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the whistleblower Marty Tripp alleged that as Tesla ramped up Model 3 production their battery production facility was creating hundreds of millions in wasted b

by xoxoy 6y ago

the whistleblower Marty Tripp alleged that as Tesla ramped up Model 3 production their battery production facility was creating hundreds of millions in wasted battery product. Scrap inventory has a severely depreciated value - the emails that have surfaced suggest they may have tried to hide it under “Work in Progress” where they could value it fully. If they actually wrote down $100M+ in battery inventory that would be a massive shock - no investor is considering that level of scrap in valuing the company right now. If they have a secret subsidiary they could sell it to this entity at some bloated price without anyone knowing. This company then becomes some highly indebted entity that will probably eventually go bankrupt but save Tesla’s valuation.

baybal2 6y ago
Would it change the fact they will still be 100x times overvalued?
- xoxoy 6y ago
  the valuation could go in a second if there’s a hint of running low on liquidity - or that either assets appear bloated or liabilities understated also it’s the clearest sign of accounting fraud...but apparently the SEC doesn’t care to investigate that anymore.
bob33212 6y ago
That is a reasonable concern from an accountant point of view. But time and time again Elon has shown that he isn't operating with the normal MBA CEO mindset. He is operating as an engineer, and all that matters in the engineering world is that if you can successfully build the technology and factories to remake these packs at a low cost, your total costs will be significantly lower than your competition. It doesn't take an MBA to understand the implications of that.
- xoxoy 6y ago
  if this is indeed a Tesla subsidiary, it’s accounting fraud
  - recuter 6y ago
    How could it possibly be? Tesla had $100M+ of scrap inventory they pretended was still good and then somehow created a subsidiary out of thin air and "sold" the scrap to it? I don't understand where the $100M the subsidiary paid materialised from. How is any of this possible. What's preventing others from having secret fake subsidiaries and printing money out of nowhere?
    - maxerickson 6y ago
      Funding such a fraud could make sense for holders of large amounts of Tesla stock. Spend $100 million to prop up billions. Note that I'm commenting in the abstract, not commenting in support of fraud as an explanation. I have no information or opinion about this battery recycling company.
    - xoxoy 6y ago
      I mean it’s hardly a secret if it’s on the cover of WSJ. The question is who funded this company and what transactions have they made with Tesla? but obviously no one will tell you those two things.
    - pbhjpbhj 6y ago
      How about M invests $100M in company B, he writes them a cheque, company B purchase waste from company C for $100M, by cheque. Company C loan M the money, by cheque, or give him it. M isn't out any money. B has a lot of waste to process, batteries maybe. C has $100M extra on their balance sheet. There'd be some wastage: capital gains taxes, ancillary costs. Does that kind of thing work?
  - bob33212 6y ago
    All corporate accounting has some amount of bending the rules. Conferences and team meetings at high end resorts which are not counted as compensation for example. The rules exist because of people like the Enron bean counters who spent their time and energy scamming the system rather than actually building something. It is fine if you don't like Elon or how he runs his company, but it is absurd to suggest that this is a shell company and not an actual effort to improve recycling technology.
- mschuster91 6y ago
  > It doesn't take an MBA to understand the implications of that. And that is perhaps the greatest advantage of all that Tesla has over many other companies, especially in the car industry, but generally (excluding only Amazon and parts of Apple/Google): Tesla is not run by beancounters with a next-quarterly only mindset, but by someone with a long-term vision and a general engineering focus with deep pockets. Not many companies these days go for extensive, ground-breaking, costly R&D that Tesla does, and those that do rarely go to the length of Tesla/SpaceX. For most companies that level of investment would flatten their stock value, shareholders would be angry... but Elon Musk (and similarly Jeff Bezos) are impressive personalities that manage to keep the beancounter hawks at bay.
