Carmageddon Sinks Tesla’s Bonds

Tesla is steeped in chaos – and chaos is absolutely the opposite what a complex manufacturing, distribution, and retail operation needs.

When bonds dive, it’s a bad sign. And Tesla’s bonds dove today to new all-time lows, and the yield spiked to new highs. In August 2017, Tesla sold $1.8 billion in senior unsecured notes due in August 2025, with a coupon rate of 5.3%. The most recent transaction at the moment that I see recorded by FINRA/Morningstar this afternoon was at 82.375 cents on the dollar. This is what these bonds have done in their lifetime:

Tesla’s shares are volatile and jump up and down. So they’ve been jumping down, down, down, leaving out the ups in between, as some long-term investors finally threw in the towel. They’re down 47% from their 52-week high last December, a big move in five months, when other stocks have rallied in a historic manner. However, at $205 at the moment, they’re still ridiculously overvalued, according to Tesla’s bonds.

The bonds tell a story of a company that is facing a considerable risk it might default on its debts. If this scenario comes about, it would trigger a restructuring of the company, possibly in bankruptcy court, where creditors would get most or all of the equity, and current shareholders would be mostly or totally wiped out. The bond market is now saying that this risk – the risk that existing shareholders might get wiped out in a restructuring – though still distant, is getting closer.

The yield on these notes due in August 2025 has shot up to 9.06% this afternoon, the highest ever (when the price of a bond falls, the yield rises):

Standard and Poor’s rates these notes a B-. Moody’s recently downgraded them to Caa1, one notch below S&P’s rating. Both ratings are deep junk (here is my cheat sheet on the corporate bond rating scales by S&P, Moody’s, and Fitch and what they mean in painfully plain English). Moody’s Caa1 means “substantial risk” of a default.

The average yield for B-rated junk bonds in the US was 6.67% as of Friday evening. So Tesla’s B-/Caa1 rated bonds trading at a yield of 9.06% means that the market has already downgraded these bonds a lot further than the ratings agencies.

To shed some light on the obscure bond market, FINRA now publishes the data on the actual bond transactions. Here is today’s batch of transactions for Tesla’s notes due in August 2025, as of the moment I’m writing this:

In early May, Tesla closed an offering of stock and convertible notes that netted $2.4 billion, giving it sorely needed cash to keep its cash-burn machine fueled for a while longer, after having reported a huge loss and a massive cash burn in the first quarter, that would have been a lot worse if Tesla had not booked record pollution credits that it ingeniously disclosed five days after the earnings announcement.

Immediately after the stock and debt offering, shares rose because the new money would delay Tesla’s liquidity crisis by some time, depending on how fast it will burn this cash. But then reality sank in. Shares have since dropped 18% from $250 two days after the offering was announced to about $205 now. So OK, some true believers got taken to the cleaners.

But the $1.84 billion of senior unsecured convertible notes issued at the time were supposedly acquired by institutional investors – the smart money. They were issued at 100 cents on the dollar at the beginning of May and jumped 4% to close at 104.37 on May 7. Then they started the downtrend. Today, they’ve traded in a range of 88.5 to 92, and are currently at 90. In other words, the smart money handed its cash to Tesla and two weeks later already lost 10%.

Turns out, according to CEO Elon Musk’s own admission in an email to his employees, Tesla will burn through that $2.4 billion in net proceeds in just 10 months. If Tesla’s stock is still worth anything at that time, the company will have to sell more shares or it will have to sell more debt to an increasingly nervous bond market. If it cannot do that, and thus if it cannot get more cash to fuel its cash-burn machine, it will have to default on its debts – see above scenario.

Tesla has been steeped in chaos – and chaos is absolutely the opposite of what a complex manufacturing, distribution, and retail operation needs. Musk himself has sowed that chaos. And he relentlessly continues to sow it.

One of his recent antics was that he told employees in this email last week that the company would embark on a cost-cutting drive that would entail that “all expenses of any kind anywhere in the world, including parts, salary, travel expenses, rent, literally every payment that leaves our bank account must (be) reviewed” by the CFO, and that Musk himself would sign off on every 10th page of expenses.

The CFO and Musk will be busy reviewing and signing off on janitorial department purchases of cleaning materials and toilet paper. The hope is that this amount of work will keep Musk off Twitter, but those hopes too will be dashed.

The company has already undergone waves of layoffs. Now the CFO and Musk are themselves looking at cleaning supplies to reduce the cash burn.

So let me give you, Dear Elon, a little piece of personal advice: I only ran a small company, a Ford dealership and subsidiaries with 250 employees. And I kept my eyes closely on expenses. But let me tell you, Dear Elon, that in even such a small and local operation, there are many thousands of expense items every month!

But Tesla is a large, global, complex manufacturing, distribution, and retail operation, and you, Dear Elon, will have no idea what most of these expense items are and what they’re for unless you ask the responsible manager. This, Dear Elon, takes a HUGE amount of time. Trying to do this for a company the size of Tesla shows that you are:

  • Either clueless about running a complex manufacturing, distribution, and retail operation,
  • Or so desperate that you can’t think straight any longer,
  • Or willing to say anything no matter how silly just to boost the shares,
  • Or all of the above.

