14 ms·

Why almost everyone was wrong about Tesla’s cash flow situation

168 points by TekMol 8y ago

TekMol 8y ago
Short version: They never had a cash problem. They invested the money they had into developing a car. Turned it into a success. Then invested even more into the next car. Turned it into an even greater success. And so on. I wonder how profitable this type of 'short opinion piece' journalism is. How much does a journalist get paid to write something like this? Running some content websites myself which make like $0.001 per visitor, I am surprised this can be sustainable.
- dgritsko 8y ago
  Remember their "Secret Master Plan?" This was published 12 years ago: >In keeping with a fast growing technology company, all free cash flow is plowed back into R&D to drive down the costs and bring the follow on products to market as fast as possible. When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car. https://www.tesla.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me https://www.tesla.com/blog/secret-tesla-motors-master-plan-j...
- JumpCrisscross 8y ago
  > They never had a cash problem They absolutely did. Tesla was a bet on production. They bet the company over the past few months. They weren’t an Amazon “if we dial it back a bit we can be profitable” case. They were a “if we don’t make enough cars we may not pay our debts” case. They made enough cars. That doesn’t mean the concerns ex ante were unmerited.
- binarybits 8y ago
  Author here. What do you mean by "short?" The piece is 1,500 words, which is about double the length of a typical newspaper column. I'm not going to get into the exact economics, but Ars writers write about a piece a day, and the average piece gets tens of thousands of visitors. Revenue per article (for most mainstream news site, not just Ars) is significantly better than $0.001 per visitor. High-end advertisers are willing to pay a premium to put their ads next to high-quality content and to know the demographics of the people seeing their ads. None of us is getting rich doing this though! We're also fortunate to have a significant base of paying subscribers, which makes it easier for us to write in-depth pieces that might not generate enough revenue from ads alone.
  - TekMol 8y ago
    Hey, great to meet the author on HN! First of all, let me say that I liked the article. I am the one who posted it to HN after all. Maybe "short" was not the perfect word to express what I mean. I mean that the message/idea is kind of short. It's almost like a showerthought "See this chart? It looks like they are in the red all the time. But think of it this way: They build success after success. They could have been profitable ever since Model S. But they keep investing in bigger projects instead.". Interesting, that the revenue is significantly higher then $0.001 per visitor. Because it looks like the main ad spots are filled with Google Ads. Which I run too. Do advertisers really target specific sites manually via Google Ads? I would have thought they do that algorithmically based on demographic factors.
    - binarybits 8y ago
      Mainstream news sites aren't going to give you the kind of super-deep insights you're going to find in academic research or trade press or whatever. 90 percent of any site's audience knows very little about any given topic, so laying out obvious-to-insiders ideas in a clear way is a significant value for the average reader. Ars readers are more technically savvy than most sites but most of them are not experts on corporate finance. I do not know very much about the specifics of Ars's ad sales strategy. I would guess Google pays more to established sites. Also, if you're seeing a Google ad that might be because they didn't have a higher-paying direct-sale competitor for that particular impression.
anoncoward111 8y ago
Serious question, and I'm not a Tesla hater either: Why does anyone spend $35,000 - $50,000 on a car? It just feels like a number that is at least 5x too high. A used car from a fairly reputable source can be had for between $3,000 - $6,000, depending on mileage and cosmetic appearance. My 2005 Ford Focus sedan was $3,000 and should last me about 3 years before I need to make a decision about major repairs, so that's less than $100 a month in ammortized costs. Are there really hundreds of thousands of people who are making $5,000+ a month necessary to justify the purchase of such an expensive vehicle? I'm not far from that number and most of my money still goes to food and rent.
- joezydeco 8y ago
  If nobody buys $35,000 cars, where does the supply of reliable 10-year-old $5000 cars come from?
  - Majestic121 8y ago
    That's a different question than the parent (albeit a related one). If there's no one to buy 35k cars, there won't be a steady flow of 5k cars indeed, but I don't think people buy 35k cars because they're nice people trying to provide 5k cars to other people after a while
    - joezydeco 8y ago
      Of course they don't. But you can't declare dependence on an ecosystem, simultaneously declare that the ecosystem is stupid, then have people take you seriously.
      - travisjungroth 8y ago
        You absolutely can. If everyone in a neighborhood tossed dollar bills on the street cause they didn't like carrying anything smaller than a five, it would make sense to both make a living picking them up and say "why the hell are they doing this?".
draw_down 8y ago
The posts about how doomed they were did seem a bit severe to me. But on the other hand Musk acts like such a dingus these days it can be hard to know what to think.
PeterMikhailov 8y ago
I will wait until Matt Levine analyzes what happened.
bflesch 8y ago
Shouldn't we wait for the fully audited FY2018 results before making these bold claims? I feel with Tesla it is always swinging to the extremes. You could do a lot of accounting magic to make one quarter appear great, but it will show up in the full year's numbers. We have to remember that they have a lot of churn in the financial department, for example the CFO left in April (see https://www.business-standard.com/article/companies/elon-musk-s-tesla-sees-a-flurry-of-executives-leave-the-company-since-2016-118101800200_1.html https://www.business-standard.com/article/companies/elon-mus... )