  - xoxoy 6y ago
    > costly R&D huh? you realize that Tesla spends less than $300M a quarter in R&D when companies they now dwarf like Ford and GM consistently spend more than $1B each? in fact Tesla’s R&D spend has noticeably shrunk since last year, which is another head scratcher considering how many projects they claim to be working on, including a “full rewrite of FSD”
    - yowlingcat 6y ago
      > less than $300M a quarter in R&D when companies they now dwarf like Ford and GM consistently spend more than $1B each? I don't think the two of you have points in contention. That is to say, I think it is accurate to say that Ford and GM _spend_ more on R&D but Tesla _executes_ more on R&D. In fact, I would say that very discontinuity forms much of the basis for Tesla's very (some would say irrationally) high P/E ratio!
      - xoxoy 6y ago
        I don’t buy the efficiency argument. Either they are publicly exaggerating the scope of the projects they are working on (eg the “million mile” battery and “full rewrite of FSD”), severely underpaying engineers and understaffed, or something else.
- reitzensteinm 6y ago
  With respect, if you leave out the sophisticated games Tesla plays with finance and PR you're missing a big part of what has made the company effective. In order to qualify for the S&P 500, Tesla needed a cumulative four quarter profit. Q1 and Q2 2019 were "take out the trash" quarters, with $702 million and $408 million in losses respectively, for a cumulative loss of $1.11 billion. In the four quarters since that time, Tesla has posted profits of $143, $105, $16 and $104 million, for a combined profit of $368 million. The previous two quarters were heavily juiced with credit sales to shore them up to be a slight profit. This fits the criteria for S&P 500 inclusion, and also solidifies the notion that Tesla can be profitable - it's just taking losses like Amazon, investing in the future. A company that purely focuses on engineering and ignores the short term would have instead sold credits as they came in, and not structured expenses and income to achieve the result that they did. If Tesla had instead posted 6 losses in a row of ~$125 million they'd be materially worse off, both from an investor perception perspective and by not qualifying for the S&P 500. There's absolutely nothing wrong with playing these games. The "shorts" point them out to denigrate the company, but I don't think that makes sense. The fact that Musk has such tight control over the company is a major competitive advantage. The CEO of VW could not have done the same thing.
- bob29 6y ago
  In that case, why would the "unprecedentedly brilliant engineer-ceo" Musk not develop battery recycling technology as a division within Tesla, solely reaping the rewards of cheaper battery packs?
- afrojack123 6y ago
  Its clear your not an engineer nor know anything about Elon. He purchased Tesla and scrubbed the founder's name from it. Hardly what you call an engineer. Most engineer's don't know complex financial and legal tricks.
sukilot 6y ago
How is that legal? (Besides the boring answer of the fundamental corruption in the concept of the corporation.) I can't outsource all my debts to a zero-net-worth friend who then declares bankruptcy.
- xoxoy 6y ago
  it’s not
  - deleted 6y ago
    [deleted]
- AndrewBissell 6y ago
  "How is that legal?" is never really a relevant question when it comes to Tesla or Elon Musk.
omgwtfbyobbq 6y ago
Writing down $100M+ in battery inventory would be a big hit, especially with their profit margins being thin, but I wouldn't consider it a big shock. At $20000 per pack, $100M+ in battery inventory is 5000+ cars, which is less than a percent of total production so far. Having a significant number of defects early in the production process is common. Ultimately, it's up to them how to value it, within reason and the law, just like it's up to them when to sell emissions credits.