I give you, Dear Elon, enormous credit for having put electric cars on the map and making them cool. No one in the world has ever been able to do this. You created an entire industry. And that was an awesome accomplishment. But this very talent of creating market hype and investor bedazzlement has a dark side, and that is now coming to the foreground.

The surprise came in Tesla’s SEC 10-Q filing when no one was supposed to pay attention. Read…  Tesla Discloses Record Pollution Credits for Q1: Without Them, it Would Have Lost $918 Million and Bled $1.14 Billion in Cash

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  96 comments for “Carmageddon Sinks Tesla’s Bonds

  1. Marcus
    May 20, 2019 at 3:32 pm

    Hi Wolf. A couple of times you refer to the 2025 bonds as 2015.

    • May 20, 2019 at 5:40 pm

      Thanks. This fat finger of mine caused flash-crashes before :-]

      • Ed
        May 21, 2019 at 9:27 am

        Wolf – How is Tesla performing relative to luxury competitors? Isn’t part of Tesla’s decline a symptom of a broader industry decline? It seems like Tesla is still one of the top 10 selling cars in the world.

        If the stock drops to $50, Apple or Google will likely buy them and give to accesss to unlimited amounts of cash.

        • Yancey Ward
          May 21, 2019 at 11:24 am

          If the stock drops to 50, it will go to zero.

        • May 21, 2019 at 4:31 pm

          The luxury auto makers (BMW, Daimler, etc.) have been very profitable for years. So Tesla doesn’t even compare at all.

          If Tesla doesn’t become profitable and get to a point where it has a self-sustaining business model, it will end in bankruptcy. This will happen after investors get tired of throwing money at it during its stock and bond sales.

          If Tesla becomes solidly profitable, then there is this: The price-to-sales ratio. Currently, the price-to-sales ratios are:

          Tesla: 1.6
          Daimler: 0.32
          Honda: 0.31
          Ford: 0.25

          If Tesla becomes a profitable company, at its current stock price, it would be overvalued by this measure compared to Daimler by a factor of 5. In other words, a highly profitable Tesla, by this measure, might be worth $40 a share. But all these calculations are illusory if Tesla doesn’t become profitable.

        • jon laughing
          May 22, 2019 at 12:05 pm

          This Apple or Google will buy them nonsense has been spouted for years and remains as complete and total nonsense. Please just ask yourself what it is that Apple or Google would be buying. Nothing. No technical or industrial or scientific or mathematical secrets. No manufacturing competence. No marketing competence. And even if there were something hidden that they wanted they can buy it at the Ch7 sale for .0001 on the dollar.

  2. Senecas Cliff
    May 20, 2019 at 4:03 pm

    Its a good thing there are not many door-to-door salesmen anymore. If there were they would certainly flock to any house with a Tesla in the driveway as they would figure anyone with one of Elon’s gimmick mobiles would be an easy mark to sell nearly anything from vinyl siding to ginzu knife sets.

    • James Mitchell
      May 20, 2019 at 4:59 pm

      I sold burial life ins door to door many years ago. A Buick in the driveway indicated a possible good prospect. A plastic pink flamingo on the front lawn was a perfect indicator of a person who would buy anything. But if the license plate frame said, ” Granny’s the name, Spoilin’s the game. ” , you could spend the commission. The perfect contra-indicator? A Harley in the driveway. I lost nothing skipping them.☺

      • Dean
        May 20, 2019 at 8:25 pm

        Dang it, I knew my life was better when I used to ride a motorcycle!

      • Erle
        May 22, 2019 at 7:39 am

        In 1974 Hardly-Abelson is one thing, but a Ducati 750SS guy might want to buy insurance, but the company might have to pay out.

    • Marcus
      May 20, 2019 at 10:01 pm

      I’m not sure that owning a Tesla is nearly as bad as owning Tesla stock. I’ve driven three and they were outrageously good in my limited experience. I know 5+ people who own them and all love them. My take is that Tesla makes great cars but they do so through a poorly run company. I’m sure you can find some anecdotes about manufacturing problems, but for the most part I’ve heard only praise for the vehicles.

      • Dsharmon
        May 20, 2019 at 10:58 pm

        Interesting.

        My parents bought an Edsel when they first came out.

        They have nothing but praise for that car.

        • Javert Chip
          May 20, 2019 at 11:51 pm

          Yea but an Edsel couldn’t beat a Porsche 911 0-60…

          Not actually sure if an Edsel could safely get to 60.

        • d
          May 21, 2019 at 4:27 am

          Edsels were good cars, the 58 coupe/convertible is a classic.

          What they had, was terrible marketing at the wrong time, simple.

          In reality it was a 58 custom 300/Fairlane frame, with a different body shell on it, the 361 is simply a different configuration in the 332-390-427 FE, engine family.

        • Erle
          May 22, 2019 at 7:35 am

          At least you could get service at a huge number of Ford dealers.

