August 2022
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August 17, 2022

Financials Matter

"It's Not Just About Finance"

Is It Time to Short Tesla?

Let’s start with some shop talk.

Shorting a stock means you’re betting it goes down. (See full description HERE).

You probably know by now that we don’t make individual recommendations of stocks.  We do, however like to point out how certain situations present opportunities for those with ears to hear.

So, regarding Tesla, it’s worth looking at some signs that it’s due for a fall.  A very big fall.

Let’s look at some facts:

  • Tesla has never earned a profit.

  • Tesla needs to raise anywhere from $5 to $8 Billion to stay solvent in the next 14 months.

  • On April 1st After teasing “important news” to come, CEO Elon Musk tweeted: “Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it.”

So far, it’s not looking good when your CEO openly jokes about being bankrupt.

Tesla claims that their production will rise to 5000 Model 3’s per week.  So far, it’s a no go.   Model 3 is supposed to make a profit of $35,000 on a car that costs $50,000.

That’s hard to believe when you see that last year they lost $20,000 per car in their S and X Models (both sold for roughly $100,000).

Ask anyone with experience in the auto business and they’ll tell you profit margins are far higher on bigger, more expensive cars. Therefore, the faster Tesla makes Model 3’s, the more money they will lose.

Up till now, Tesla’s done a great job drawing down lines of credit to finance their losses and increase manufacturing.  However, regulated lenders and suppliers eventually want to see profits.

They know that in a game of financial musical chairs, it’s important to sit down quickly.

Tesla’s not alone, but who’s next?

Netflix?

Find out (HERE).

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