Is Tesla Inc. (formerly Tesla Motors) an elaborate ponzi scheme?

"We might finally be the generation that transitions to electric cars"... has been said for decades now.

Usually with more and more amplification, with any results largely due to novelty factors and tax incentives.

Here's another Solyndra style "bet" that gouvmint wants to make for us.

https://electrek.co/2019/04/30/faraday-future-electric-car-startup-bridge-loan/

The Tesla shareholder base has undergone significant changes over the last several months, at the same time the stock has dropped a whopping 38% from its 52-week highs of $387.46. One of the talking points popular among Tesla skeptics remains why such large institutional names and major holders continue to own the stock given the significant shitstorm of events operational challenges the company appears to be facing.

Today, we have slightly more transparency as to how the Tesla shareholder base is "evolving", thanks to CFA Paul Huettner, who has compiled a chart showing how Fidelity has been the most recent Tesla shareholder to reduce their exposure to the company.

"Fidelity's big funds sell nearly 1 million shares of [Tesla], 24% of their entire Tesla position in March! That's 6 million shares, or 66%, in the last year," he commented on Twitter.

"As a percent of total net assets, [Tesla] is now at a multi-year low. Blue Chip Growth looking like it's headed for a complete liquidation while OTC is completely out."

This comes amid a slew of insider stock sales from people like departing Board Member Antonio Gracias and Musk's longtime lieutenant JB Straubel, who filed a Form 4 just yesterday disclosing stock sales in the $230's and $240's.

At the same time, according to data from RobinTrack.net that tracks users of the Robinhood app, the number of retail shareholders of the company has continued to rise as the price falls and these institutions spray the bid.

As VC entrepreneur and fund manager Josh Wolfe accurately stated:

"The people dumping shares in Tesla are not short-sellers (short interest lower than usual)— but large institutional holders + Tesla Board of Directors members."

Tesla's need for cash has finally slipped beyond the point where CEO Elon Musk can continue to pretend to ignore it, and instead has been given a violent thrust into urgent, as the company filed this morning to offer about 2.7 million shares (~$650 million in stock) and $1.35 billion in convertible notes one week after Musk said there was merit to the cash-crunched company raising more capital. Shares popped on the news in the pre-market session on news Musk would participate in the offering:

CEO Elon Musk has indicated his "interest" in purchasing up to about 42,000 shares, or $10 million of the offering (0.05% of his net worth). Elon Musk is the only executive officer or director who has purchased shares in the last 12 months. Other executive officers and directors have executed 41 sales in the past 12 months.

https://www.zerohedge.com/news/2019-05-02/tesla-announces-2-billion-stock-bond-offering-stock-jumps-because-musk-buying

https://twitter.com/WallStCynic/status/1123929634624741379

Tesla launched a new, cheaper Model 3 with 150km range in Canada to get access to the new $5,000 federal incentive, but we’re now learning that the company is not offering any range upgrade on that new version of the Model 3 — effectively making the vehicle unsellable.

As we previously reported, Canada’s federal government launched a new $5,000 incentive at the purchase of new electric vehicles with base prices of less than $45,000 and that cost no more than $55,000 after options.

It disqualified Tesla’s vehicles from being eligible to the incentive because the base Model 3, which is only available as an “off-the-menu item”, starts at $47,000.

In response earlier this week, Tesla has lowered the price of the vehicle to $44,999 in Canada, but it also software-locked the vehicle to only 150 km (93 miles) of range.

https://electrek.co/2019/05/02/tesla-model-3-range-upgrade-canada/

Bloomberg reported that on an investor call to fill out Tesla's proposed $2 billion offering, Musk "confidently told investors on the call that autonomous driving will transform Tesla into a company with a $500 billion market cap". On top of that, Musk claimed that Teslas would increase in value and will be worth up to $250,000 within three years.

This morning the company unexpectedly filed a registration statement seeking to raise $2 billion in cash by selling about 2.7 million shares (~$650 million in stock) and $1.35 billion in convertible notes.