      • robt
        May 21, 2019 at 8:36 am

        All the environmentalists love electric cars, but the rationale for them on a purely practical, economic, or environmental basis eludes me (as it usually does with anything these people believe in). The average home consumption in North America is about 1000 KWH/month, but charging a Tesla or any plug-in takes about 30 to 90 KWH/day or 900 to 2700 KWH/month for 100 to 300 miles of daily driving meaning that a homeowner’s consumption is doubled or quadrupled.
        What ever happened to turn out the lights because we’re running out of power, and the banning of incandescent bulbs for the same reason?
        Imagine if all the greedy capitalist light bulb makers would have gotten together with a plan to try to sell a 25 or 50 cent light bulb for 5 or 10 bucks that requires special handling to dispose of safely because of the mercury contamination, or that requires a computer in every light bulb for LEDs. And do they really last 10x as long?

        • Marcus
          May 21, 2019 at 9:46 am

          Umm, yes. Electric consumption will increase to charge your car. And I just paid $4.25 a gallon to refill my gas powered car. And that gasoline will yield a lot of CO2 in the environment. True also that electricity is derived from fossil fuels, but it is also partly derived from renewables. So, my desire for an electric car (don’t have one yet) is the long game. I want to be a tiny piece in the transformation to a more efficient and less-polluting lifestyle.

        • Jeff T
          May 21, 2019 at 10:19 am

          Keep in mind that many electrical utilities have gone to a tier system of pricing for electricity. The more you use, the greater the cost per kilowatt hour on the extra usage. In a cold weather event, many people are hit with double and triple their normal bills. Charging a car at home could be at a rate twice what your are currently paying.

        • May 21, 2019 at 4:12 pm

          Charge it at night when rates are lower because the utility has a HUGE amount of idle capacity at night that it would like to use and make money with.

        • Prairies
          May 21, 2019 at 12:56 pm

          I believe the point he is making is that the electrical output of the current power grid and future power grid will have to be increased to a point that would make your co2 burning car seem like a candle next to a raging forest fire.

          The idea is sound to switch to EV small scale, but for the whole system to switch will require horrendous amounts of wattage which takes us back to emissions at the power source being just as bad.

          The whole game is a lose – lose.

        • Kent
          May 21, 2019 at 2:48 pm

          @Prairies,

          I disagree. Most charging would be handled at night during the lowest period of electric consumption, so major upgrades to the transmission system are not that needed. And burning nat gas and transmitting the electricity is still 2 – 3 times more efficient than burning gasoline in a car.

          Eventually, we could see parking places covered with rooftop solar, charging cars while they sit in the parking lot at work. A practical possibility only when we convert in mass.

          As for me, I will hopefully eventually buy an EV, if only because I understand the physics of AGW. But I also know that current battery chemistry is unsustainable in the long term. So I’ll semi-hyper-mile drive my little Honda Civic as little as possible and get around 40 mpg.

        • Cosmin
          May 22, 2019 at 2:47 am

          Kent,
          I’ve been looking for someone who understands the physics of AGW to explain something to me. Thank god I found you here.
          First, how much additional energy in Joules is captured annually by Co2 at 400ppm compared to Co2 at 300ppm?
          Second what is the mass of the atmosphere?
          Third, what is the mass of the oceans?
          Because if the ocean’s mass was a 1000 times that of the atmosphere, the energy that would raise the temperature of the atmosphere by 1 degree would only raise the temperature of the total system by 0.001 degrees, not accounting for other factors. And if there were enough energy to raise the temperature of the entire system by 1 degree, that means had we not had oceans, the temperature of the atmosphere would have gone up by 1000 degrees. Which one of these 2 scenarios is closer to the truth?

    • Tom T
      May 27, 2019 at 5:30 pm

      Yeah to complete the door step scenario the salesman will have recently changed his name to Lone Skum and will be pounding not knocking on the backdoor with red eyes and drool issuing from the corner of his mouth as he bellows “new lamps for old … new lamps for old”

  3. WES
    May 20, 2019 at 4:16 pm

    I am not too concerned about Tesla.

    Tesla has recently started selling Car-B-Qs!

    • d
      May 21, 2019 at 4:36 am

      Others sell them.

      Yesterday there was black 3 series BM Boot (trunk in America) bellowing smoke and flame stopped in the fast lane on the local expressway in peak home time traffic.

      Owner was attempting to extinguish teh flame with his bottled water.

  4. Old Codger
    May 20, 2019 at 4:20 pm

    As the wise man said, “a fool and his money are soon parted”.

  5. Harvey Darrow Cotton
    May 20, 2019 at 4:30 pm

    So how long before Tesla gets bought out by SpaceX?

    • Shawn
      May 20, 2019 at 9:18 pm

      And I suppose the Guardians of the Galaxy will eventually buy SpaceX.

    • Eamonn Harter
      May 20, 2019 at 10:34 pm

      Tesla will get bought out by Tesla through financial wizardry engineered by Musk. Sort of like how Chuck Norris is his own father. Funding secured.

