Enron was a product of the late 1990’s dot.com / tech bubble. Similar to Tesla’s “production tent,” Enron would set entire floors of buildings to look like elaborate energy trading rooms. The operations were nothing more than a fraudulent shell game, set-up for the benefit of Wall Street analysts and journalists.
Bear Stearns was a product of the mid-2000’s mortgage bubble. It created catastrophically leveraged mortgage-backed securities hedge funds that would inevitably collapse. The managers of these funds kept these funds alive by hiding positions from upper management and fraudulently over-marking the value of the underlying assets, which eventually proved worthless.
And now, Tesla’s path to demise seems quite similar to the recent implosion of Theranos. Theranos was biotech company which collapsed after it was revealed that it had fraudulently promoted claims about its blood testing technology. This story resonates in Tesla’s decision to skip a critical brake test in order to meet a superficial production goal last week. Anyone who takes delivery and pays for a Tesla Model 3 is putting themselves and their families at risk.
While not widely reported, there has been a rapid exit of high level executives, including the chief engineer, who resigned the day after Elon Musk issued the command to skip the brake test. After this story broke, one of my subscribers emailed me: “I design and build (from my bare hands) electrical testing equipment for the automotive industry. Plants shutdown rather than let their stuff go out the door untested.” Now we know why the chief engineer bolted from the Company.
The proprietor of the Adventures In Capitalism blog published a comparison between Tesla and Theranos. He focuses on the recent erratic behavior of the CEO and potentially lethal production decisions implemented:
The question is, who would want to invest new capital when Tesla is now admitting to knowingly selling cars without testing the brakes in order to hit some arbitrary one week production target? When a company admits that it will sacrifice vehicle quality and even risk killing its customers to win a twitter feud and start a short squeeze, regulators must step in. The question is; what else has Tesla done illegally to hit its targets? We know that Tesla long ago passed over the ethical threshold of selling faulty products that have killed people—what other allegations will soon come to light? Elon Musk demanded that Tesla stop testing brakes on June 26. Doug Field, chief engineer, resigned on June 27. Is this a coincidence? Of course not—Doug Field doesn’t want to be responsible for killing people…
You can read the rest of this here: Tesla Is The New Theranos
The only ingredient missing from the chain of events that precedes the complete collapse of Tesla is a table-pounding, frothing-at-the-mouth “buy” recommendation from CNBC’s Jim Cramer.