- samfisher83 8y ago
  I agree Earning and cash flow can be manipulated. To improve cash flow just don't pay your vendors for a quarter. To improve earning you can shift they delivery time from 1q to another. It did look AP went up for Tesla by about 500mil so did AR which is kind of strange, but their Quarter still looked great.
- ianai 8y ago
  Churn should be a strong indicator of managerial issues. But I think it’s not because of how much wealth companies and certain people amassed.
- wjnc 8y ago
  I had the same feeling. Could use an accountant chiming in here. On the one hand the third quarter update clearly states 'Unaudited' above the statement of operations and balance sheet. On the other hand, they present GAAP-figures. As far as my practical knowledge of working with accountants go, they would frown quite heavily upon using 'new and improved' accounting methods for their Q3-update. Even for 'unaudited' GAAP-figures 'we' (investors) should be able to expect a continuous accounting practices from the firm. But it's good practice to read any statement of an accountant dilligently (ever read an ISAE-statement?) and read non-audited statement with even more caution.
  - appleiigs 8y ago
    For a public company the size of Tesla, unaudited will be the same as audited. Sometimes in the MD&A, they use adjusted figures because it tells a story differently (maybe more accurately) than un-adjusted GAAP figures.
InTheArena 8y ago
This seems like a good breakdown - but it's also that Tesla (like SpaceX) runs really really close to the edge every time they do a product launch. How many people doubted SpaceX until the Falcon 9 flew? How many until the Falcon 9 landed on land? How many until Falcon 9 Heavy launched? How many are still doubting until Falcon 9 completes it's first manned mission? How many doubted Tesla until the Roadster shipped? The S, the X? The 3? The low cost 3? It's still a startup - but Elon's companies move fast and take a toll on everyone.... then one day you look up and rockets are landing on barges, and 60% of world wide lithium battery capacity has been grabbed by Tesla, and Tesla suddenly selling the top sedan by revenue, and the fifth by number of units in the US. Then competitors have to start working and playing like Tesla and SpaceX - the companies have to become more startup like. You can see this in how ArianneSpace and ULA are trying to get to their next generation of vehicles (which won't be competitive in terms of re-usability) and by the increasingly hyperbolic VW statements about "delivering a car as good as any Tesla at half the cost" this morning.... Tesla and SpaceX have multi-year advantages - they have the super charger networks, they have the only facility capable of cranking out the amount of batteries that electric cars need, reusable rockets, dominating market share over all other luxury cars in the wealthiest market in the world, which happens to show signs of becoming more "European", as in much larger luxury market segment then there is in the United States.. It's definitely taken a hit on people's sanity - but you suddenly look up, and the competitive grounds have changed dramatically.
- petre 8y ago
  > hyperbolic VW statements about "delivering a car as good as any Tesla at half the cost" this morning. This while launching yet another compact SUV, based on the Polo platform w/o 4wd and the the base model using a three-cylinder one liter engne. Give me a break VW.
  - zhte415 8y ago
    So, another Polo model then. Is it called an SUV, interested to see.
    - 8y ago
AllegedAlec 8y ago
I'm not sure I'm sold on the perspective that the worst Tesla detractors were actually just misinformed or wrong about the subject, rather than being actively malevolent by trying to gain money by shortselling while funding anti-Tesla articles.
- ericb 8y ago
  Under current rules, I'm pretty sure it is legal to try and destroy a company by destroying its reputation and maligning its financials and profit by shorting it while you kill it. That this is allowed seems anti-competitive and takes away from the notion that shorts "make a market healthier by bringing balance."
  - AllegedAlec 8y ago
    > Under current rules, I'm pretty sure it is legal to try and destroy a company by destroying its reputation and maligning its financials and profit by shorting it while you kill it. Yeah, it's legal, but that doesn't mean it's not malevolent.
    - ericb 8y ago
      I think we're in agreement about everything including its malevolence. Destroying otherwise healthy companies does nothing beneficial for the country's competitiveness, so if it could be done carefully, I'd support laws reigning this behavior in.
- InTheArena 8y ago
  There is no doubt that there were players in the markets that were doing their best to actively destroy Tesla for personal profit reasons. But then there were a lot of people - even Tesla fans - who knew the numbers and still worried.
- matwood 8y ago
  I think it's still a little soon to call them wrong. I was long TSLA for quite awhile, and have never been short. TSLA still has financial issues. While this quarter was certainly a positive, it remains to be seen if they can keep it going [1]. When it comes to financial investment I try not to be 'anti' anything. I look at what is. The facts still show TSLA having a bumpy road ahead. The next two quarters will really show if things have turned. First we'll find out if this beat was just a timing beat with cash flow and accounts payable. Next, we'll see how the debt payments coming due are covered. [1] I see a lot of 3's on the road, so I'm starting to lean back towards probably.
simonebrunozzi 8y ago
