The future is electric?

Big Daddy

Super User
I subscribe to different investment information databases. Here is one view that I received in an email. It just reminds me that Tesla is running a scam like the Flipkart founders did. The opinion is more on the funny side.

It all calls back to mind the Bubblevision commentator who, a couple weeks ago, when Tesla (Nasdaq: TSLA) reported its numbers, chided Roger McNamee for being too “quarter focused” with respect to Elon Musk’s lemon.

The gist is Elon’s another brilliant disruptor who needs time to work his magic. And, therefore, Tesla shouldn’t be judged by ordinary standards of profitability.

Of course, Tesla’s quarterly look was not good… again. Never in its 14-year history has it generated an annual profit, and the couple quarters it did post in the green were down to government support.

As Wolf Richter noted, you could give Tesla infinite time because its business model is all about burning cash and winning praise from its wealthy customers:

Tesla lacks a viable business model in the classic sense. Its business model is a new business model of just burning investor cash that it raises via debt and equity offerings on a near-annual basis because investors encourage it to do that, and love it for it, and eagerly hand it more money to burn, and they’re rewarding each other by keeping the share price high. It’s just a game, you see. And nothing else matters.

And that’s the “beyond ridiculous” part.

Since 2009, Tesla has generated negative $10.4 billion of free cash flow. It’s been kept alive only by serial capital raises, billions of dollars of customer deposits, and billions of dollars more of supplier payables.

Its total debt currently stands at $13 billion. That’s up from just $370 million in 2009, and it’s on top of $2.2 billion of new equity issuance over the last decade.

Its net payables (that’s supplier payables and accrued expenses less receivables) were roughly balanced back in 2009. But, now, it owes a net of $4.6 billion to the supply base and other vendors.

That, folks, is a Ponzi scheme.

But, so long as Elon’s con holds, Tesla will take customer deposits, supplier IOUs, and investor funds faster than its helter-skelter factories and production systems can burn cash.

When Wall Street crashes again, though, and the U.S. economy lurches back into recession, Tesla will be in Chapter 11 bankruptcy in a heartbeat. Its preposterous $40 billion market cap will vaporize and send TSLA’s army of momo-lemmings into coronary arrest.

There’s only one reason this auto-wreck has lasted 10 years and burned through $10 billion of cash: the delusional belief in the power of the Federal Reserve to keep easy money flowing and forever putting off market crashes and economic recessions.

This “suspension of disbelief” and the destruction of honest price discovery in our financial markets is the ultimate downside of monetary central planning.