thousands of reservations. So 100K reservations would mean $100M in interest-free income until the launch in late 2017/early 2018.

I think that the author missed the three biggest risks to TSLA:

1) Tesla has shown an inability to meet timelines; the Gigafactory must be producting high-quality, inexpensive battery packs for the Model ≡ to be successful; the Model ≡ must be ready on time and successful for the Gigafactory to make sense.
2) Model X production ramp up has been much slower than anticipated.
3) The end of March Model ≡ reveal needs to be successful.

Nexxus | March 9, 2016

@JeffreyR

You hit the nail on the head. These know-nothing shills the oil industry gets to write up bad press about Tesla to try and kill it are numbskulls. Doesn't matter if they say what's true or not, or if it libels anyone or company. Once they get the message out, they think the damage has been done. They are on a fools errand, because the electric car is now here to stay, and fight it they might but they're going to lose.

jeffpoel | March 10, 2016

Fun fact: selling 2013 Model S85P loaded, 48K miles, paid $120K new, worth 50-65K now. Zero degradation in battery range after 48K miles. Zero. The author of that article was either incredibly ignorant or a liar. We'll see what the actual sales price will be. I'm not sure what a typical luxury car loses in value over 3 years, but 40-50% doesn't seem bad. Love the car, getting a new Model X, loaded. Red. Fast.

david | March 12, 2016

The author of the article is obviously wrong about the whole 5 year battery is a dead "brick" but capacity loss in ALL batteries is indeed a thing. My leaf lost around 10% of its capacity over 3 years / 38k/mi. I've heard of some Leaf Taxis that are over 200k/miles (full charge/discharge multiple times per day) are at around 70% original capacity which would indicate that over time the RATE of capacity loss levels off but never really goes to 0.

The Tesla may or may not do better but assuming it degrades the same as the leaf. If it does than at 200k/miles you'd have 70% of your 230/mi range (on a 70). You'd be sitting at 161/mi range which would still be 2X the range range of my Leaf when it was new. Although any loss in range doesn't "feel good" even at 70% of original capacity your range on the lowest end available Tesla would still be VERY good.

For comparison, a 2011 BMW 750i xDrive that was $80k when new, at 200k/mi is worth about $8k. Cars depreciate, some faster than others... but once they get to 200k/miles pretty much every car is "junk" versus its original purchase price.

What matters more to TSLA's stock is what a 3 year old 36-45k/mi car is worth when it rolls off lease. I am very grateful that TSLA leased such a fantastic car to me on such equitable residual value terms. If TSLA wasn't actively managing the CPO market the way they are (IE, disappearing all the older inventory to use as loaners) my estimate would be the optimistic estimation of residual value would already be an issue. They can continue to do this trick as long as the number of new cars they ship keeps going up at a VERY fast rate (which it might given how awesome the car is) but if there is any slowdown in sales (which could happen because there are a finite number of people that can buy a car in this cost range) they could hit a residual value wall if more come rolling off lease with lower residual values than they calculated.

Mike83 | March 12, 2016

The leaf battery(terrible loss) is nothing like the Tesla battery with many safeguards. These batterys have been around for a long time with little diminished capacity. Some owners since 2010(Roadster) and MS have 200,000 miles. They are dead wrong about the batteries but keep repeating incorrect opinions.

Mike83 | March 12, 2016

Many opinions are stated especially by those justifying a very big short stock position. But the opinions are mostly false.