The article seems very imprecise on factual data. > With $3 billion in the bank and a growing cash cushion, Tesla won't need to raise any cash to pay off the big $920 million loan that's coming due next March. Except that there's less in the bank, and that Tesla owes something like $3B to suppliers. I am not a financial expert, but I'd think that the situation is not as easy as it is depicted here.
- RivieraKid 8y ago
  Agreed, the article is a very basic and imprecise overview of Tesla's finances, it brings no new insight. The more informed shortsellers and investors go to much more depth. The headline is quite... bold, given that the author doesn't know much about Tesla's finances and corporate finance in general. By the way, last quarter was a big surprise to everyone, bulls and bears.
jason46 8y ago
I live in northern Mi, I see Tesla's everyday, and I don't think they can be bought in MI, so despite the inconvenience they are moving cars.
empath75 8y ago
I’m skeptical that those are legit numbers and not just the result of pushing off payments to suppliers and booking revenue for cars they haven’t shipped yet.
- greglindahl 8y ago
  Tesla books revenue when they deliver cars to buyers, not when they ship them.
apo 8y ago
Tesla in its current form has never had to weather an economic downturn. It will be subject to the same headwinds as any luxury manufacturer. Unlike other car companies that sell luxury, Tesla has no economy model. Some commenters have noted that they can easily afford the price tag. It might be time to consider the transitory nature of that situation. Tesla is an amazing company, (because/but) it has put all its eggs in one basket.
- TazeTSchnitzel 8y ago
  The last financial crisis led to the rich getting richer. They'll always have money for Teslas.
- leesec 8y ago
  What are you talking about? Tesla was founded in 2003, and did in fact have to stomach the major economic downturn in 2008. Was not a great time to be a car company, especially a small start up.
  - didndkdk 8y ago
    2008 occurred when TSLA was insignificantly small. Most had never even heard of it, and they started selling the roadster in 2008 - by 2012 they sold 2200 cars. Point being they were small enough that a couple of investors, or Musk by himself, can support the company through the storm. If the financial crisis would hit today, Musk couldn’t keep it afloat by himself for long and would have to raise serious amounts of capital to keep a company its size. So no. Tesla, as a serious car company, has yet to live through a financial storm. Not as anything other than a niche vanity project.
    - apo 8y ago
      Exactly.
amluto 8y ago
There is nothing in this article that suggests any error in the naysayers’ reasoning. None of the analysts were so dumb as to say that Tesla’s massive capital expenditures should be instantly depreciated and were thus worthless. The issue had always been cash flow: Tesla’s cash flow was negative enough that there was a serious risk that they would run out. Fortunately, they seem to have turned the corner without running out of cash first. I think they still have considerable risks ahead: - All the Model 3 cars they’ve recently sold represent potential liabilities for repairs. My neighbor’s has spent weeks in for repairs due to poor QC, and is probably a lemon under CA law. Even ignoring the lemon law, warranty repairs are expensive. - To be worth their valuation, they need to sell massive numbers of cars for quite a few years. In particular, they need to continue leading after their competitors introduce serious EVs. Having driven Teslas and other cars, Teslas have a lot to be desired in terms of interior amenities and controls. - The NTSB is investigating an autopilot fatality. The liability from that particular fatality is irrelevant to Tesla, but the NTSB could plausibly force a recall of Autopilot. That would be bad for Tesla. (And arguably quite good for transportation safety.)
jgalt212 8y ago
Sure the math works out so long as each newer and more expensive project/product is well received by the marketplace. That being said, how many times can you bet the company before the coin comes up tails? If the coin never comes up tails, then TSLA is worth an infinite amount of money. If the coin eventually comes up tails and each project is bigger than the previous one, ruin awaits. https://en.wikipedia.org/wiki/Gambler%27s_ruin https://en.wikipedia.org/wiki/Gambler%27s_ruin
11thEarlOfMar 8y ago
Because a lot of hedge funds make their money on volatility, not growth. They take advantage of the media's need to sell Fables rather than Facts, and jeopardy is an effective plot device.
- nemild 8y ago
  In that vein, I'm looking for contributors to my financial media literacy guide: https://github.com/nemild/hack-the-media/blob/master/financial-media-guide.md https://github.com/nemild/hack-the-media/blob/master/financi... It's a new version of my broader software eng media literacy guide: https://github.com/nemild/hack-the-media/blob/master/software-engineers-media-guide.md https://github.com/nemild/hack-the-media/blob/master/softwar...
casper345 8y ago
Heard a great quote (gonna butcher it) - "What people say or what competition is doing at the end of the day does not matter - if the forces allow, it will allow".
jandrese 8y ago
IMHO the flood of negative Tesla stories over the past few months has been an incredibly successful stock manipulation scheme. These people just got a huge payday when the Tesla earnings report dropped. It's up something like 75 points. Bloomburg is news for suckers. Another factor is how quarterly earnings reports mean the investment media can't look past the end of their own nose. Obviously a company that is making a massive infrastructure investment to fill thousands of orders already on the books is going to have a cash shortfall in the short term, but it's a temporary problem and the long term prospects are quite rosy. I mean these are the same people who every single day try to explain 1% upticks/downticks in stocks where the change is clearly below the noise floor. It's not being made for smart people.

