Tag Archives: Elon Musk

Tesla: Enron Status Secured

Elon Musk a has long track record of being long on promises and short on deliveries – literally and figuratively.  His motive, as has been self-professed repeatedly on Twitter,  is to torment short-sellers by driving the stock higher with fraudulent tweets.  But underlying Musk’s garish bravado and overtly fraudulent financial reports is a business operation that, by all indications, is slowly disintegrating.

Musk has ushered in the long-awaited introduction of the $35,000 Model 3 with a tweet two days earlier aimed at pushing the stock higher to squeeze short-sellers. Musk’s highly questionable tweet tactic drove the stock price up $21 over two days. The stock did a $10 belly-flop when the Model 3 announcement hit the tape, accompanied by an announcement that Tesla was cutting the size of the workforce for the 3rd time this year and would transition the sales operation to online-only.

While Musk spends an inordinate amount of time scheming to squeeze short-sellers, Tesla’s business operations and financial flexibility is getting squeezed by reality. All Ponzi scheme’s eventually fall prey to the laws of economics. Musk’s Ponzi has been proliferated by a financial system flooded with printed money  and by a Government that no longer applies the Rule of Law to billionaires with the ability to buy protection from regulatory enforcement.

Arcadia Economics‘ Chris Marcus and I spent some time on Wednesday discussing the similarities between Tesla and Enron and Elon Musk and Bernie Madoff:

Just How Indebted Is Elon Musk?

Tesla continues to head south since hitting its post-earnings high of $321. It’s down nearly $100 from the $380 post “funding secured” tweet all-time high close on August 7th. The stock has diverged negatively from the SPX since mid-January. By all accounts the order-rate and delivery rate of Tesla’s 3 models is dropping quickly. While there may be a brief boost in sales from  Model 3 deliveries into Europe and China in Q1, it looks like Model 3 orders and deliveries in North America have slowed to a trickle. Complaints about the poor quality of the Model and poor service from Tesla are already populating European automobile forums.

There have been wide-spread reports from people who are having trouble getting canceled $1,000 reservation deposits on Model 3’s refunded. Several have reported receiving the refund only to have the check bounce after it’s deposited. Consumer Reports removed its highly sought recommendation rating from the Model 3 after citing poor quality control and reliabity. This past Wednesday Tesla’s General Counsel, who left his Washington, DC law practice and took the job two months ago, announced he was leaving the Company. The stream of high-level c-suite departures has been nearly continuous over the last year.

Tesla is staring at the $920 million convertible bond maturity due next Friday (March 1st). I have no idea how Tesla will address this, as it seems by many indicators that the $3.9 billion in cash Tesla posted on its year-end balance sheet may not be accurate, in addition to showing negative working capital of $1.7 billion. That said, I would not bet that Tesla will default this soon on its debt.

On Friday it was reported that Elon Musk took out $61 million in mortgages on his five California mansions, $50 million of which was new funding and $11 million was refinancing (note:  rumor of this deal was in the market a week earlier). Morgan Stanley underwrote the mortgages. I would suggest that Musk possibly needed the money to meet margin calls on his stock-holdings, against which Musk has borrowed heavily. Otherwise it makes no sense to me why an alleged billionaire would need to trifle with $61 million in mortgages. Morgan Stanley is one of Musk’s primary stock custodians. In that regard, I’m wondering if Morgan Stanley forced the issue.  It’s a good bet that Musk has pledged and hypothecated most of his assets as collateral against indebtedness. I have no doubt that when Tesla hits the wall, Musk’s wealth will largely vanish.

Tesla: Can You Smell The Blood In The Water?

“The demand for – the demand for Model 3 is insanely high. The inhibitor is affordability. It’s just like people literally don’t have the money to buy the car. It’s got nothing to do with desire. They just don’t have enough money in their bank account.” – Elon Musk on the Q4 earnings conference call

The following commentary/analysis is from the February 3rd issue of the Short Seller’s Journal.

Tesla’s Failed Business Model – The statement above is an actual comment from Elon Musk on the earnings call. I literally had to ask a couple of people who were on the call if I had misread the transcript or if it was a mistake in transcription. I’m not sure if Elon erringly thought he was sharing profound insight into the laws of economics or if the relationship between price and demand eludes his understanding.