    • Rising Rates
      May 21, 2019 at 8:04 am

      I was thinking the same thing…can he Solar City his way out of Tesla? We all know Musk acquired solar city as a bailout his cousin ran it and it was more of a cash furnace than his own company

    • CoCosAB
      May 21, 2019 at 8:18 am

      As long the ZIRP/NIRP keeps feeding the current ponzi scheme… TESLA is A’ok… They are the auto version of fracking.

  6. MCH
    May 20, 2019 at 4:43 pm

    Remember the book Chaos Monkey? If you look for through the dictionary, that’s Elon’s picture there. Having said that, chaos can be good sometimes, just look at the state of the US space industry since he has gotten involved.

    So, if he bats a 0.500, well, it’s not the end of the world. And credit where it’s due, he made EVs cool. He might not be around to profit on it, but that’s a different story.

  7. Paulo
    May 20, 2019 at 4:45 pm

    250 employees is a helluva big company to run. Run, run, “excuse me _____do you have a minute”?

    As for Musk, he should be limited to marketing and ideas, and leave the details of running the company to people who know how to organise and delegate. “Being Flamboyant” is not subject taught in management courses. From what I can see the best run companies have pretty quiet head offices.

    • MCH
      May 20, 2019 at 6:22 pm

      I think you hit it on the head, Paulo, but it does extend more than that. At least a little, he has to drive his ideas through at a high level. He can go through and figure out the process and make it work at a high level. Build one rocket, great, build two rockets, good. But, the problem though is that Elon is not an operational guy. He is more of a scientist in many ways, he can build one or a few things great. Put it in volume, and he has no clue. Ask him to build a million rockets on an assembly line, he will be in trouble. What Elon needs is to have Tim Cook work for him.

      It’s the difference between building a hero unit vs a regular unit. And Cook knows how to build a million things.

      • Dale
        May 20, 2019 at 8:20 pm

        Meanwhile, Tim Cook couldn’t create anything new, innovative, and interesting if his life depended on it. Were it not for the magic of buybacks, he would have been sacked years ago.

        I think you are right. Either Tim should work for Elon, or Elon for Tim.

        • Javert Chip
          May 21, 2019 at 12:33 am

          Dale

          Apple’s performed spectacularly well for over a decade (no flash in the pan), is one of the most valuable companies on the planet, makes spectacular products, executes with a 63%+ gross margin, 2018 after-tax profit was $53B+, along with Google & Microsoft, sucks a huge % of total tech profits.

          Apple’s 2018 $53B+ after-tax PROFIT is 3 times larger than all the venture capital + IPO money invested in UBER since it’s founding, and larger than the REVENUE of all but the top 53 Fortune 500 companies…

          …and you think Cook should have been sacked years ago?

          For your sake, I hope you’re not considering a career in executive recruiting.

        • MCH
          May 21, 2019 at 11:03 am

          @JC

          I’m pretty sure Dale is kidding about Cook being sacked. Because Leader Tim has done well, he is no Jobs, but he doesn’t have to be. He has kept the ship afloat well enough that gives Apple the shot for the next Jobs.

          Jobs and Elon were quite a bit alike. I think the biggest difference is that Jobs realized that he couldn’t do it all, and he had the smarts to surround himself with really capable people, and at least not drive them away at a faster rate than he could pull them in. Elon unfortunately thinks he can do everything, he hasn’t picked out the stuff he is really good at. Which most assuredly is not running operations.

        • Martin
          May 22, 2019 at 10:34 am

          Apple are a bloody curse. I’m locked in to using their appalling computers, having 3 decades worth of teaching material formatted in ‘Pages’ from when they were a million miles better than anyone else.

          Today, told one of their minions that although I’d have no opinion than to pony up for a new battery on a 14 month old MacBook. This would be at the expense of replacing my old iPhone with a cheap Android. I added that screwing over your customers time and time again (l had to replace a earlier laptop 10 years ago, out of my own pocket, literally days after the warranty ended – generic manufacturing fault) is no way to run a sustainable business.

          My Asian students seem to concur. Long gone are the days that they slavishly upgraded to the new iPhone year in year out. Apple, a hedge fund that makes ‘commodity’ phones, crappy, over-priced computers, oh and of course, silly ‘watches’.

          I’d like to blame Cooke of course, but he’s merely a symptom, not the cause of this behemoths woes. I sincerely believe and ardently hope that at 54 I’ll outlive this piece of shit company.

      • intosh
        May 21, 2019 at 8:21 pm

        Well, many people can have good ideas but GREAT ideas are those which can be executed in an economically sustainable fashion. EM is lucky we are in an era of abondance of cheap credit and yet…

    • Borg
      May 20, 2019 at 8:29 pm

      What’s amazing is that he has failed to build a team around him to do just that. He’s been sitting on giant piles of money. So, if he wanted to, he could afford to hire top people in manufacturing and retail and in general in how to run a big business without creating chaos. Resources were not the issue. So obviously its a personal fault in not being able to see his own weaknesses and make sure there is an organization around him to use his strengths and cover his weaknesses.

  8. Lemko
    May 20, 2019 at 4:57 pm

    You can’t spell Felon without elon!

