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2018-10-05 09:50 by Karl Denninger
in Company Specific , 139 references
[Comments enabled]  

IMO Tesla is a ****ed company folks.

It's not just Elon, who is exhibiting classic signs of bipolar disorder -- and apparently, if smoking weed on TV is an indication, self-medicating for it too.

Calling the SEC the "Shortseller Enrichment Commission" is the sort of thing that commentators without a proceeding before the commission might do but it certainly isn't wise when you're staring down a penalty from them -- and one that has yet to be approved!

That's sort of like walking into a courtroom, standing before the Judge, and calling him an ******* before he sentences you.  It's likely to work out about that well for Elon.....

The more-serious issue before the company, however, is two-fold.

Demand is waning for the Model 3 and the firm faces a serious liquidity problem into the end of this year and early next with convertible debt offerings that are maturing.

Tesla doesn't have the cash to pay both of those converts off which means it must either issue stock or refinance the debt.  Attempting the latter into a rising rate environment is going to be very expensive on a comparative basis if it can get done at all.

Between the two there is a very real risk of a no-bull**** bankruptcy later this year or early in 2019.

That the company appears to recognize this is amplified by multiple reports of people wiring money for a purchase and then not getting the car, with the alleged promised delivery being delayed and in some cases the VIN number they were provided has suddenly disappeared.  That anyone is insane enough to wire more than $50,000 somewhere without receiving their property immediately at the same time belies belief but apparently it has happened in recent weeks on multiple occasions if reports around the web are to be believed.  If the company is kiting funds in this fashion that's a serious matter and I'd argue it constitutes wire fraud to take funds from someone in exchange for a car, where a specific VIN number has been provided along with a commitment to deliver and then fail to deliver the car after the money has been paid.

Yes, things go wrong but to keep the funds under such a circumstance sure sounds like grand theft and fraud to me -- and it doesn't sound like a singular instance either, as there are multiple reports flying around.  Of course one piece of data does not a trend make, but IMO this definitely bears watching closely.

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2018-09-29 09:32 by Karl Denninger
in Company Specific , 222 references
[Comments enabled]  

Musk has been sued by the SEC, asking for a permanent bar on him being a director or officer of a public company.

Needless to say, that would include Tesla.

To those who said that Musk's "420" tweets were of no importance, or wouldn't lead to serious enforcement action -- how's that prediction looking roughly about now?  And further, while you have to assume there is some settlement effort being made it appears, from reporting, that Musk has already refused a settlement offer.

Any settlement or sanction that removes Musk from Tesla -- and bars him from any officer position in a public company in the future -- would be quite bad.  But it's not really the big problem the company has right now.

As I've pointed out the real issue is cash flow and debt, which was the motivating factor for his "tweets" in the first place.  There are two convert issues coming due -- one toward the end of the year and another in early 2019 -- that the company does not have the cash to redeem.  This means either they have to go back to the market with more debt issuance (and a lot of it) or the stock price has to be over the conversion price, so the holders would choose to convert to common stock.

The latter would be quite dilutive to existing shareholders but that risk was known all along when the converts were issued -- and as such if you bought or are holding the stock this is a risk you have already accepted.  

In a generally rising rate environment, which is where we are today, rollovers of debt and especially those that had highly-favorable terms previously get more expensive, pinch cash flow and in some cases become impossible to fund at a cost the firm can afford.

It is outrageously stupid bordering on insane to take debt you do not believe you will be able to pay off in cash when rates are at historic lows, as any requirement to roll said debt over down the road must be assumed to have to take place at a higher cost -- not a lower one.

The chimera of "ever-lower and lower rates" has driven trillions of uneconomic borrowing decisions over the last 30 or so years.  That cycle is over -- and will not repeat.  Tesla is far from the only firm that is going to get it up the chute from this practice but it is one with a CEO that thinks smoking a joint on TV is a good idea.

Maybe the board and Musk were equally-stoned when they issued the converts.

I smell bankruptcy.

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2017-07-20 15:38 by Karl Denninger
in Company Specific , 262 references
[Comments enabled]  

How do you stop Zuckerpig's privacy invasions?

Boycott anyone who advertises on those sites -- do not buy and do not do business with in any other way.  How do you know they're advertising?  You see "Sponsored" or any sort of video ad from a given entity.

This post is exempt and will never go away.  I will add to it as I see new companies, and if you do and can confirm it to me I'll add them.  Here's my pledge: If I see an ad from your firm on any of Zuckerpig's properties or sufficient confirmation (e.g. seeing such an ad on someone else's device in the app) I will never buy anything from you.

You choose -- you advertise and pay that company to do so, you lose my business.  To get it back you must permanently pledge to never again advertise on any Facebook-owned property, in public, via a formal press release or other similarly-verifiable and public method.

Oh and you get one second chance, never more.

Advertising is legal.  So is refusing to do business with you because you are the primary and in fact nearly the sole source of funds for a company that does things I consider detestable.

So here is the start of it folks, and yes, it will grow.... check back often!

  • Best Buy (Oh well; I've bought plenty there)
  • REI (this one hurts; I like them.... but no more!)
  • Big Green Egg (Sorry *******s, I was interested but NOT NOW!)
  • Southwest Airlines (all airlines SUCK, but now these ****ers are on my blackball list)
  • Consumer Reports
  • Inked Magazine
  • Runner's World (oh well!)
  • 30A clothing company (oops -- that one's local)
  • The Heritage Foundation (oops again!)
  • Huffington Post (no loss there)
  • A&E TV
  • We Are The Mighty (Military-oriented news org)
  • Orbitz
  • LinkedIN (be a paying customer and you're blackballed - as employer or employee!)
  • iHeartDogs.Com
  • Pensacola Runners Association (ouch; they sponsor races I'd run in...)
  • National Geographic (oh well)
  • CNet (Bleh)
  • 22 Words (Clickbait garbage, but heh)
  • Theclymb.com
  • Active.com (oops again; and I have bought quite a lot from gearup...)
  • 12 Tomatoes
  • The Penny Hoarder (yeah, another clickbait garbage site, but..)
  • SoWal (oops -- bye-bye Walton County beach businesses..)
  • Innermost House (San Fran Non-profit... good for some west coasters)
  • NTD Television
  • The New York Times (shock - NOT!)
  • Conservative Tribune (news)
  • Netgear (Router/ipCam/etc manufacturer)
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