It was announced in late January, before Tesla posted earnings, that the Saudi Public Investment Fund had hedged its 4.9% investment in Tesla’s stock (8.33 million shares). It accomplished this via a structured note (OTC derivative) created by JP Morgan. In exchange for downside price protection, the Saudis gave up participation in any gains should Tesla’s shares rise in price. My guess is that the Saudis also paid a hefty transaction fee to JP Morgan on the order of 3-4% on the market value of the shares hedged.

It did not take long for the Saudi fund to abandon its investment in Tesla. The Saudi stake in Tesla was announced shortly after Tesla’s Q3 2018 earnings release. Musk’s infamous “funding secured” tweet was issued right after the Saudi stake was revealed to the public.

My best guess is that the 8.3 million shares where accumulated during July around an average price in the low $300’s. It’s also possible that one of the large U.S. fund holders sold a big block of shares that was crossed into the Saudi fund. Hard to say for sure but I would surmise that JP Morgan and/or Goldman Sachs (Tesla’s primary investment banks) know the truth.

If the hedging derivative was structured during the month before it was announced, the average price of the hedge is likely $320. Let’s assume the Saudis locked in a $20/share profit – $166 million. Netting out all trading and transaction fees (at a 3.5% fee, the derivative hedge would cost $93 million) the Saudi fund maybe netted about $60 million on the trade. But why did the Saudis bail on the investment after less than six months?

For me the demand/price comment exemplifies the Tesla tragicomedy. The Company reported its Q4 on Thursday after the market closed. Until the 10-K is release (40-60 days), I can not layout a detailed dissection of Tesla’s accounting games. But needless to say it appears as if Tesla’s CFO employed all of the same accounting schemes as were used in Q3 in order to manufacture a GAAP “net profit.” Notwithstanding this, the Company “missed” the Wall St consensus estimate and warned that it may or may not generate a profit in Q1 2019.

Speaking of the CFO, it was announced at the end of call – literally before the Company hung up the phone in order to avoid questions on the matter – that the CFO would be leaving the Company sometime in early 2019 though no specific date was set. He is to be replaced by a little-known 34-year old VP in the finance department, Zach Kirkhorn. Kirkhorn prior to Tesla was a “business analyst” McKinsey & Co. This is a fancy term for someone who helps design computerized enterprise applications for McKinsey clients. Prior to McKinsey, Kirkhorn worked at Microsoft.

Kirkhorn was a curious choice becasue he stunningly has little apparent experience in accounting and finance. Typically CFO’s have either worked their way up the accounting/controller side of a company or are hired from a similar role from the outside. This move left everyone scratching their head but reflects the general dysfunctionality that pervades the Company.

Telsa has experienced a stunning drop-off in orders since the end of 2018 that appears to have begun during late December. The $7500 tax credit was cut in half starting January 1st. Data from Europe show that EV sales fall off a cliff when the tax credit disappears. The chart to the right illustrates this by showing Tesla’s Model 3 sales over the last 12 months (from @TeslaCharts).

The jump in December M3 sales is a product of huge incentive programs Tesla implemented to stimulate sales ahead of the cut in the tax credit. As you can see, since July TSLA has averaged 20,000 unit sales per month. The January number is largely the expected cliff dive related to the drop in the tax credit. However, the large drop-off is also likely attributable to potential EV buyers waiting for the spring roll-out of the Audi E-Tron and Porsche Taycan. Porsche announced in January that it was doubling production in response to demand.

Briefly on Tesla’s numbers. Taking $139 million of net income attributable to stockholders at face value – i.e. assuming the accounting is 100% clean – nearly $100 million of that is from Tesla’s sale of greenhouse gas and zero emission vehicle credits. If we assume just $39 million worth of GAAP manipulation used to generate “income” (the real number is multiples of $39 milion) small amount of accounting games were used to generate GAAP “income,” reversing out the GHG/ZEV credits takes Tesla’s actual net income to zero. This means that the ability of Tesla’s business model to generate actual cash income is based solely energy credit sales. This is not a valid sustainable business model.

In the short term, the next big event is the maturity of the $920 million convertible bond due in March. It looks like Tesla’s stock price will be below the price at which bondholders will want to convert. Additionally, the deadline to reset the conversion price lower has passed. This suggests that Tesla will use cash to pay off the converts.

But here’s the problem:  At quarter end, Tesla’s balance sheet showed a working capital deficit (current assets minus current liabilities) of $1.7 billion.  Of the $8.3 billion in current assets, $3.6 billion is cash. However, of the $9.99 billion in current liabilities, $3.4 billion is accounts payable. It would appear that Tesla will be stiffing its suppliers, vendors and service providers if it uses the cash, as reported, to pay the converts.