    • Bill from Australia
      May 20, 2019 at 5:25 pm

      Nice one Lemco

    • May 21, 2019 at 4:33 pm

      This comment wins the internet today.

  9. Bookdoc
    May 20, 2019 at 5:34 pm

    I have seen figures quoting about 1.9-2.01% of the cars sold in the US are plug in electrics. I also see that just about every manufacturer is introducing electrics. That seems to me to be a small amount of vehicles sold with many, many choices for those who are interested. Not only that, the designs and tech are far newer than the Tesla. Musk is selling an old design in a field where people want the latest thing. As I am sure Wolf is aware, cars are often an emotional purchase which, to my mind, is why car sales can be a profitable operation if done right. I spent 21 years in the business-it is competitive and Elon seems to think offering the cars is enough. I do not believe it is in today’s world.

  10. Anthony Aluknavich
    May 20, 2019 at 5:44 pm

    I wonder how he is going to refund all the prepaid deposits on the Big Truck and the Model Y?

    Maybe the income pouring in from the 1,000,000 Tesla Taxis scurrying about?

    • Dale
      May 20, 2019 at 8:18 pm

      Unsecured creditors. Not likely to be very happy at the end of the day.

  11. ooe
    May 20, 2019 at 5:45 pm

    the problem for Tesla and other companies that do not make a profit during expansions, they will go out of business when the recession hits.
    that is the fundamental problem.

  12. Auld Kodjer
    May 20, 2019 at 6:15 pm

    People need heroes, more so in difficult times.

    Superheroes were popular following the Great Depression. A scarred populace looked to sport and entertainment. Heroes were found on the screen (Superman and Batman) and on the sporting arena (Babe Ruth and Phar Lap).

    The need for heroes also heightened following the Great Recession. The new versions include the Avengers, Tiger “Lazarus” Woods, and Winx.

    Somewhat bizarrely, a section of society included Musk in the modern list. Supporters will say he has made superhuman achievements in the advancement of electric cars. Critics will say he shares batman’s dark side, has Babe Ruth’s & Tiger’s penchant for screwing anyone, and deserves to be stuffed and put in a museum like Phar Lap.

    We have good Elon, and we have bad Elon. The debate might continue but, like all flawed heroes, his time will shortly – probably very shortly – pass.

    • intosh
      May 21, 2019 at 8:28 pm

      Very true. The mythical man of destiny leading and saving humanity — the Chosen One. People have been brainwashed with this idea from mainstream culture for decades.

  13. rivereddy
    May 20, 2019 at 6:29 pm

    And good luck attempting to buy TSLA’s bond as apparently it is Reg S (international buyers) and Qualified Institutional Buyers only club.
    My broker, Fidelity, doesn’t handle it at all.

    • May 20, 2019 at 6:35 pm

      Most retail brokers don’t sell high-yield bonds to their retail clients. I don’t know about Fidelity. But most don’t. They only sell investment-grade bonds to their retail clients. So for most retail investors, it’s tough to buy junk bonds outright.

      • Transport Driver
        May 21, 2019 at 8:59 pm

        Fidelity has many non-investment grades bonds available to its retail customers.

    • Ididsa
      May 21, 2019 at 3:22 pm

      Could not find them on Schwab’s bondsource either……

  14. Mike
    May 20, 2019 at 6:40 pm

    One of the big investors sold about 85% of their shares, about 4% of total floating Tesla shares were dumped on the market in a short time…most likely a one time event, however one could argue this both ways…:)

  15. M. W.
    May 20, 2019 at 6:44 pm

    Tesla is a barometer on climate change. If Tesla goes down, we’re all cooked. (Actually we’re probably cooked anyway…)

    • c_heale
      May 21, 2019 at 5:07 am

      Electric cars get their energy from power stations. I haven’t seen too many solar powered ones around. And mining lithium uses vast amounts of water. If Tesla goes down it makes no difference. We need to stop traveling so much. Energy conservation not energy conversion is the only solution.

      • Ed
        May 21, 2019 at 9:02 am

        c_heale – Actually, the real problem is meat consumption. Global demand for meat is the primary contributor to CO2 emissions, water consumption, and environmental destruction.

        Most public officials are scared to say for some reason.

    • Bla
      May 21, 2019 at 6:33 am

      Tesla is a barometer for Musk’s sanity.

      Globally Tesla has a minority market share even in pure BEVs. If anything: EV revolution will only get healthier once Tesla fanboys stop shitting all over the other EVs. There’s noone attacking all other EVs as rabidly as Tesla fanboys.

  16. Kasadour
    May 20, 2019 at 6:45 pm

    RIP Harambe sippin on some Bombay smokin on some stronger; we thinkin about you. . .

    Back in the day we called it cross-fade.

  17. Delikon Threetree
    May 20, 2019 at 6:51 pm

    I am now convinced that Tesla survived this long because Elong Musk had the cleverness to name the company after the great Nikoli Tesla. If Musk had named it anything else the company surely would have crashed and burned a long time ago.

    • Bookdoc
      May 20, 2019 at 7:16 pm

      I read about Tesla when I was a kid and admired him. As I learned more, I now feel he was a mixture of brilliance and crazy which fits the tesla auto company perfectly.