168 points by TekMol 8y ago

Short version: They never had a cash problem. They invested the money they had into developing a car. Turned it into a success. Then invested even more into the next car. Turned it into an even greater success. And so on. I wonder how profitable this type of 'short opinion piece' journalism is. How much does a journalist get paid to write something like this? Running some content websites myself which make like $0.001 per visitor, I am surprised this can be sustainable.

dgritsko 8y ago
Remember their "Secret Master Plan?" This was published 12 years ago: >In keeping with a fast growing technology company, all free cash flow is plowed back into R&D to drive down the costs and bring the follow on products to market as fast as possible. When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car. https://www.tesla.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me https://www.tesla.com/blog/secret-tesla-motors-master-plan-j...
JumpCrisscross 8y ago
> They never had a cash problem They absolutely did. Tesla was a bet on production. They bet the company over the past few months. They weren’t an Amazon “if we dial it back a bit we can be profitable” case. They were a “if we don’t make enough cars we may not pay our debts” case. They made enough cars. That doesn’t mean the concerns ex ante were unmerited.
binarybits 8y ago
Author here. What do you mean by "short?" The piece is 1,500 words, which is about double the length of a typical newspaper column. I'm not going to get into the exact economics, but Ars writers write about a piece a day, and the average piece gets tens of thousands of visitors. Revenue per article (for most mainstream news site, not just Ars) is significantly better than $0.001 per visitor. High-end advertisers are willing to pay a premium to put their ads next to high-quality content and to know the demographics of the people seeing their ads. None of us is getting rich doing this though! We're also fortunate to have a significant base of paying subscribers, which makes it easier for us to write in-depth pieces that might not generate enough revenue from ads alone.
- TekMol 8y ago
  Hey, great to meet the author on HN! First of all, let me say that I liked the article. I am the one who posted it to HN after all. Maybe "short" was not the perfect word to express what I mean. I mean that the message/idea is kind of short. It's almost like a showerthought "See this chart? It looks like they are in the red all the time. But think of it this way: They build success after success. They could have been profitable ever since Model S. But they keep investing in bigger projects instead.". Interesting, that the revenue is significantly higher then $0.001 per visitor. Because it looks like the main ad spots are filled with Google Ads. Which I run too. Do advertisers really target specific sites manually via Google Ads? I would have thought they do that algorithmically based on demographic factors.
  - binarybits 8y ago
    Mainstream news sites aren't going to give you the kind of super-deep insights you're going to find in academic research or trade press or whatever. 90 percent of any site's audience knows very little about any given topic, so laying out obvious-to-insiders ideas in a clear way is a significant value for the average reader. Ars readers are more technically savvy than most sites but most of them are not experts on corporate finance. I do not know very much about the specifics of Ars's ad sales strategy. I would guess Google pays more to established sites. Also, if you're seeing a Google ad that might be because they didn't have a higher-paying direct-sale competitor for that particular impression.