I don’t know how Tesla will resolve this issue but I suspect the maturing bond will paid. Otherwise the Company will be forced to file for bankruptcy of some flavor. I don’t see this event happening until at least the end of 2019. This is why I moved my long-dated Tesla OTM puts out to June 2020.

Regardless of this immediate issue, I expect to see continued deterioration in Tesla sales across all three of its models. Snapshots from around the country from major metropolitan areas show lots full of unsold Teslas – all three models – with the inventory stored in these lots growing by the week.

Since I wrote the above analysis for the Short Seller’s Journal issue released this past Sunday, it was reported that Tesla has not received EU approval to sell Model 3’s with autopilot installed. Most of the Model 3’s pre-ordered in Europe were for the Model 3 with autopilot. This little factoid was in direct contradiction to the Company’s announcement, reiterated by Musk in the earnings letter to shareholders, that the Model 3 was fully approved in Europe.

There’s clearly something amiss with Tesla’s liquidity. It’s been reported by customers in Germany that Tesla is demanding full payment for Model 3’s ordered before the Company will deliver the vehicle. Perhaps a tempest in a teapot? A Model S owner who had canceled his Model 3 order and requested a refund of the $1000 deposit posted a copy of the refund check on Twitter – only Tesla had placed a “stop payment” on the check:  LINK

Meanwhile the Company has been laying of workers and cutting prices on feverishly on the Model 3. This is in response to a cliff-dive in demand since January 1st, especially in China. Based on this new evidence, I don’t know if Tesla will be able to make the $920 million convertible bond payment. I would seem possible, given the anecdotal evidence, that Tesla has misrepresented the cash balance on its year-end financials (unaudited as of December 31st). No one knows the answer to that question right now except the banks holding the alleged cash as shown on Tesla’s year-end balance sheet.

Whether or not Tesla can complete a financial hail Mary and address the convertible bond repayment, this company is circling the drain. As far superior competitive models hit the market, demand for Teslas could possibly disappear completely. The stock will drop to zero and the creditors will be left to fight for standing and priority in bankruptcy. I can smell that blood in the water.

In the Short Seller’s Journal I cover economic analysis combined with ideas for shorting the stock market, including market timing, capital management and the use of options.  In the latest issue I presented ideas for using puts to short Tesla, including full disclosure of my trades in the name.  You can learn more about this newsletter here:  Short Seller’s Journal.

Overvalued Stocks, Undervalued Gold And Silver, Insolvent Tesla

Craig Hemke, the well-known proprietor of the TF Metals Report  invited me on this his new “Thursday Conversation” podcast to discuss the stock market,  economy, precious metals and Tesla.

“If you adjusted the current S&P 500 earnings stream using the same GAAP accounting standard that were applied in 1999, the current S&P 500 P/E ratio – expressed in 1999 GAAP accounting terms – would be the most overvalued in history.”

“Deutsche Bank is a zombie bank that would have blown up in 2012 if the Bundesbank, ECB and German Government hadn’t bailed it out.”

“Elon Musk used a Halloween bag full of accounting tricks to generate GAAP ‘net income.'” The fact remains that Tesla is closer to insolvency this quarter than it has been at any point in the history of the Company.

“Mining stocks are cheaper now in relation to the S&P 500 and to the price of g old than they were at the bottom of the 20-year gold bear market in 2001”

You can listen to my conversation with Craig “Turd Ferguson” Hemke by clicking on the graphic below:

(NOTE: You can download the MP3 by using this LINK and right clicking on the audio bar)

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:   Short Seller’s Journal  information and more about the Mining Stock Journal here:   Mining Stock Journal information.

The SEC Settlement With Musk: Crime Pays Once Again

“…when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.” – Francisco D’Anconia’s Money Speech, “Atlas Shrugged”

The SEC ended up settling with Elon Musk for violating securities laws with his “funding secured” tweet. Musk and Tesla will each pay $20 million in fines and Musk will be barred from acting as Chairman of Tesla but will remain CEO. I doubt the SEC will investigate to what extent, if any, Musk and his family and friends took advantage by accumulating stock and call options ahead of Musk’s tweet, which triggered an $87 move higher in the stock price. Certainly we know Musk and his family controls an offshore stock account in the Cayman Islands.

Thirty years ago, Musk would have been forced to serve jail time for securities law violations. Ask Michael Milken and Ivan Boesky about that. The last time a corporate CEO was incarcerated for securities laws violations was Qwest’s Joe Nacchio in April 2007.

