10 Facts/Headscratchers from the Ongoing TSLA Saga

So plenty has happened since my last post on Tesla, and to the untrained eye it seems like only good news coming from the Tesla hype-mobile. Well, despite my own thoughts on these things, this post is going to contain no more color than I’ve already given in the past two sentences (and the title, for that matter). For all my followers, the unadulterated timeline of what we’ve seen over the past few weeks, and I will leave you to think on it as you please. [This will, to the best of my ability, be in chronological order]

• Last week on Tuesday, Tesla CEO Elon Musk announces via Twitter that a very significant and important announcement regarding Tesla Motors will be coming out on Thursday, 3/28 (the penultimate day of Q1 2013) in which he says he will “put my money where my mouth is in a [very] major way.” TSLA stock jumps 4% within minutes of the tweet.

• The next day, Musk tweets again that the announcement will be moved to Tuesday of the following week (4/2) in order to not be a distraction to Tesla’s quarter end.

• Completely unrelated to the aforementioned tweets, Musk posts a blog on Tesla’s website just after midnight on April 1 announcing that Tesla has achieved profitability for Q1 and exceeded its company-supplied guidance of 4,500 Model S deliveries, clocking in at “over 4,750 Model S sales,” and revises guidance to achieve both non-GAAP and GAAP profit for the first quarter. In the same note, Tesla announces that it has decided not to put the 40kW-hr Model S into production due to “lack of demand,” citing that only 4% of orders were for this particular model. Further, all Model S cars will be equipped with the supercharger hardware (usually only available on the 85kW-hr or as a $2,000+ upgrade on the 60kW-hr) already installed. People who did not pay for it will have it disabled through a software governor, but can upgrade at any time if they pay. The stock surges about 16% to an all-time high in the $43-44 range.

• On Tuesday, 4/2 at 2:00pm PST, Tesla makes its much-awaited major announcement: they have reached an agreement with Wells Fargo and US Bank to provide financing for the Model S, with a guaranteed buyback agreement in which Tesla will repurchase the Model S from the customer after 36 months (if they so choose) with residual value pegged to that of the Mercedes S Class. Tesla announces on a conference call that the financing will be in the area of $500/month for qualified lessees.

• In order to even get remotely close to a $500/month lease payment, according to Tesla’s lease calculator, one must live in California and receive a full $13,000 EV tax credit, have a superior credit rating, be able to deduct the Model S as a business expense, value their time at a minimum of $100/hr and take advantage of EV access to the carpool lane on the highway to save several hours worth of time doing so. Also, the lessee will need to save at least 2-3 hours a month (at a rate of $100/hr minimum, again) by not having to waste time pumping gas. Tesla does not account for the fact that charging a Model S typically takes at minimum 1 hour and filling up a tank of gas takes around 10% as long. For what it’s worth, most estimates so far have the monthly rate pegged at about $1200/month, not including the 10% down payment required to begin the “blease.”

• Not mentioned on the conference call or in the press release but present at the bottom of a page on Tesla’s website pertaining to the leasing program, the “blease” financing is only available in 8 states: CA, CO, IL, FL, NJ, NY, OR and WA. Coincidentally, these are all higher-income states and all have generous EV kickbacks for owners, as well as emissions credits for anyone who sells a car in their jurisdiction. That would mean Tesla gets their all-important emissions credits on leases as well.

• After the announcement of the lease, the stock promptly tanks 8%, closing on 4/3 in the $41-42 range on heavy volume.

• It is revealed that Tesla sales representatives sent out letters in mid-late March to reservation holders urging them to “confirm and send in their payments to allow Tesla to reach a “huge company milestone,” which was Q1 profitability.

• Elon Musk denies any knowledge of the email, instead saying that some of his sales staff got “a bit overzealous” and sent the emails off on their own. He reiterates that no recognition of deliveries are actually made until the car is officially in the hands of the customer after the delivery process. Language used in all SEC filings by Tesla do not explicitly require the physical delivery of the car for revenue recognition, however.

• In the conference call, along with several interviews given recently, Musk has promised that several more “major announcements” are coming up in the next few weeks: one dealing with superchargers, another with Tesla’s service arm, and the last one being “another mystery announcement that is already right under every Model S owner’s nose.”

So there you have it, your 10 interesting facts about Tesla to keep you up to speed on what’s been going on. To get back to my pointed and opinionated ways for a moment, we have used these bogus hype-machine opportunities to almost double our position, making Tesla our 2nd largest portfolio position and 3x as large as the next biggest holding in our short book.

Is Elon Musk for real? Is he just a cheerleader CEO with enough money from previous exploits to make waves in the market when he needs to? Does it even matter? Your answers to these questions will dictate how you see Tesla from an investment standpoint. However, a few things can’t be denied by anyone: Tesla has a lot of work today before they have officially proven themselves. Getting to 4,750 Q1 deliveries was a stretch for the business in one aspect or another, or in all aspects. Tesla misrepresented their financing product in many material aspects. Also, let’s not forget about Detroit Electric company, a new Tesla-lite firm that is marketing a $135,000 luxury EV that may compete with the higher-end Model S configurations. While they could easily flop due to Tesla’s great name recognition, we can’t deny that if anything it can only have a negative impact on TSLA.

Bottom line for me, and hopefully for many others, is that normal, legitimate companies do not act this way. Executive officers do not spend this level of time on spin, publicity, and media access; they are too busy running their companies [properly]. There are far too many questions left to be answered to justify this ~$5B market cap. Keep in mind, that makes it more than 10% the value of Ford Motor Company, who sold almost 70,000 Ford F-Series cars in March alone, at much better margin than Tesla has ever been capable of up to this point. It’s simply going to take a lot of optimism and faith in Tesla and its management for someone to buy this stock. I don’t think any intelligent investor would have those characteristics after spending even 30 minutes looking into the company.

Happy Hunting everyone, and expect another post relatively soon on a few new ideas. I apologize for being a bit slow on the posts lately – just finished the moving process to a new city. It can take a lot out of you spending that much time at Bed Bath & Beyond… (am I hinting at that store being on my radar?…)