anoncoward111 8y ago

Serious question, and I'm not a Tesla hater either: Why does anyone spend $35,000 - $50,000 on a car? It just feels like a number that is at least 5x too high. A used car from a fairly reputable source can be had for between $3,000 - $6,000, depending on mileage and cosmetic appearance. My 2005 Ford Focus sedan was $3,000 and should last me about 3 years before I need to make a decision about major repairs, so that's less than $100 a month in ammortized costs. Are there really hundreds of thousands of people who are making $5,000+ a month necessary to justify the purchase of such an expensive vehicle? I'm not far from that number and most of my money still goes to food and rent.

joezydeco 8y ago
If nobody buys $35,000 cars, where does the supply of reliable 10-year-old $5000 cars come from?
- Majestic121 8y ago
  That's a different question than the parent (albeit a related one). If there's no one to buy 35k cars, there won't be a steady flow of 5k cars indeed, but I don't think people buy 35k cars because they're nice people trying to provide 5k cars to other people after a while
  - joezydeco 8y ago
    Of course they don't. But you can't declare dependence on an ecosystem, simultaneously declare that the ecosystem is stupid, then have people take you seriously.
    - travisjungroth 8y ago
      You absolutely can. If everyone in a neighborhood tossed dollar bills on the street cause they didn't like carrying anything smaller than a five, it would make sense to both make a living picking them up and say "why the hell are they doing this?".

draw_down 8y ago

The posts about how doomed they were did seem a bit severe to me. But on the other hand Musk acts like such a dingus these days it can be hard to know what to think.

PeterMikhailov 8y ago

I will wait until Matt Levine analyzes what happened.

bflesch 8y ago

Shouldn't we wait for the fully audited FY2018 results before making these bold claims? I feel with Tesla it is always swinging to the extremes. You could do a lot of accounting magic to make one quarter appear great, but it will show up in the full year's numbers. We have to remember that they have a lot of churn in the financial department, for example the CFO left in April (see https://www.business-standard.com/article/companies/elon-musk-s-tesla-sees-a-flurry-of-executives-leave-the-company-since-2016-118101800200_1.html https://www.business-standard.com/article/companies/elon-mus... )

samfisher83 8y ago
I agree Earning and cash flow can be manipulated. To improve cash flow just don't pay your vendors for a quarter. To improve earning you can shift they delivery time from 1q to another. It did look AP went up for Tesla by about 500mil so did AR which is kind of strange, but their Quarter still looked great.
ianai 8y ago
Churn should be a strong indicator of managerial issues. But I think it’s not because of how much wealth companies and certain people amassed.
wjnc 8y ago
I had the same feeling. Could use an accountant chiming in here. On the one hand the third quarter update clearly states 'Unaudited' above the statement of operations and balance sheet. On the other hand, they present GAAP-figures. As far as my practical knowledge of working with accountants go, they would frown quite heavily upon using 'new and improved' accounting methods for their Q3-update. Even for 'unaudited' GAAP-figures 'we' (investors) should be able to expect a continuous accounting practices from the firm. But it's good practice to read any statement of an accountant dilligently (ever read an ISAE-statement?) and read non-audited statement with even more caution.
- appleiigs 8y ago
  For a public company the size of Tesla, unaudited will be the same as audited. Sometimes in the MD&A, they use adjusted figures because it tells a story differently (maybe more accurately) than un-adjusted GAAP figures.

