One Year from today, Tesla’s stock price will less than half what it is today. It just closed at $346.11.
I get no end to the entertainment which is Elon Musk desperately trying to prop up his dying empire. Almost weekly, he’s having to stick another finger into a leak in the levy. Whether it’s a new lawsuit by customers, investors, or whistleblowers. Or another product defect like peeling paint, whompy wheels, or self-immolating batteries. It seems like Tesla is cursed and Musk is now wholly consumed with putting out one emergency after another.
I get no end to the entertainment which is Elon Musk desperately trying to prop up his dying empire. Almost weekly, he’s having to stick another finger into a leak in the levy. Whether it’s a new lawsuit by customers, investors, or whistleblowers. Or another product defect like peeling paint, whompy wheels, or self-immolating batteries. It seems like Tesla is cursed and Musk is now wholly consumed with putting out one emergency after another.
I’m not dissuaded from the eventual collapse of Tesla’s stock price simply because of their brief stock price jump within the last few weeks. It’s understandable and even predictable if you think about it. But it won’t last much into 2020.
Tesla has shown a pattern of trying to push up the stock price before bad news in order to avoid breaking through a new floor. For example, if they know about a big lawsuit or investigation coming that will cost them $20-$30 in share price. They try to get ahead of it and push the stock price up by $20-$30 so that they end up where they were.
Tesla had to creatively manufacture a Q3 profit to avoid getting below $200 per share. Because if that happened, a continued loss in Q4 would have sent it below $150. And if that triggered a margin call on the illiquid Musk, it would be game-over. Musk would be forced to sell stock in order to pay his margin calls and that would ignite a death spiral somewhat akin to a battery fire. Almost impossible to stop.
So by manufacturing a Q3 profit, Tesla bought themselves 3 months of stock price stability and a potential window to raise more cash. But it in the long view, it doesn’t matter. Because in 2020, Tesla’s declining demand, declining average selling prices, and increasing competition will do their damage. But Tesla is so consumed with their daily emergencies that they don’t have time to think about what could happen next year. Musk figures he’ll cross that bridge when he gets to it.
Even Tesla bulls now admit that year-over-year, Tesla is suffering from declining revenue and a bad product mix. Their margin increases were from the accounting treatment of warranty expenses and foreign currency translation. There are no new manufacturing efficiencies at Tesla. That’s because they’re cutting prices and increasing sales incentives faster than they can improve manufacturing.
And Tesla’s large institutional investors are getting restless. I think their impatience could be part of the reason for the whole Q3 charade. They are probably privately warning Musk that it’s time to put up or shut up. One big thing about this recent stock price increase has been very telling. None of Tesla’s big institutional investors added to their position. The stock purchases came from those not following Tesla closely. The current big holders weren’t convinced or they would’ve added to their position.
And as I mentioned, the Tesla shorts win big even if Tesla stays in business. In fact, Tesla shorts win even if Tesla stays in business AND turns permanently profitable. Of course, that’ll never happen. But the shorts are making a bet that Tesla is over-valued. And the minute that Tesla’s valuation shifts to a multiple of earnings, the shorts win.
As a basket-case company like Tesla sits close to $350/share, this is not even a difficult prediction to make. And when it happens, don’t any of you longs come crying to me. I’ll simply remind you that I warned you way back in 2019.
Tesla has shown a pattern of trying to push up the stock price before bad news in order to avoid breaking through a new floor. For example, if they know about a big lawsuit or investigation coming that will cost them $20-$30 in share price. They try to get ahead of it and push the stock price up by $20-$30 so that they end up where they were.
Tesla had to creatively manufacture a Q3 profit to avoid getting below $200 per share. Because if that happened, a continued loss in Q4 would have sent it below $150. And if that triggered a margin call on the illiquid Musk, it would be game-over. Musk would be forced to sell stock in order to pay his margin calls and that would ignite a death spiral somewhat akin to a battery fire. Almost impossible to stop.
So by manufacturing a Q3 profit, Tesla bought themselves 3 months of stock price stability and a potential window to raise more cash. But it in the long view, it doesn’t matter. Because in 2020, Tesla’s declining demand, declining average selling prices, and increasing competition will do their damage. But Tesla is so consumed with their daily emergencies that they don’t have time to think about what could happen next year. Musk figures he’ll cross that bridge when he gets to it.
Even Tesla bulls now admit that year-over-year, Tesla is suffering from declining revenue and a bad product mix. Their margin increases were from the accounting treatment of warranty expenses and foreign currency translation. There are no new manufacturing efficiencies at Tesla. That’s because they’re cutting prices and increasing sales incentives faster than they can improve manufacturing.
And Tesla’s large institutional investors are getting restless. I think their impatience could be part of the reason for the whole Q3 charade. They are probably privately warning Musk that it’s time to put up or shut up. One big thing about this recent stock price increase has been very telling. None of Tesla’s big institutional investors added to their position. The stock purchases came from those not following Tesla closely. The current big holders weren’t convinced or they would’ve added to their position.
And as I mentioned, the Tesla shorts win big even if Tesla stays in business. In fact, Tesla shorts win even if Tesla stays in business AND turns permanently profitable. Of course, that’ll never happen. But the shorts are making a bet that Tesla is over-valued. And the minute that Tesla’s valuation shifts to a multiple of earnings, the shorts win.
As a basket-case company like Tesla sits close to $350/share, this is not even a difficult prediction to make. And when it happens, don’t any of you longs come crying to me. I’ll simply remind you that I warned you way back in 2019.
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