All Posts

Is Tesla going bankrupt?

Photo by Taun Stewart on Unsplash

There’s a vicious debate about whether Tesla is going bankrupt and it’s being reflected in Tesla’s stock price.

The chart below show how many Robinhood users are holding $TSLA over the past year. Clearly, Robinhood’s users - young, tech savvy, relatively inexperienced in the markets - believe in the company and are buying the stock as it goes down.

There have been many ups and downs just this year. From Elon Musk tweeting about taking the company private at $420 per share to the stock trading down to a 52 week low of $176.99. There are even competeing Twitter hashtags, $TSLA and $TSLAQ, that the bulls and bears use respectively to discuss each side.

What are the people on either side of this trade thinking?

In my view, the bulls believe that Elon Musk is a visionary and that the product is the best in the market. In their minds, Tesla has the best battery technology, the best autonomous driving technology, and the most innovative leadership. This combination will drive the stock prices high in the long run.

On the other side, the bears believe that the company is horribly run and will run out of money before it can achieve its ambitious goals. The crux of the bear case is that in the short-term, there is far less demand for Tesla cars than the company thinks. This will cause them to run out of cash and default on their debts resulting in bankruptcy.

The difference between bulls and bears is the difference between a venture capital mindset and a Wall Street mindset. The venture side is more focused on founder, product, and growing market share while Wall Street is more focused on margins, cash flows, unit economics.

I’ve collected some links which have helped me understand the topic. If you have a perspective or resource to add, please suggest them on Twitter. I’d love to hear your feedback on this list!

$TSLA

ARK Invest - Tesla Valuation Model: Are Investors Stuck in Reverse?

Even if full autonomy turns out to be “science fiction” and Tesla cannot produce an autonomous car, ARK estimates that the electric vehicle opportunity alone would boost its stock 2-6 fold from $195 today to $560-$1,200 by 2023. If Tesla does solve for full autonomy, however, and its electric vehicle (EV) production surpasses our bear case estimates, TSLA could scale significantly higher than our previous $4,000* price target during the next five years

Chamath Palihapitiya - Tesla investor breaks down TSLA bull case: solid fundamentals and cars are amazing

So when we looked at Tesla, what we thought was a company at an inflection point that was as close to its version of an iPhone moment, and what I mean by that is a company that had been growing up, taking risks and had finally found the mass-market product that would unlock an enormous amount of product market fit

Aswath Damodaran - Tesla’s Travails: Curfew for a Corporate Teenager?

This year marks a turning point, as I find Tesla to be under valued, albeit by only a small fraction. Even in the midst of my most negative posts on Tesla, I confessed that I like the company (though not Elon Musk's antics as CEO and financial choices) and that I would one day own the stock.

$TSLAQ

Perseid Capital - Tesla Cashflow Analysis v2

While I certainly don’t pretend to be able to predict the future with this level of accuracy, the model suggests that the bankruptcy cutoff is 60,000 deliveries. If Tesla hits that number—and everything goes right with cashflow—they’d survive. If they fall short of that pace along the way, $TSLAQ.

TeslaCharts - TSLAQ and the Crowdsourced Short Sale of the Century

In this week’s episode of Hidden Forces, Demetri Kofinas speaks with TeslaCharts, one of the leading members of the online community known as TSLAQ, a group of largely anonymous Twitter users who exist to expose the reality behind the Tesla façade.

Stanphyl Capital - Tesla Will Have To Raise Money In Q3 With “Back Against A Wall

The core points of our Tesla short thesis are:

  • Tesla has no electric vehicle “moat” of any kind; i.e., nothing meaningfully proprietary in terms of design or technology, while existing automakers—unlike Tesla—have a decades-long “experience moat” of knowing how to mass-produce, distribute and service high-quality cars consistently and profitably.
  • Tesla is now a “busted growth story”; demand for its existing models has peaked and it will have to raise billions of dollars to produce new ones.
  • Tesla is losing a ton of money with a terrible balance sheet while suddenly confronting massive competition in every aspect of its business
  • Elon Musk is extremely untrustworthy.

Empire Financial Research - The Most Dangerous Stock in America

The biggest problem is that the demand for Tesla’s cars appears to be falling off a cliff.

Value Investors Club - Tesla Inc

Shorting Tesla stock (or buying put options, or shorting the unsecured bonds, or short MXWL stock, or shorting TSLA call options) is one of the most asymmetric risk/reward trades in financial markets since shorting subprime CDOs in June 2007. We believe Tesla’s stock price is on the precipice of a spectacular collapse. The company has hit a demand air pocket at the same time that its balance sheet is stressed by 2019 debt maturities.