InTheArena 8y ago

This seems like a good breakdown - but it's also that Tesla (like SpaceX) runs really really close to the edge every time they do a product launch. How many people doubted SpaceX until the Falcon 9 flew? How many until the Falcon 9 landed on land? How many until Falcon 9 Heavy launched? How many are still doubting until Falcon 9 completes it's first manned mission? How many doubted Tesla until the Roadster shipped? The S, the X? The 3? The low cost 3? It's still a startup - but Elon's companies move fast and take a toll on everyone.... then one day you look up and rockets are landing on barges, and 60% of world wide lithium battery capacity has been grabbed by Tesla, and Tesla suddenly selling the top sedan by revenue, and the fifth by number of units in the US. Then competitors have to start working and playing like Tesla and SpaceX - the companies have to become more startup like. You can see this in how ArianneSpace and ULA are trying to get to their next generation of vehicles (which won't be competitive in terms of re-usability) and by the increasingly hyperbolic VW statements about "delivering a car as good as any Tesla at half the cost" this morning.... Tesla and SpaceX have multi-year advantages - they have the super charger networks, they have the only facility capable of cranking out the amount of batteries that electric cars need, reusable rockets, dominating market share over all other luxury cars in the wealthiest market in the world, which happens to show signs of becoming more "European", as in much larger luxury market segment then there is in the United States.. It's definitely taken a hit on people's sanity - but you suddenly look up, and the competitive grounds have changed dramatically.

petre 8y ago
> hyperbolic VW statements about "delivering a car as good as any Tesla at half the cost" this morning. This while launching yet another compact SUV, based on the Polo platform w/o 4wd and the the base model using a three-cylinder one liter engne. Give me a break VW.
- zhte415 8y ago
  So, another Polo model then. Is it called an SUV, interested to see.
  - 8y ago

AllegedAlec 8y ago

I'm not sure I'm sold on the perspective that the worst Tesla detractors were actually just misinformed or wrong about the subject, rather than being actively malevolent by trying to gain money by shortselling while funding anti-Tesla articles.

ericb 8y ago
Under current rules, I'm pretty sure it is legal to try and destroy a company by destroying its reputation and maligning its financials and profit by shorting it while you kill it. That this is allowed seems anti-competitive and takes away from the notion that shorts "make a market healthier by bringing balance."
- AllegedAlec 8y ago
  > Under current rules, I'm pretty sure it is legal to try and destroy a company by destroying its reputation and maligning its financials and profit by shorting it while you kill it. Yeah, it's legal, but that doesn't mean it's not malevolent.
  - ericb 8y ago
    I think we're in agreement about everything including its malevolence. Destroying otherwise healthy companies does nothing beneficial for the country's competitiveness, so if it could be done carefully, I'd support laws reigning this behavior in.
InTheArena 8y ago
There is no doubt that there were players in the markets that were doing their best to actively destroy Tesla for personal profit reasons. But then there were a lot of people - even Tesla fans - who knew the numbers and still worried.
matwood 8y ago
I think it's still a little soon to call them wrong. I was long TSLA for quite awhile, and have never been short. TSLA still has financial issues. While this quarter was certainly a positive, it remains to be seen if they can keep it going [1]. When it comes to financial investment I try not to be 'anti' anything. I look at what is. The facts still show TSLA having a bumpy road ahead. The next two quarters will really show if things have turned. First we'll find out if this beat was just a timing beat with cash flow and accounts payable. Next, we'll see how the debt payments coming due are covered. [1] I see a lot of 3's on the road, so I'm starting to lean back towards probably.

simonebrunozzi 8y ago

The article seems very imprecise on factual data. > With $3 billion in the bank and a growing cash cushion, Tesla won't need to raise any cash to pay off the big $920 million loan that's coming due next March. Except that there's less in the bank, and that Tesla owes something like $3B to suppliers. I am not a financial expert, but I'd think that the situation is not as easy as it is depicted here.

RivieraKid 8y ago
Agreed, the article is a very basic and imprecise overview of Tesla's finances, it brings no new insight. The more informed shortsellers and investors go to much more depth. The headline is quite... bold, given that the author doesn't know much about Tesla's finances and corporate finance in general. By the way, last quarter was a big surprise to everyone, bulls and bears.

jason46 8y ago

I live in northern Mi, I see Tesla's everyday, and I don't think they can be bought in MI, so despite the inconvenience they are moving cars.

empath75 8y ago

I’m skeptical that those are legit numbers and not just the result of pushing off payments to suppliers and booking revenue for cars they haven’t shipped yet.

greglindahl 8y ago
Tesla books revenue when they deliver cars to buyers, not when they ship them.

apo 8y ago

Tesla in its current form has never had to weather an economic downturn. It will be subject to the same headwinds as any luxury manufacturer. Unlike other car companies that sell luxury, Tesla has no economy model. Some commenters have noted that they can easily afford the price tag. It might be time to consider the transitory nature of that situation. Tesla is an amazing company, (because/but) it has put all its eggs in one basket.