By 8PM EST the offering was upsized by 400,000 shares to the tune of 3.1 million shares, pricing at $243 per share. The price represents a 0.45% discount to the latest close,

Demand for the company's equity financing exceeded what the company initially sought to raise.

Lead underwriter Goldman has a sell rating and a $200 price target on the stock.

And another one.

https://www.zerohedge.com/news/2019-05-21/tesla-slashes-car-prices-third-time-3-months

On Wednesday, Morgan Stanley held an investor call for clients, led by analyst Adam Jonas, supposedly due to feedback after the company's note yesterday, which saw the investment bank lower its "bear case" target to on the company to just $10 per share. This came, ironically enough, just weeks after the company helped Tesla perform a $2.4 billion financing. To us, nothing smells more like another potential downgrade than letting "select" investors on a call that wasn't supposed to be for media or for the public. Yet we get the funny feeling that the media - and the public - are going to hear all about the call and discuss it widely for days, if not weeks, to come. Adam Jonas opened the call by talking about how optimistic 2018 looked - the company was generating cash and Elon Musk was saying they don't need to raise cash. Demand was robust and all was right with the world, at the time. Then, 2019 happened... and somehow everything went to hell overnight.

Jonas also chimed in on the effects of the trade war: "Could there be a worse time to depend on China to sell robot cars?" he asked.

He also mentioned that the company's debt was only now a burden, since the growth story has dried up. Even Jonas is seemingly unable to ignore the fact that the bond market is pricing the company's 2025 bonds at 82 cents on the dollar: "No one really cares about debt; no one cares about the CDS as long as you're growing. When questions are calling into your growth these numbers start start to be noticed," he said, sounding exasperated.

Jonas then went on to talk about the company's 5 year CDS prices: "Nevertheless, the CDS on Tesla I believe the five-year CDS this morning was 673 basis points. That compares to Ford Motor Company at around 200." While the implications are clear, the price implies a 46% probability of default in 5 years.

He claimed that after inquiring with Morgan Stanley's credit desk about the price of the company's CDS, they informed him that it is pricing in "a 10% chance of default".

If that wasn't enough, Jonas also slammed the "departure of key executives, price discounting, and extraordinary cost-cutting efforts add to the narrative of a company facing real potential stress."

Tesla Inc. dropped 4.4% in U.S. pre-market trading as analysts at Loup Ventures and Morgan Stanley gave increasingly bearish commentary on the U.S. electric-car maker.

Loup Ventures co-founder Gene Munster wrote in a note that Tesla will probably miss its 2019 delivery target range as sales shrink in China amid a trade war between the two countries. The analyst cut his estimate for Tesla’s full-year global car sales by about 10% to 310,000 vehicles, versus the minimum 360,000-unit target the manufacturer set in March. The shares are poised for their seventh day of losses and are down 27% over the past month.

“We are lowering our numbers as a precautionary measure related to two unknowns,” including China’s probable imposition of tariffs on Tesla car imports as well as other impediments such as new regulations on sales or a potential consumer boycott of U.S. goods, Munster said. Loup’s pessimism on the import fees is a “minority view,” discounting most investors’ expectation that Tesla will remain exempt because of its investment in a Chinese battery factory, he said.

You are right, Tesla is amazing and Elon Musk is a great leader and business man. Can you remind me again tomorrow? Off to get paid now!

Yep, LRC predicted it first, and now the story is all coming true.

Barclays analyst Brian Johnson said: “Tesla’s stock for a while was wildly inflated as many investors thought that the company could not only become a very profitable large automaker, but will also dominate other fields like solar energy, energy storage and autonomous mobility. But now the auto part seems to be headed more towards a niche automaker. Those other businesses? Nowhere to be seen.”

Roth Capital Partners analyst Craig Irwin said: "Investors now care more about units, average pricing, gross margins and the expectations of profits."

Bradford Meikle, a senior analyst for Williams Trading concluded: “Electric vehicles are certainly the future of transportation, but I don’t think Tesla will be the one that profits from it. The value of the brand is going down every day.”