Tesla (NASDAQ - TSLA) reports Q2 numbers after the close on Wednesday and after Elon Musk’s bizarre performance on the Q1 earnings call, this one is likely to be box office. Far from learning from that meltdown back in May, his behaviour since has been even more erratic - with his spiteful reference on twitter to the British diver involved in the Thai cave rescue as “that pedo guy” and, more recently, his contacting the boss of a vociferous critic on twitter “Montana Skeptic”, with threats of legal action.
That a man whose company is staring bankruptcy in the face should have been devoting his time to interfering in the Thai cave rescue for narcissistic reasons and obsessing over criticism on Twitter should be extremely worrying for anyone invested in Tesla, and to me suggests that this situation is rapidly approaching its denouement. There are a few ‘boring, bonehead questions’ that will doubtless be asked on the call. For starters, what is the current net reservation number for the model 3 sedan at the current price of $49,000 plus? Recent reports suggest that refunds are outstripping deposits, something the company vehemently denies but will not elaborate upon.
Musk pulled out all the stops to produce 5,000 cars a week in the final week of Q2 but evidence of thousands of cars sitting in open air lots in the baking California sun suggests that either they are not yet in a condition to be delivered to customers or that the demand is not there. After all, many of the 400,000 deposits that Tesla boasted that it had received were presumably for the $35,000 price - at which it now says it cannot afford to sell. The Wall St Journal reported recently that Tesla was contacting suppliers asking them to return cash paid out on contracts for work done claiming that it was “essential to Tesla’s continued operations”. Tesla countered that this was normal practice for a company that was increasing production and therefore able to bargain from a position of strength, but asking suppliers for “retroactive” discounts, however it is spun, smacks of desperation and weakness.
Musk still claims that Tesla does not need to raise cash and that Q3 and Q4 will be profitable and cash generative, but no one really believes him. His rationale on this is a bit of a mystery. Either he has completely lost it and is living day to day, hoping that some miracle will arrive, as it has on a couple of occasions before when days from bankruptcy, or, more likely, he is hoping somehow to engineer with window dressing a Q3 “profit” allowing him to tap the markets in the ensuing euphoria. Whatever his reasoning or lack of it, all the signs are that Musk’s days are numbered and his recent behaviour ensures that there will be large dollops of schadenfreude when he comes crashing down to earth. I am short and still believe that the stock trades sub $100 by Christmas.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece from Lucian shortly click HERE
Filed under: Tesla, Elon Musk, Bearcast, David Lenigas, Boxhill Technologies, liquidity, Range Resources
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