Tesla will go bankrupt: Muddy Waters Research’s CIO

Carson Block starts by saying “It is not a major position for us”. Which translates to, even if we are wrong, it wont affect us that much. We don’t have a stake in this that would matter.

CNBC seems to be the platform of choice to allow TSLA short sellers to re-iterate their fear uncertainty and doubt points:

• TSLA can’t be profitable with a $35,000 car
• There are stockpiles of Tesla’s documented all over the internet signalling low demand
• $420 Tweet (10b-5 Violation)
• Tesla will go bankrupt

Do the above points make sense? First, would Tesla promise a $35,000 Model 3 on March 31 2016, launch the Model 3 summer of 2017 and sell only higher priced versions for over a year and a half with the intent of getting costs down so they could announce an $35,000 Model 3 which they would lose money on? If they wanted to lose money on a car, why would they put so much time and effort into getting the cost down on that car?

Stockpiles of Tesla’s on the internet. There is no shortage of parking lot images from various time periods where Tesla has filled the parking lots full of cars. They have documented their transition for “Production Hell” to “Delivery Hell”. Logically, if you were making 5000+ cars per week and making arrangements to get these cars into the hands of their owners, you would keep the cars together until such time that delivery trucks can be loaded up and they can be shipped to their destinations. It only makes sense that short sellers are spinning this to confuse delivery logistics with demand shortcomings. These demand problems were cited long before Tesla began shipping cars overseas. As if the demand overseas didn’t exist.

Tesla has had the most impressive natural progression from designing the car, to designing the production lines, to scaling the production lines, to designing the delivery logistics, to scaling the delivery logistics. If Tesla had a demand problem, would it make sense for them to buy a trucking company?

Did Elon make a mistake with the $420 tweet? Yes. Has he paid dearly? Yes. The tweet was serious in the sense that Tesla would benefit tremendously from being able to cut out shortsellers and that would allow his workforce to focus on the positive mission ahead. It must be very difficult to be doing such a great job, to know that Tesla has demand for their cars, and know that their cars are amazing and know that their boss is making great decisions to make the company bigger and bigger and yet the stock price at $278USD March 31 2019 is basically exactly where it was in 2017 before they produced and delivered hundreds of thousands of Model 3s, before they purchased the trucking company, before they began building their third Gigafactory in Shanghai. If I were Elon, I would have wanted to take the company private as well.

Tesla will go bankrupt? So, Carson Block feel this will happen. He gives no timeline because then people could hold him to something and tell him he is wrong. But what makes a company go bankrupt? For Tesla to go bankrupt, he would have to be right. He would need to be right that people don’t want to buy Tesla cars. That Tesla is making cars nobody wants. That demand isn’t there. That they will continue on and start making cars that lose them money. But nobody will want those cars. And if that was the case, Tesla would have a bunch of cars, no buyers and only debt. However, what we are seeing instead is Tesla Model 3 = #1 Best Selling Car In The US (In Revenue) and Tesla Model 3 Sales Shatter All Records In December 2018 and as they start focusing their higher end sales to new markets we get this article from today Tesla Model 3 = #1 Electric Car In Europe — #CleanTechnica Electric Car Sales Report. You would have to be daft to stand there and say, that they are seeing parking lots full of cars, so that implies Tesla is stockpiling cars and demand has fallen off. In fairness, this video was from a month ago, so his foreshadowing was just wrong. But it is not an excuse because Tesla was hitting record number before that. Carson Block is wrong. If you listen to him for investment advice, you should rethink that. But then again, “It is not a major position for us”, so maybe if you invest with them it won’t really impact you at all.

FUD (9 points)

fear points (2)

• Likely do go bankrupt.
• That is why we think there is a demand issue here.

uncertainty points (4)

• Can't tell you exactly when [Tesla will go bankrupt] but that is our bear thesis on it.
• So lowering the prices to prices where they seem to be losing money on the cars is a giveaway.
• The anticipated delivery times on the website are pretty short.
• Pulling cars out of inventory stock piles.

doubt points (3)

• There doesn't seem that there is a way for them to be profitable on selling the car at $35,000
• There are signs that demand is not really there anymore for higher priced versions of Model 3's, Models S', Model X's and kind of doubt that even for this stripped down version of the Model 3 is there
• Stockpiles chronicled on the internet with parking lots brimming with Teslas.

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