Well, that did not play out as expected.
Last week I was blathering on about how it was a good week to be short, because Facebook’s stock crashed, and Tesla’s was going down. I don’t short Tesla, but I bought puts, which were a great speculation two weeks ago, but a horrible disaster this week.
As you know, Tesla announced horrible results. Lower profit, massively negative cash flow, etc. Every financial statement number was horrible.
But, on the analyst’s conference call, instead of Elon Musk yelling at the analysts like he did last quarter, this time he apologized, kept his mouth shut, and therefore in contrast appeared to be completely normal. Even better, he said “we have no plans to raise capital”, and “we are going to spend a billion dollars on a factory in China”!
Yup, he can’t pay his suppliers, he’s reducing CAPEX, and yet he will somehow be able to borrow a billion dollars to build a factory in China.
Not a tent. An actual factory.
So investors said “great, he’s not crazy, and he’s building a new factory, which is growth, so that’s great, let’s bid the stock up”!
And they did.
By 50 bucks.
Tesla had a slight pullback on Friday, down just over a dollar, but it was a big spike on the week.
And, depending on how you want to draw your downtrend lines, it would appear that the downtrend line started in June was broken.
So it’s all good, right?
Yeah, no.
It is quite possible that the good feelings of this past week will propel Tesla to $400. It would not surprise me at all.
They could keep building cars in tents and have a not horrible third quarter.
Could happen.
But you can’t continue losing money forever. That’s not a strategy. That’s not a plan.
So, I will take my lumps and live to fight another day. As I said last week, I’m not betting big bucks on this.
Gold, on the other hand, appears to be perking up, so that will be our discussion topic next week.
Until then, thanks for reading.
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Tesla: You can lie about Funding Secured and suffer no consequences
by JDH on August 11, 2018
Yes, I got killed on my Tesla short play. I assumed that when they released horrifically bad results, the stock would tank. I assumed that repeated customer complaints about crappy car quality would cause the stock to tank.
Apparently not.
All it took was a tweet from Elon Musk to “confirm” that financing was confirmed to take the company private at $420 per share.
Yup. “Funding secured”.
Of course this is a lie. Investor support comes in the form of cash. What investor group has $70 billion to complete the largest “go private” transaction in corporate history?
None, apparently. “All it takes is a shareholder vote” is a lie. What you really need is $70 billion to buy a company that can’t make cars, and can’t make money.
It ain’t happening, folks.
But, as I have said before, imminent and inevitable are not the same, so this scam could continue for many more weeks or months.
Time will tell.
See you next week.