Tesla’s (NASDAQ:TSLA) Elon Musk, ‘an interesting man’

Tesla’s (NASDAQ:TSLA) Elon Musk, “an interesting man”


Saturday, a Seattle fund manager noted that Elon Musk is “possibly the most interesting man in the world,” in a post on his firm’s website

He did not refer to Wednesday’s conference call Mr. Musk held on the controversial financial travails of the company.

Instead, the piece noted Mr. Musk’s projects that include electric cars, space exploration, mass transit and flame throwers.  Comparing Mr. Musk to the Duke of Abruzzi, Prince Luigi Amedeo, an explorer who made several failed attempts in the early 20th Century to climb K2 in the Himalayas once believed to be the highest point on Earth. The Duke died in a progressive living experiment in Africa.

Now, back to Elon Musk and Tesla, the EV company that burns cash, not fuel. That said I prefer the comparison is with Nicola Tesla, also a notable 20th Century failure.

Tesla, Inc. is a company that Elon Musk is trying to build with the notion that he can produce the EV of the future better and faster than the giant, most technicality advanced manufactures in the automotive sector: Volkswagen, Daimler Benz and BMW, as he runs out of cash to do it.

CEO Elon Musk’s wild eyed ambitions moved into the financial sector headlined again this week.

Once again the fledgling company fell very short of its own production targets for the M-3 sedan, another person died in a crash involving its robot driver, Mr. Musk got into a public argument with US safety regulators and fenced with analysts on the earning call Wednesday.

Tesla’s extremely overvalued stock hammered by downgrades from credit and automotive analysts alike has dropped nearly 30% from its September 2017 highs.

There is good reason to worry

Elon Musk raises money on vision, and spends money like a drunken sailor on leave, then get combative when questioned about it, calling the analysts “not cool” and “boring”.

Tesla is burnning money so fast that, without additional financing, there is now the real risk that the 15-year-old company could run out of cash in Y 2018.

Bloomberg calculates that the company burns more than $7,430 each minute. And free cash flow has been negative for 6 Quarters running, and grew to more than $1-B when Tesla reported earnings on 2 May.

Mr. Musk had made a public joke about being bankrupt.

Tesla makes 3 EVs: the M-S, M-3, and the Model X SUX, all at 1 plant, located in Fremont, California. Mr. Musk has announced plans to build a over-the-road truck, a hot rod roadster to compete with the likes of Ferrari (NYSE:RACE), and the M-Y crossover

The company employs about 40,000 workers that do not produce cars in any significant volume.

It has been reported that Tesla’s employee roster more than 3X from Y 2014 to 2017, and revenue per employee is super sub-par, and that does not include the contractors and subcontractors to the company

General Motors (NYSE:GM) and Ford (NYSE:F) each bring in about 2.5X as much revenue per employee.

Since its $225-M IPO June 2010, Tesla has raised money by selling stock and convertible bonds, monetizing leases and floating junk bonds in the ways automakers do.

The US Department of Energy, under the Hussein Obama Administration awarded Tesla a $465-M loan in Y 2010, which Tesla paid off early and in full in Y 2013.

“No other automaker has so far been able to convince legions of fans to put deposit money behind a revolutionary agenda or take advantage of government subsidies for emission-free vehicles to the degree that Tesla has.”

But that fact makes Tesla a rentier company, and all rentier companies fail.

“Elon Musk is an engineer, and so he treats raising money as one element that he needs to solve,” said an analyst who has commented on Mr. Musk’s frequent trips to Wall Street and once worked for the company’s IR department.

Tesla ended Y 2017 with $3.4-B in cash on hand and $9.4-B in outstanding debt, and under $1-B in sales in Q-1. I and many other analysts believe that Tesla will need to raise money again soon.

In the past CEO Musk has been able to monetize the patience and goodwill of its customers and fans.

The Big Q: How long can that last as 1 disappointment after another comes from the lips of the leader of Production Hell.

Here is the core problem as Shayne and I see it.

Tesla sells its products direct to consumers, it has no dealer network, it as not finance to own plan, customer deposits are cash payments that serve as interest-free loans, loans than can stretch on for years, as long as the depositor/lenders do not call them back and Elon Musk can scratch their ears.

Mr. Musk’s fans believe, that he is taking personal financial risk too.

If Tesla goes bankrupt, those deposit holders will be wiped out and Elon Musk will be too.

Perhaps he will found a progressive living village some where in the jungle too after the automotive giants come on in 2019 with real EV for the extremely tiny market that exists.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 294.09 4 May 2018 9.64 283 296.86 279.52 8,569,300
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Neutral (-0.23) Neutral (-0.02) Bearish (-0.29) Bearish (-0.39)

Have a terrific weekend

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