Notwithstanding the fact that Musk remains CEO of Tesla, the Company is on a path toward insolvency within 12-18 months. Just like Enron’s auditors before it, I’m sure Price Waterhouse will have no problem cooking up financial statements for Q3 which show a GAAP-manipulated profit of some sort. But make no mistake, rigged GAAP accounting can not change the fact Tesla continues burning billions in cash – nearly $2 billion in the first six months of 2018 between operating activities and investing activity.

I’m hopeful the Justice Department investigation of Musk and Tesla will produce results that are more reflective of Rule of Law than the SEC delivered. Clearly the SEC has once again sent the message to the world that crime pays in the United States if you have a bank account large enough to cover the tab. But, at the end of the day, the fate of Tesla is subject to the Laws of Economics. That is a battle Musk and Tesla have no hope of winning.

What a fucking comical charade. They take a slam dunk case and settle??? At least now we know how serious they are about prosecuting securities fraud among the privileged few. And people wonder how Madoff could get away with such a gigantic heist for so long??? Seems pretty clear the rules are set up to protect the elite crooks in our financial system. – Short Seller’s Journal  subscriber

WTF Just Happened? Gold And Silver Set-Up To Soar

According to the latest Commitment of Traders Report released Friday and which accounts for Comex trader positioning through Tuesday, August 21, the hedge fund net short position in Comex paper gold futures soared to an all-time high of 89,972 contracts. This represents nearly 9 million ounces of paper gold. It’s more gold than is produced by gold mines in the U.S. annually. As of Thursday, Comex vault operators reported a total of 8.4 million ounces of gold, only 282,000 of which were available for delivery.  In other words, the hedge fund paper gold short position exceeds the total amount of gold in Comex vaults.

Conversely, the Comex banks are taking the other side of the massive hedge fund short bet. Given the history of extreme positioning by the hedge funds and the banks (the banks are normally short paper gold – thus a long position by the banks is considered “extreme”), it’s a safe bet that at some point in the near future gold (and silver) are set to soar. Perhaps the more interesting question would be to ask why the banks have assumed a large long position in gold. What is it that the banks “see” that has them positioned for a big move higher in the precious metals?

Meanwhile, Tesla is the ultimate evidence that no price discovery is not possible in the U.S. stock market. In a market with true price discovery, TSLA would no longer exist. It appears as if Elon Musk was indeed under the influence of illicit psychotropic drugs when he claimed that funding was secured for a going-private transaction.

In this episode of “WTF Just Happened?” we discuss the massive hedge fund paper gold short position plus lift our leg the idea that Tesla will be around in two year (WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

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In the next issue of the Short Seller’s Journal I explain why the housing market is headed south quickly, update my homebuilder short ideas and discuss Tesla. You can learn more about this newsletter here:  Short Seller’s Journal information

In the next issue of the Mining Stock Journal, I dissect the latest COT report and update my favorite junior mining stock ideas, including a couple of interesting silver explorations stocks. You can learn more about this here:   Mining Stock Journal information.

More Evidence The Economy Is Deteriorating

“Financial-market and economic prospects remain far shy of the hype and headlines, amidst tanking consumer optimism and negative revisions to recent reporting.” – John Williams, Shadowstats.com

The economy may seem like it’s doing well if you are part of the upper 10% demographic. Though, in reality, for most of the upper 10%, doing “well” has been a function of having easy access to credit. NASA Federal Credit Union is offering 0% down, 0% mortgage insurance for mortgages up to $2.5 million.

Someone I know suggested the tax cut stimulus had run its course. But the narrative that the tax cuts would stimulate economic activity was pure propaganda. The tax cuts stimulated $1 trillion in expected share buybacks and put more money in the pockets of corporate insiders and billionaires. The average middle class household spent its tax cut money on more expensive gasoline and food. Since the tax cut took effect, auto sales and home sales have declined. Retail sales have been mixed. However, it’s difficult to distinguish between statistical manipulation and inflation. I would argue that, net of real inflation and Census Bureau statistical games, real retail sales have been declining.

As an example, last week Black Box Intelligence released July restaurant sales. While comparable store sales were up 0.54% over July 2017, comparable restaurant traffic was down 1.8%. On a rolling three months, comp sales are up 0.46% but comparable traffic is down nearly 2%. With traffic declining, especially a faster rate relative to the small increase in sales, it means the sales “growth” is entirely a function of price inflation. If Black Box Intelligence could control it’s data for price increases, it would show that there is no question that real sales are declining. I have been loathe to recommend shorting restaurant stocks because, for some reason, the hedge funds love them.

