Tesla: Is This Finally The End?

by JDH on May 2, 2020

I currently have no position in Tesla, but I am on record as thinking it’s a gigantic fraud.  Their technology is no better than anyone else’s, and despite a decade in business they have never made an annual profit.  They exist entirely due to government largess.

And their CEO is nuts.  On Friday he tweeted that the stock price is too high:

Have you ever heard of a CEO tweeting that his stock price is too high?

And now he’s going to sell everything?

Does that mean he’s going to sell all of his Tesla stock?

What’s going on?

The most obvious answer is that the dude is having a break down, or he had consumed too much wine, or pot, or both, and was tweeting nonsense.

Or, perhaps, the game is up.

The Fremont plant is currently shut down due to COVID-19, but it still burns $300 million per week.  It produces a lot of the parts that go to the plant in Shanghai, so if it can’t support that plant, it may have to close as well.  That closure would probably burn another $150 million per week.  So with Tesla not making a profit, and with sales down, cash eventually runs out.

Perhaps Elon realizes that investors won’t keep pouring money into the money pit forever, and he won’t be able to do a capital raise, so it’s time to get out?

If so, perhaps he wants to start selling the shares he personally owns to put cash in his pocket, before the crash.  The share price is $700, so why not cash in now?

The peak was $968 back in the first week of February, and then just under $950 in the third week of February, and then the market crashed, sending Tesla down to $347 on March 18.  At that point Elon must have realized that his fortune was wiped out, particularly since a lot of his shares are pledged as collateral for his personal borrowing.

But then the market recovered, and this week Tesla got back over $800.  Great!

But if Elon starts selling, and word gets out, the price goes down, and he risks lawsuits from investors saying “you were selling and you didn’t disclose it”.

Well, now he has.

He “disclosed”, via a tweet, that he was selling everything.  How much more “disclosure” do you want?

Perhaps this tweet is finally enough to get him fired as CEO.  He takes the money and runs, but he can preserve his legacy by saying “everything was going great until COVID-19, that’s why sales tanked, and that’s why I got fired”.  The new CEO will discover the elaborate fraud, and the lawsuits will start flying, but Elon will have a few billion in cash tucked away to fight the lawsuits, and he’ll have a great defense: COVID-19 was the cause of the problems, not me, and I tweeted that I was selling, so leave me alone!

How’s that for a conspiracy theory?

Again, I have no position in the stock, short or long, but if Tesla can’t hold the $700 level than a drop to $640 is inevitable, and who knows how far it drops from there.

It’s been a losing game to short Tesla, so I don’t recommend it.  But, if Tesla opens up on Monday, gambling with a few out of the money puts may be fun.

Sit back and watch the show.

See you next week.