      • Audi
        May 20, 2019 at 8:39 pm

        IIRC, Prof Tesla failed to profit on his ideas, while a dude named Thomas Edison succeeded.

      • drg1234
        May 20, 2019 at 9:18 pm

        The original Tesla generally burned through money by the truckload. His most successful stuff was executed by other people. Maybe there’s a lesson in there.

        • Ed
          May 21, 2019 at 9:20 am

          drg1234 – The lesson is that a profit based society cripples innovation and lowers the quality of living for the common man. All done to keep 1% of the population rich and powerful.

    • KSFO
      May 20, 2019 at 9:15 pm

      “I am now convinced that Tesla survived this long because Elong Musk had the cleverness to name the company after the great Nikoli Tesla.”

      He didn’t start Tesla, it was called Tesla when he bought the company…….

      • Delikon Threetree
        May 22, 2019 at 7:07 am

        I stand corrected but I’ll still say if the company was named anything else it would have crashed and burned a long time ago.

  18. MaryR
    May 20, 2019 at 7:04 pm

    So with negative ‘earnings’ Tesla’s share price is $205.

    What is that in PE terms? Magic? Or perhaps Elon fairy dust…

  19. May 20, 2019 at 7:30 pm

    Trump et al. must have fallen asleep at the wheel propping up this piece of garbage just like the rest of the rigged fraud U.S. stock market.

  20. Vadim
    May 20, 2019 at 7:32 pm

    A programmer friend of mine bought Tesla stock at around $300 sometime last year. After he told me, I linked him an article from here showing how the company is loosing loads of money, thinking he would be scared off and sell the shares in due time. But no, he wasn’t scared at all, still thought it was a good investment because Tesla is the future and makes innovation and has cool high tech stuff.

    I think we tech millennials are delusional in this tech field. We make excellent greater fools.

    But it looks like the greater fools are running out for this company. Still, there might be pension funds around to buy this kind of bonds. Curiously, that Thomas Cook company hasn’t found someone to pour fresh money into it. Maybe next year Tesla will be in the same situation. We will be here with the popcorn, ready!

    • May 20, 2019 at 11:16 pm

      I noticed this about my own understanding of things: once my own money is in it, I lose the clarity of thought that I feel I have otherwise. Once I put my money on something, it taints my thinking. This is automatic. My brain starts mixing up the facts with what I want to happen, and I don’t really notice it. It’s a pernicious thing — and a very serious issue in decision-making.

      • d
        May 21, 2019 at 4:46 am

        “Once I put my money on something, it taints my thinking.”

        That’s what I like about FX and indexes. Always set a stop loss, and stick to it along with a trailing stop as soon as it makes money (Locking in profit).

        It takes a lot of the self second guessing and stress out of it.

        Also only mange the trade dont “Watch” it.

        That’s probably harder to do with stock’s unless you only day trade them.

      • Bla
        May 21, 2019 at 6:37 am

        To make things worse: a number of Tesla shareholders grows rapidly, as large, self-aware shareholders dump, crowds of minions purchase.

        It’s literally reverse-Robin Hood. Tesla stock takes money from the poor to give them to the rich.

        Meanwhile, online Tesla fanboys are only getting more rabid as the company gets in bigger and bigger trouble and competitors release new cars (eg. look no further than all the attacks on e-Tron, that’s despite being superior in borderline everything but some 9% real-world efficiency difference, is constantly being bashed by Tesla fanboys for that “atrocious efficiency”, lol)

      • Kasadour
        May 21, 2019 at 9:05 am

        The heart is treacherous more than anything else and is desperate – Jer 17:9

        • Jr
          May 25, 2019 at 9:47 am

          Who can know it?

  21. Bobber
    May 20, 2019 at 7:42 pm

    Tesla needs government support, and will have to go into bankruptcy to get it, just like GM did.

    Short of bankruptcy, the government isn’t going to subsidize this money burning show, run by an unrealistic petulant figure, that caters exclusively to the wealthy.

  22. May 20, 2019 at 7:46 pm

    “all expenses of any kind anywhere in the world, including parts, salary, travel expenses, rent, literally every payment that leaves our bank account must (be) reviewed” by the CFO, and that Musk himself would sign off on every 10th page of expenses.

    This is a stalling tactic. It sounds like they’re really worried about short term funding.
    Say they’re really worried about funding operations – this policy stops all outgoing payments and the CFO/CEO can decide which can wait vs which will be paid to keep things moving. Delaying invoice payments to suppliers is not technically a default.
    Certain missed payments will sink them quickly … There are serious legal repercussions if you’re late on payroll for example. Other payments will leave suppliers complaining with little immediate recourse.
    For a CFO, increasing days of payment is often equivalent to taking on interest-free debt. Of course you can’t say this directly – saying that you need to carefully review and pare down expenses sounds better both for potential lenders/investors or if anything goes to court.

