Every time, Charlie Brown says, “This time I’m really going to kick that football.” And, every time, Lucy yanks the ball away from him at the last moment and Charlie Brown lands flat on his back. This is a perfect analogy for Elon musk and the American public, or if you prefer, Tesla Inc. (NASDAQ:TSLA) shareholders.
Musk overpromises, underdelivers, and has done so thanks some $15 billion in government handouts across Tesla, SpaceX and SolarCity. He is the ultimate crony capitalist — and that’s exactly why TSLA stock should be shorted and the government should cut him off.
Tesla has gobbled up $5.3 billion in taxpayer money: a $3 billion factory subsidy from California, another $1.3 billion tax incentive from Nevada, a $45 million discounted Department of Energy loan, $517 million in the sale of California and other regulatory credits, $284 million in federal income tax credits given to Model S buyers and $257 million in other incentives.
Musk has repeatedly promised ridiculous delivery targets for the Model 3. In June of last year, Musk said Tesla would be pumping out 20,000 model three cars every month by the end of 2017. In the third quarter, only 222 were delivered. In the fourth quarter, 1,550 rolled off the line. At the same time, Musk said that Tesla would produce 2,500 Model 3s per week at the end of the first quarter, and 5,000 per week by the end of the second quarter.
Instead, just under 10,000 were delivered in the entire first quarter. Yet, somehow, Musk is maintaining his Q2 target. Back in May of 2016, he also said Tesla would deliver 200,000 Model 3 cars by the end of 2017.
But, hey, at least Tesla delivered about 101,000 Model S cars in 2017! Oh, but wait, 123,000 built before April 2016 had to be recalled (50% of the total sold to date), on top of the 90,000 recalled in 2015, and 53,000 Model S and X cars last year.
The operational disasters and broken promises are adding up. TSLA stock has never shown a profit. Despite nearly tripling revenue from 2015 to 2017 (to $11.76 billion), net losses increased from $888 million to $1.96 billion. Tesla is burning cash faster than the rate at which Falcon Heavy left Earth’s atmosphere.
Moody’s downgraded three different debt issues on TSLA stock a few weeks back, saying:
“Tesla’s liquidity consists principally of $3.4 billion in cash and securities… This liquidity position is not adequate to cover: 1) $500 million in minimum cash that we estimate Tesla must maintain for normal operations; 2) a 2018 operating cash burn that will approximate $2 billion if Tesla maintains high discretionary capital expenditures to increase capacity; and 3) convertible debt maturities of approximately $1.2 billion through early 2019.”
TSLA stock needs a capital raise. Let’s hope the government doesn’t bail Musk out. At least Musk can’t suck away liquidity for his own salary.
Why does SpaceX matter to TSLA stock investors? Because Musk is running the same scam over there that he is at Tesla. In addition, his attention is diverted by the $7.1 billion in government contracts for SpaceX.
The Falcon Heavy launch was, indeed, spectacular. However, let’s not forget that his first rocket launch exploded in 2006, so did the second in 2007, so did the third in 2008, which also blew up the NASA satellite inside of it. Then, a fourth rocket exploded at launch in 2015, while two other explosions occurred while landing on the drone ship. This was followed by a fifth rocket explosion in 2016 — with a $300 million Facebook Inc. (NASDAQ:FB) satellite on board.
Oh, and Falcon Heavy’s third core booster actually crashed into the ocean, while its payload completely blew past its intended orbit around Mars. That’s okay. What matters is Musk’s Tesla Roadster with Starman aboard is on its way to the asteroid belt.
However, in classic Elon Musk fashion, he tells everyone to forget about previous launches. That’s because he’s going to push resources towards his latest snake oil: the “BFR” rocket.
Now it’ll be the BFR rocket, instead of Falcon Heavy, that goes to Mars by 2022.
And if you believe that, I’ve got a Model 3 to sell you. It’s the same one I promised would roll off the line in January.
The Falcon Heavy also didn’t fit NASA’s needs. So, the government spent billions of dollars and it all added up to a big fat zero.
Bottom Line on TSLA Stock
But, hey, it’s okay. Musk is working on the hyperloop! Never mind that it’s probably impossible to build, would cost far more than estimated, would be vulnerable to terrorism, that heat generated by the system would destroy its own track, and if anything went wrong everybody on board would die a horrible death.
What matters is that hyperloop may very well qualify for some of the proposed $20 billion infrastructure packages for transformative projects.
Taxpayers need to lean on their representatives and cut off Elon Musk. Stop wasting taxpayer dollars.
And if you can find any shares of Tesla stock to short, join in.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at [email protected].