TC Profile picture
Mar 15, 2018 15 tweets 4 min read Twitter logo Read on Twitter
1/ A friendly reminder of what really matters with #Tesla. It isn't today's stock action or yesterday's executive departure. That's all noise. Before proceeding, disclosures: short via puts, not investment advice, do your own research, etc. etc. etc.
2/ At the highest level, gross profit - operating expenses - interest = pretax profit. It is really that simple. To assess a company, look at those three things. For $TSLA, gross profit can be divided into auto and everything else.
3/ Gross profit for everything else ex-auto at Tesla isn't pretty. Batteries, solar, services and other. Not good. Roughly a $70MM loss in Q4. Essentially: Auto gross profit must carry things.
4/ Auto gross profit is complicated by how Tesla recognizes ZEV credits. It is very lumpy. But in Q4 2017, they sold the most ever, implying there's not much left for a quarter or two
5/ If you remove ZEV credits (and there should be very few if any in Q1 2018), the gross profit from the auto business has been declining throughout 2017. In Q4 it was down to about $330MM. And the Model 3 doesn't explain much of this.
6/ This $330MM in gross profit (ex-ZEV) needs to carry losses from all other businesses and the operating expenses and interest. Let's look at operating expenses. Sequentially growing to over a $1B per quarter!
7/ Interest expense is growing with increasing debt load. Approaching $150MM per quarter in Q4 2017. So $330MM - $70MM - $1B - $150MM = -$890MM per quarter before things get better or worse. Note: Some of these losses are applicable to non-shareholders. Don't ask.
8/ Will Model 3 make things better? Management has guided the Model 3 gross margins will be negative in Q1. As a rule, Tesla always hits its negative guidance. They will almost assuredly recognize negative gross profit on all Model 3s sold in the quarter.
9/ I can find no evidence that demand for Model S/X is growing in Q1, either sequentially or year on year. There's much evidence for the opposite. This can change with a strong March, but things aren't looking great. If Tesla was more transparent we wouldn't have to guess.
10/ So baseline loss of ~$900 per quarter, less Model 3 losses, less declining Model S+X demand, plus increasing interest expenses. Losing a billion per quarter seems quite possible in the near term.
11/ But what about their cash position? Roughly 25% of their cash is in the form of refundable customer deposits not held in escrow. Mostly for the Model 3, presumably. Not that you'd know by reading their disclosures.
12/ And Q4 saw a massive swing in net working capital. Almost -$1.7B from Q3 to Q4. In other words, inventory draw down, collecting receivables, postponing payables, etc. Sustainable?
13/ Eroding net profit ex auto. Declining Model S+X. Production challenges and negative gross margins on Model 3. Competition arriving at all levels (Leaf, I-Pace, Bolt, Porsche, Audi, etc). And priced for thread-the-needle perfection.
14/ But don't worry, they can raise whenever they want right? Well, why haven't they? Why didn't they at $380? Or $350? They need capital and fast. To me, this is the Tesla news that really matters. Q1 is go time. Trade carefully!

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More from @TESLAcharts

Oct 8, 2018
1/ On Friday, September 21, Fred published his weekly leak of $TSLA Model 3 production numbers. Below is a summary. Fred had them at 46,000 on that Friday.
2/ A week later, on Friday, September 28, Fred posted the news-moving headline that $TSLA had already achieved Model 3 production targets (51,000) with 'two days to go'. He also quoted 77,400 total cars produced, including Models S and X.
3/ $TSLA went on to report 53,229 Model 3s produced for the quarter, with 5,300 coming in the last week, and a total of 80,142, including Models S and X.
Read 10 tweets
Oct 8, 2018
1/ If you are on twitter debating the finer points of various potential debt refi options for $TSLA, please stop. Issuing equity would be very much easier and is what’s required here. Whatever is stopping them from issuing equity is also going to hinder a debt raise of any kind.
2/ Any refi deal would require due diligence. Nobody is investing billions of new money in a company under active regulatory investigation without a close inspection of the books. If a close inspection of the $TSLA books wasn’t a hinderance, they’d go the equity route.
3/ Now, it is not to say that $TSLA won’t *announce* some kind of raise - pending due diligence. They’ve already done that with $420 funding secured. I knew funding secured was a lie in part because per the blog post that day no due diligence had yet been done.
Read 4 tweets
Oct 6, 2018
1/ As long as we are going to use twitter to express what should and should not be legal in the world of business, I figured I'd contribute to the debate. $TSLA
2/ It should not be legal to demonstrate a technology that you know actually won't ever be practical in order to extract more regulatory credits. If a CEO were to do that, it should definitely be illegal. $TSLA
3/ It should not be legal to demonstrate a technology that you know actually doesn't work in order to facilitate a shareholder vote on a related party bailout. If a CEO were to do that, it should definitely be illegal. $TSLA
Read 7 tweets
Oct 4, 2018
1/ In this thread I will show, through simple arithmetic and logic, that if $TSLA experiences a material drop in demand in Q4, it will have very little choice but to urgently raise capital. And if it can’t raise capital? Big trouble.
2/ Before diving in, my typical disclosures: I’m long Tesla puts, this is not investment advice, do your own research, Elon is a baby jaguar, etc. $TSLA
3/ Let’s start by estimating $TSLA’s cash balance at the end of Q3. We turn to the infamous WSJ article from mid-August. Let’s take $TSLA at its word. Assume $TSLA ended Q3 with $2.5B in cash, up from $2.24 at the end of Q2.
Read 17 tweets
Sep 30, 2018
1/ Yesterday, while Elon was not admitting or denying committing securities fraud, the Shorty Air Force did a little flyover of Fremont. I'm pleased to present a summary of what was found.

H/T @Paul91701736
2/ This area seems to be particularly interesting. Let's have a closer look, shall we?

H/T @Paul91701736
3/ I didn't know it was legal to paint cars outside in the San Francisco area. Unless this is a meat packing factory of some sort, it seems very sus bro.

H/T @Paul91701736
Read 14 tweets
Sep 29, 2018
1/ How did the credit market digest the news that the CEO of the most amazing example of The-CEO-Is-The-Stock ever was charged with fraud by the SEC? Let's have a look. $TSLA
2/ The flagship straight bond blew out to very near the all-time high yield. This bond is due in 2025. With an 84 handle and an 8.3% yield to maturity, the bond market is basically closed to $TSLA.
3/ The credit default swaps on those bonds blew out to very near the all-time high cost to insure. You don't have to be an expert in the CDS market to know this isn't a good sign. This market is pricing in a very serious risk of default. $TSLA
Read 5 tweets

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