by xoxoy 6y ago

baybal2 6y ago

Would it change the fact they will still be 100x times overvalued?

xoxoy 6y ago
the valuation could go in a second if there’s a hint of running low on liquidity - or that either assets appear bloated or liabilities understated also it’s the clearest sign of accounting fraud...but apparently the SEC doesn’t care to investigate that anymore.

bob33212 6y ago

That is a reasonable concern from an accountant point of view. But time and time again Elon has shown that he isn't operating with the normal MBA CEO mindset. He is operating as an engineer, and all that matters in the engineering world is that if you can successfully build the technology and factories to remake these packs at a low cost, your total costs will be significantly lower than your competition. It doesn't take an MBA to understand the implications of that.

xoxoy 6y ago
if this is indeed a Tesla subsidiary, it’s accounting fraud
- recuter 6y ago
  How could it possibly be? Tesla had $100M+ of scrap inventory they pretended was still good and then somehow created a subsidiary out of thin air and "sold" the scrap to it? I don't understand where the $100M the subsidiary paid materialised from. How is any of this possible. What's preventing others from having secret fake subsidiaries and printing money out of nowhere?
  - maxerickson 6y ago
    Funding such a fraud could make sense for holders of large amounts of Tesla stock. Spend $100 million to prop up billions. Note that I'm commenting in the abstract, not commenting in support of fraud as an explanation. I have no information or opinion about this battery recycling company.
  - xoxoy 6y ago
    I mean it’s hardly a secret if it’s on the cover of WSJ. The question is who funded this company and what transactions have they made with Tesla? but obviously no one will tell you those two things.
  - pbhjpbhj 6y ago
    How about M invests $100M in company B, he writes them a cheque, company B purchase waste from company C for $100M, by cheque. Company C loan M the money, by cheque, or give him it. M isn't out any money. B has a lot of waste to process, batteries maybe. C has $100M extra on their balance sheet. There'd be some wastage: capital gains taxes, ancillary costs. Does that kind of thing work?
- bob33212 6y ago
  All corporate accounting has some amount of bending the rules. Conferences and team meetings at high end resorts which are not counted as compensation for example. The rules exist because of people like the Enron bean counters who spent their time and energy scamming the system rather than actually building something. It is fine if you don't like Elon or how he runs his company, but it is absurd to suggest that this is a shell company and not an actual effort to improve recycling technology.
mschuster91 6y ago
> It doesn't take an MBA to understand the implications of that. And that is perhaps the greatest advantage of all that Tesla has over many other companies, especially in the car industry, but generally (excluding only Amazon and parts of Apple/Google): Tesla is not run by beancounters with a next-quarterly only mindset, but by someone with a long-term vision and a general engineering focus with deep pockets. Not many companies these days go for extensive, ground-breaking, costly R&D that Tesla does, and those that do rarely go to the length of Tesla/SpaceX. For most companies that level of investment would flatten their stock value, shareholders would be angry... but Elon Musk (and similarly Jeff Bezos) are impressive personalities that manage to keep the beancounter hawks at bay.
- xoxoy 6y ago
  > costly R&D huh? you realize that Tesla spends less than $300M a quarter in R&D when companies they now dwarf like Ford and GM consistently spend more than $1B each? in fact Tesla’s R&D spend has noticeably shrunk since last year, which is another head scratcher considering how many projects they claim to be working on, including a “full rewrite of FSD”
  - yowlingcat 6y ago
    > less than $300M a quarter in R&D when companies they now dwarf like Ford and GM consistently spend more than $1B each? I don't think the two of you have points in contention. That is to say, I think it is accurate to say that Ford and GM _spend_ more on R&D but Tesla _executes_ more on R&D. In fact, I would say that very discontinuity forms much of the basis for Tesla's very (some would say irrationally) high P/E ratio!
    - xoxoy 6y ago
      I don’t buy the efficiency argument. Either they are publicly exaggerating the scope of the projects they are working on (eg the “million mile” battery and “full rewrite of FSD”), severely underpaying engineers and understaffed, or something else.
reitzensteinm 6y ago
With respect, if you leave out the sophisticated games Tesla plays with finance and PR you're missing a big part of what has made the company effective. In order to qualify for the S&P 500, Tesla needed a cumulative four quarter profit. Q1 and Q2 2019 were "take out the trash" quarters, with $702 million and $408 million in losses respectively, for a cumulative loss of $1.11 billion. In the four quarters since that time, Tesla has posted profits of $143, $105, $16 and $104 million, for a combined profit of $368 million. The previous two quarters were heavily juiced with credit sales to shore them up to be a slight profit. This fits the criteria for S&P 500 inclusion, and also solidifies the notion that Tesla can be profitable - it's just taking losses like Amazon, investing in the future. A company that purely focuses on engineering and ignores the short term would have instead sold credits as they came in, and not structured expenses and income to achieve the result that they did. If Tesla had instead posted 6 losses in a row of ~$125 million they'd be materially worse off, both from an investor perception perspective and by not qualifying for the S&P 500. There's absolutely nothing wrong with playing these games. The "shorts" point them out to denigrate the company, but I don't think that makes sense. The fact that Musk has such tight control over the company is a major competitive advantage. The CEO of VW could not have done the same thing.
bob29 6y ago
In that case, why would the "unprecedentedly brilliant engineer-ceo" Musk not develop battery recycling technology as a division within Tesla, solely reaping the rewards of cheaper battery packs?
afrojack123 6y ago
Its clear your not an engineer nor know anything about Elon. He purchased Tesla and scrubbed the founder's name from it. Hardly what you call an engineer. Most engineer's don't know complex financial and legal tricks.

sukilot 6y ago

How is that legal? (Besides the boring answer of the fundamental corruption in the concept of the corporation.) I can't outsource all my debts to a zero-net-worth friend who then declares bankruptcy.

xoxoy 6y ago
it’s not
- deleted 6y ago
  [deleted]
AndrewBissell 6y ago
"How is that legal?" is never really a relevant question when it comes to Tesla or Elon Musk.

omgwtfbyobbq 6y ago

Writing down $100M+ in battery inventory would be a big hit, especially with their profit margins being thin, but I wouldn't consider it a big shock. At $20000 per pack, $100M+ in battery inventory is 5000+ cars, which is less than a percent of total production so far. Having a significant number of defects early in the production process is common. Ultimately, it's up to them how to value it, within reason and the law, just like it's up to them when to sell emissions credits.