TazeTSchnitzel 8y ago
The last financial crisis led to the rich getting richer. They'll always have money for Teslas.
leesec 8y ago
What are you talking about? Tesla was founded in 2003, and did in fact have to stomach the major economic downturn in 2008. Was not a great time to be a car company, especially a small start up.
- didndkdk 8y ago
  2008 occurred when TSLA was insignificantly small. Most had never even heard of it, and they started selling the roadster in 2008 - by 2012 they sold 2200 cars. Point being they were small enough that a couple of investors, or Musk by himself, can support the company through the storm. If the financial crisis would hit today, Musk couldn’t keep it afloat by himself for long and would have to raise serious amounts of capital to keep a company its size. So no. Tesla, as a serious car company, has yet to live through a financial storm. Not as anything other than a niche vanity project.
  - apo 8y ago
    Exactly.

amluto 8y ago

There is nothing in this article that suggests any error in the naysayers’ reasoning. None of the analysts were so dumb as to say that Tesla’s massive capital expenditures should be instantly depreciated and were thus worthless. The issue had always been cash flow: Tesla’s cash flow was negative enough that there was a serious risk that they would run out. Fortunately, they seem to have turned the corner without running out of cash first. I think they still have considerable risks ahead: - All the Model 3 cars they’ve recently sold represent potential liabilities for repairs. My neighbor’s has spent weeks in for repairs due to poor QC, and is probably a lemon under CA law. Even ignoring the lemon law, warranty repairs are expensive. - To be worth their valuation, they need to sell massive numbers of cars for quite a few years. In particular, they need to continue leading after their competitors introduce serious EVs. Having driven Teslas and other cars, Teslas have a lot to be desired in terms of interior amenities and controls. - The NTSB is investigating an autopilot fatality. The liability from that particular fatality is irrelevant to Tesla, but the NTSB could plausibly force a recall of Autopilot. That would be bad for Tesla. (And arguably quite good for transportation safety.)

jgalt212 8y ago

Sure the math works out so long as each newer and more expensive project/product is well received by the marketplace. That being said, how many times can you bet the company before the coin comes up tails? If the coin never comes up tails, then TSLA is worth an infinite amount of money. If the coin eventually comes up tails and each project is bigger than the previous one, ruin awaits. https://en.wikipedia.org/wiki/Gambler%27s_ruin https://en.wikipedia.org/wiki/Gambler%27s_ruin

11thEarlOfMar 8y ago

Because a lot of hedge funds make their money on volatility, not growth. They take advantage of the media's need to sell Fables rather than Facts, and jeopardy is an effective plot device.

nemild 8y ago
In that vein, I'm looking for contributors to my financial media literacy guide: https://github.com/nemild/hack-the-media/blob/master/financial-media-guide.md https://github.com/nemild/hack-the-media/blob/master/financi... It's a new version of my broader software eng media literacy guide: https://github.com/nemild/hack-the-media/blob/master/software-engineers-media-guide.md https://github.com/nemild/hack-the-media/blob/master/softwar...

casper345 8y ago

Heard a great quote (gonna butcher it) - "What people say or what competition is doing at the end of the day does not matter - if the forces allow, it will allow".

jandrese 8y ago

IMHO the flood of negative Tesla stories over the past few months has been an incredibly successful stock manipulation scheme. These people just got a huge payday when the Tesla earnings report dropped. It's up something like 75 points. Bloomburg is news for suckers. Another factor is how quarterly earnings reports mean the investment media can't look past the end of their own nose. Obviously a company that is making a massive infrastructure investment to fill thousands of orders already on the books is going to have a cash shortfall in the short term, but it's a temporary problem and the long term prospects are quite rosy. I mean these are the same people who every single day try to explain 1% upticks/downticks in stocks where the change is clearly below the noise floor. It's not being made for smart people.