On Wednesday last week, the Government reported July retail sales, which were “up” 0.5% vs June. However, June’s 0.5% “gain” was revised sharply lower to 0.2%. Revising the previous month lower to make the headline number for the reported month appear higher is a mathematical gimmick that the Government uses frequently. As an example of the questionable quality of the retail sales report, the Government reports that sales at motor-vehicle and parts dealers rose 0.2% from June to July. But the auto industry itself reported a 4% decline in sales from June to July. I’ll leave it up to you to decide which report is more reliable…

Housing starts for July, reported last Thursday, showed an 8% decline from June’s number. June’s number was revised lower from the original number reported. No surprise there, at least for me. The report missed the Wall Street brain trust’s expectations by a wide margin for the second month in row. The downward revision to June makes the report even worse. Additionally, housing starts are now down year-over-year for the second month in a row.

This report followed last Wednesday’s mortgage applications report which showed a decline in purchase applications for the 5th week in a row. The housing starts number continues to throw cold water on the “low inventory” narrative. While there still may some areas of housing market strength in the $500,000 and below price bucket, the mortgage purchase applications data has been mostly negative since April, which reflects deteriorating home sales. This reality is “magnified” by the fact that home sales have declining during what should be the strongest seasonal period of the year for home sales.

Lending Tree, Zillow Group and Redfin are “derivatives” of housing market activity. They reflect web searches, foot traffic and sales associated with mortgages and home sales. Lending Tree stock is down nearly 42% late January. Zillow stock is down 26% since mid-June. Redfin is down 39.5% since the beginning of the year, including an 18.5% plunge two weeks ago. unequivocally, these three stocks reflect the popping of the housing bubble. The Short Seller Journal recommended shorting all three of these stocks before their big declines.

Normally I’m hesitant to discuss the regional Fed economic surveys because they are skewed by their expectations/outlook (hope/sentiment) components. However, the Philly Fed survey for August was notable because it reinforced my view that the economy and the “hope” for a better economy is fading quickly. The overall index crashed to 11.9 from 25.7 in July. This is lower than just before the Trump election, when “hope” soared. Wall Street was expecting a 22.5 reading on the index. The new orders, work week and employment components plunged. Shipments dropped, inventories rose and prices paid fell. This report reflects the view that economy is much weaker than is conveyed by the political propaganda coming form DC.

I don’t know what it will take to cause a plunge in the Dow, S&P 500 and Nasdaq but, as we’ve seen with homebuilder stocks, there’s a lot of opportunity to make money on economic reality in the lesser-followed sectors of the stock market.

Myself and my Short Seller’s Journal subscribers have been raking in easy money shorting the homebuilder sector and, of late, Tesla.  I’ve been including detailed analysis of Tesla, why it will likely be out of business within 2 years and ideas for using puts to short the stock.  You can learn more about this newsletter here:  Short Seller’s Journal information.

That egomaniac [Elon Musk] just paid for my new landscaping. LOL! Cashed in on some Jan 2019 100 & 200 puts for a 175% gain. Should be interesting to see how and how long this debacle plays on. – subscriber feedback.

WTF Just Happened: Gold Forms A Bottom And 420-Time For Elon Musk

Perhaps the most baffling aspect of the Elon Musk “Funding Secured” tweet is the number of financial media outlets and so-called “analysts” that are taking it seriously. The idea is a complete joke. Any valuation in excess of potential asset value minus the debt and other liabilities (included in “liabilities” will soon be a flood of lawsuits). Some bucket-shop stock analysts issued reports explaining why a buyout of Tesla could occur at an even higher price. We’re beginning wonder if the Tesla buyout idiocy will mark the end of the valuation insanity that has permeated the entire U.S. stock market…Meanwhile, hedge funds assumed a record short position in Comex paper gold futures. This along with the worst sentiment toward the precious metals since early 2001 and late 2015 suggest the potential for a bottom in gold, silver and mining shares.

In this episode of “WTF Just Happened?” we discuss these issues plus offer a view on the correlation between the dollar-price of gold and the $/yuan (WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

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Tesla is on its way to bankruptcy.  I don’t know how long it will take that to occur but the Company will be insolvent if it can’t raise money before the end of the year.  I explain why a buyout of the Company is next to impossible in the next issue of the Short Seller’s Journal and offer several ideas for using put options to express a bearish view of Tesla stock.