    • Sally
      May 20, 2019 at 8:36 pm

      As a former corporate minion, this language is just the CEO blowing off to his employees. I never took anything said by a CEO at straight face value. No employee who isn’t wet behind the ears would be surprised to discover that he’s not really personally checking each decimation of expenses. Just like I wouldn’t believe that he hasn’t shaded that 10 months number down at least a bit for effect.

      I’m just curious if such a letter to employees, officially released by the company, isn’t something that can effect the stock price so the SEC might be checking to see if he’s really checking every 10th page of expenses! It would be something to see a CEO actually get called for some of the nonsense that gets said in such letters/emails to employees.

    • Javert Chip
      May 20, 2019 at 9:18 pm

      Wild-assed guess:

      Tesla probably has somewhere around 150,000 “payments” a month:
      o At 50 payments/page, that’s 3,000 pages – a stack about 10-12″ high
      o A ludicrously fast 15 seconds per payment (12.5 min/page) takes 625 CEO+CFO man-hours/month
      o 625 CEO+CFO man-hours/month is 10.45 hours/day, 7 days/week, every week of the year. This seriously impinges on Elon’s 4/20 time, if you know what I mean, and I think you do…

      This kind of malarkey can quickly take you to the “pay for everything COD” stage of toxic melt-down. Musk just proposing this should cause huge vendor heartburn. Tesla investors (AKA a complete collection of greater fools) probably are somewhat immune to “loss of confidence”.

      Oh yea, any CFO would have tuned A/P days-to pay before lunch on day 1 (realistically, he would have checked on it before his first interview for the job). About now, the CFO is actually spending LOTS of quality time with Wall Street dudes pitching “strategic options reviews” & DIP consulting work.

  23. kevin
    May 20, 2019 at 11:56 pm

    “I give you, Dear Elon, enormous credit for having put electric cars on the map and making them cool. No one in the world has ever been able to do this. You created an entire industry. And that was an awesome accomplishment. ” – Wolf

    Wolf, honestly I don’t think Elon deserves that accolade above (even if its somewhat tongue-in-cheek).

    For those who know, electric vehicles have had a long and winding history, before Elon was even born. Henry Ford was the one who first made an electric vehicle in 1915. lol.

    Many other car manufacturers then followed with various technical successes but mostly commercial EV failures, partly because the technologies (in batteries, in electric drive-chains etc.) took many decades to play catch-up.

    People forget, GM was the one who put the “cool” factor in EVs with their first production model EV1, waaaay back in the 90s.

    That was before the advent of broad access to the Internet, so I reckon modern-day “hype” machines of Facebook/Twitter/Instagram etc. was what help propelled Tesla & Elon (undeservingly) to become a global “leader” for EVs.

    To me, Elon is clearly just a massive global red herring. His Tesla will fail without governmental push to install vast numbers of charging infrastructure, and so will all his other financially-nonviable schemes from underground vacuum tunnel transport to his ridiculous Mars colonization program.

    Mark my words, this Elon spin-doctor is most likely a front for mass delusion hired by either CIA or NSA to dupe investors and give false hopes for the masses. Just wait and see… none of his sci-fi ventures will be coming to fruition any time soon.

    Watch this documentary to know the forgotten history on EV1, which consumers then loved, but GM abruptly killed off for whatever reasons.

    https://youtu.be/nsJAlrYjGz8

    • Bla
      May 21, 2019 at 6:46 am

      Honestly: Government money in all markets made more to grow EV sales than Tesla ever even possibly could have.

      All that Tesla did was creating its own brand and marketing. They’d be doing it regardless if they would sell EVs, hybrids or diesel cars.

  24. akiddy111
    May 21, 2019 at 12:20 am

    Tesla is up 10 fold since 2010. It makes sense that naysayers hate it.

    • May 21, 2019 at 1:22 am

      Indeed. And at $50 a share, Tesla will still be up 100% from 2010. But try to explain that to someone who bought at $350 and still owns it or who bought at $25 and didn’t sell at $350.

      • d
        May 21, 2019 at 4:48 am

      • CreditGB
        May 24, 2019 at 6:36 pm

        Any bets on what the stockholders shares will be valued at in a final Debtors Plan of Reorganization? Wouldn’t be a bit surprised if a BK plan is not already being worked on somewhere.

    • Bla
      May 21, 2019 at 6:48 am

      From zero you can always grow up.

      Tesla’s growth in a way is similar to Microsoft Phone. And heck: At its peak, it had about the same market share. And just as likely: It’ll only go down since after the peak.

  25. Sandu
    May 21, 2019 at 1:40 am

    The only chance for success for Tesla at the current and its aspired valuation is the Autonomous Vehicles technology. The rest of the industry is soon catching up to Tesla on what used to be its moats: first to mass market EVs, best battery technology, charging stations, most sophisticated OTA software deployments, etc. Also Tesla has some significant problems with build quality since the M3 introduction and the ramp up in production, which proved them that producing cars at scale is no simple feat.

