On a recent podcast, @TeslaCharts, a prominent and distinguished member of the Tesla (NASDAQ - TSLA) bear community on twitter known as $TSLAQ, described the ingredients needed for the Tesla phenomenon as the Barbershop Quartet, which I thought aptly describes not just Tesla but the investment climate which we have, until recently, taken for granted...
First you have a Silicon Valley fraud (or, if not an outright fraud, then pick, from numerous candidates, a loss-making venture with a nonsensical business plan unhinged from reality). Second you have an inherently corrupt Wall St aiding and abetting it (think Goldman Sachs and Morgan Stanley helping Tesla raise capital at $240 while simultaneously slashing their price targets to way below that level). Third you have regulatory capture. In this instance (in what Sam Antar calls the golden age of white-collar crime), you have the SEC allowing Elon Musk to get away with a slap on the wrist for his wholly fraudulent claim that he had funding secured to take Tesla private at $420 per share, and then to brazenly continue to lie without fear of further punishment. Lastly you have ZIRP, the surreal backdrop of zero or negative interest rates, which enables such collective craziness and credulity to take hold in the stock market.
It looks like the party might be coming to an end for both the market and Tesla. Wall St has fallen for the 6th straight week and April’s raise at $243 for Tesla seems a long time ago with the price now almost 25% below that as investors wake up to the fact that they have been lied to yet again by Musk. A recording made at an investor call at the time of the funding is doing the rounds in which Musk, answering a question as to why Tesla was raising now, stated categorically that it didn’t need the money but was prudently cushioning itself for the possibility of an event beyond its control such as a recession. A recent leaked email to his staff in which he admitted that at the current rate Tesla will be out of money again in ten month’s time and demonstrated clearly that the money was, in fact, desperately needed to keep creditors at bay, shows that his statement on the call was a barefaced lie which will almost certainly trigger further lawsuits from his hapless victims.
It may well be that May’s market decline is yet another opportunity to BTFD (buy the f****** dips), a strategy that has proved so profitable for the last 10 years. But I wouldn’t bet on it and like my Cannabis Index call the prior week, I think that shorting Tesla is a great way to have geared exposure to further market weakness. There is also the comfort that should the market rebound yet again, Tesla still has bankruptcy written all over it and any rally on the journey to zero is almost certain to be short-lived. The shares are fantastic sell at $185.
Filed under: Tesla, Woodford, Diversified Gas & Oil, Kent County Council, Eqtec, Provident Financial
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