Visit these links to learn more about the Investment Research Dynamic’s  Mining Stock Journal and Short Seller’s Journal.   

Elon Musk Turns U.S. Capital Markets Into A Complete Farce

“Nobody, when they’re looking at a privatization, dangles this way and does this sort of teasing dance of choreography. Somebody only does this when they are trying to distract us with a shiny new thing…There’s a lot of problems here. He can’t afford to build the new factory that he says he wants to build. This is a distracting strategy like attacking the press” – Jeffery Sonnenfeld, Yale School of Management on CNBC

Elon Musk has turned the U.S. capital markets into a complete farce. He’s made of mockery of the fact that the regulators no longer enforce rule of law. The idea that any financial institution on earth would fund the largest leveraged buyout in history at a level that values Tesla on par with Volkswagen – the world’s larges car manufacturer – is beyond absurd.

We should hope and pray that some truth-seeking entity will hold Musk accountable for what is likely a highly fraudulent claim. Or, then again, perhaps Musk took one of his flying automobiles and went to Mars on Monday to “secure funding” from his Martian financiers.

A careful dissection of Tesla’s latest 10-Q reveals a Company with negative working capital and an unmanageable level of debt and other fixed commitments headed for eventual insolvency.

Beyond ranting about the obvious here, I’m posting an insightful, if not poignant, comment from a friend and colleague:

I am pretty amazed/disgusted that we haven’t come to terms (as a society) with social media. It is in this grey area where leaders of Government and corporations can walk a tight rope of truth/fiction without any consequence or regard for the affect of the immorality and illegality.  Narcissistic psychopaths like Musk utilize cult of personality to harness the power of the hopelessly ignorant looking for a guru; looking for a reason to justify their worst impulses and implausible fantasies. From a social science standpoint: it is interesting. From a person of the society: it is mindblowingly frightening.

Tesla’s Phony Quarterly Numbers

Tesla reported its Q2 numbers this past Wednesday. It reported $4 billion in revenue, up 43.4% year over year. Its net loss widened to $742 million, or $4.22 per share (some of you may have seen lower net loss and loss per share numbers but the numbers I’m using come directly from the SEC-filed 8-K, which means those are the “official” numbers).

The market was excited and the stock soared because the cash “burn” was lower than expected and Elon Musk reassured everyone that the Company is still on track to show positive net income and cash flow in Q3 and Q4. I can assure you that you have a better chance of standing on the eastern shoreline of Egypt and seeing the Red Sea part for Moses.

The cash balance of $2.23 billion that is presented on TSLA’s balance sheet was higher than expected – with an alleged implication that TSLA burned less cash than expected. But this was accounting sleight of hand. TSLA achieved this feat by stiffing its suppliers as evidenced by the ballooning of the accounts payable entry on the balance sheet. From Q4 2017 to Q1 2018, TSLA’s accounts payable rose $213 million, or 8.2%, to $2.603 billion. But from Q1 to Q2 this year, TSLA’s payables rose $427 million, or 16.4%.

In other words, TSLA slowed down the rate at which is pays suppliers by a considerable amount, which enables TSLA to hold the cash it owes to suppliers on its balance sheet, thereby giving the appearance of a higher cash balance.

Netting out customer deposits of $942 million, TSLA actually only has $1.29 billion in cash. That said, there are some other balance sheet items on the liability side of the balance sheet that increased and will require the use of cash, like “other long term liabilities,” that I won’t be able to analyze until the 10-Q is filed, which is when I can study the footnotes. Furthermore, the 8-K does not contain a full statement of cash flows – it’s missing the details of the “cash from operations” – which will enable me to determine other areas on its balance sheet TSLA stretched in order keep cash net of deposits above $1 billion.

All of that said, I have discovered a clever manner in which TSLA has rigged its financials to look better than they should by keeping cash expenditures it will have to incur off the income statement and balance sheet in Q2. To my knowledge, I am the only analyst who has figured out this devious form of accounting manipulation.

The commentary above is an excerpt from the latest Short Seller’s Journal, which was released today.  Tesla shares several traits with Enron and some parallels with Bernie Madoff.  Elon Musk is a gifted con-man.

In the latest Short Seller’s Journal I layout the methodical manner in which Musk’s financial architects manage to defer cash expenditures for the purpose of making the Q2 financials appear better than expected.  I suspect the scam was used to set-up an attempt to raise more money later this year.  You can learn more about my newsletter here:  Short Seller’s Journal information.