    They really blew it off in the recent event where they presented their recent AV developments: instead of partnering with NVIDIA on chip designs/production, trying to leverage LIDAR to complement the few sensors they have and arguably one the best computer vision technologies on the market (that they have developed), partnering with Uber or Lyft for ride-sharing technology, Tesla sprayed a dust of inferiority on the entire rest of the industry working on AV technologies, by going at it all alone and claiming that the rest don’t know what they are doing. Beside being counterproductive and too costly for them to implement all by themselves, I am sure this strategy did not sit well with many large investors/VCs in the Valley who had money in all the other companies which Tesla now wants to compete with at one level or another and were being made to look like being very far behind.

    True (level 5) autonomy will be nowhere ready for the market as soon as Musk boasts/claims – most technologists in the AV space believe it is at least 5-10 years away. Tesla might have had a chance to pull this off sooner, if they would have chosen to work with others. This was the last serious drool they had for investors – people are starting now to see through the BS and what used to be great about Tesla is not enough to save its stock price.

    • Bla
      May 21, 2019 at 6:52 am

      Tesla is the only company willing to accept deaths and lawsuits in the name of public perception that they’ve got ‘bleeding edge autonomy tech’.

      That’s basically it.

      Oh, and as far as charging goes – they already lost their edge in Europe, never had one in China, as it stands now Superchargers are superior only in the US, and that’s just a matter of time till CCS kills it like it did in other markets. Open standards always win over proprietary BS. (heck: the fact that Tesla refused to accept CCS when working on Superchargers 3 only goes to show that all their talk about promoting EVs adoption is pure marketing nonsense)

  26. Tom
    May 21, 2019 at 1:48 am

    In some way, E.Musk reminds me of Carl Borgward, a visionary but tragic figure of the automobile history

  27. May 21, 2019 at 2:58 am

    Great assessment Wolf thanks. The message here is clear for me because I am one of this clique of entrepreneurs (very small in my case) but no different in principal. I founded a successful computer company in the 80s here in UK and it remains today and is a ‘nice little earner’.

    I was forced out in 1995 on the grounds that ‘I couldn’t manage to company properly’ – ‘I was no manager’ they said and they were right. So I got on my bike with a payout many times less than values today – but it was the team that built that.

    Elon should bow out and let the professional run the company – it might have a chance tp prosper but under current conditions it has to be Chapter 11 or 7 one way or another – and it is close to midnight.

  28. robert curtis
    May 21, 2019 at 8:23 am

    all that i can say is Amazon 2005…

  29. IslandTeal
    May 21, 2019 at 10:08 am

    Very good article /analysis. I’ve got a feeling that the long game for Elon Tusk will be to wrap up Tesla with SpaceX and do a handoff to the the Federal Govt and taxpayers for the SpaceForce dream of going to Mars. Don’t laff…

  30. May 21, 2019 at 11:27 am

    Tesla has two separate issues, can they make cars, and is the EV viable. The second issue is more important, the faux environmentalists think just because a power plant is out of sight it doesn’t contribute to global warming. What’s it going to take to dig up all that copper? The EV is not nearly green enough. Space rockets will be replaced by smaller lighter vehicles, but concept failures seldom affect business except on the backend, (Kodak). You can make the stupidest idea work (think monetary policy) if there is enough money and the tulip bulbs are attractive enough. In ten years Tesla will be humming along, when some new technology comes up and makes them obsolete.

  31. Mike
    May 21, 2019 at 8:05 pm

    The margin on making EV is very big, a gold mine. Deploying charging stations and building a new (giga) factory in China are costly. So he guilt trips the workers for the time being until production starts in China. By the way that factory will be the most advanced and modern manufacturing facility on the planet….You may want to hold onto buying TSLA now, but you should certainly keep an eye on it. Unless of course, Apple buys it first..

  32. NARmageddon
    May 21, 2019 at 8:10 pm

    Any thoughts from any bond experts on why the FINRA data show only large-to-huge sized trades? Are there really no small investors trading these bonds, or are direct sales to small investors not reported here?

    • May 21, 2019 at 10:48 pm

      NARmageddon,

      Corporate bonds are very illiquid during the best of times. Many corporate bonds don’t trade at all for weeks or months. So there might be a $1 billion bond issue, and there are just zero trades in this issue. They’re owned by insurance companies and the like that hold them to maturity and just don’t trade. When I buy bonds, it’s with the goal to hold them to maturity. I’ve never sold a bond.

      When you look at the table, there were 14 trades on that day during that time period. So that’s a lot of trades for a bond. That’s because investors are worried, or see opportunity, which makes a market, and so there is some movement.

      Retail buyers rarely trade junk bonds like these. So most of the trades are by institutional investors. Also, individuals are trading through brokers who might themselves be using a third party, so smaller trades executed by one such entity may get lumped into one line items.

      • NARmageddon
        May 22, 2019 at 12:11 am

        Thanks. It just also occurred to me that the retail investor more commonly trade in ETFs like JNK and/or some mutual fund when they want to own these junk bonds.

        Of course, owning bonds in ETFs and mutual funds has its own risks(*), and you have pointed out several times yourself, Wolf!

        (*) namely, that a rush of people want get out of the ETF/fund and the fund sells the most liquid stuff and leaves the crappy stuff in the fund, which you then own.

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