Tag Archives: Tesla

The Stock Market, Gold, Silver, Mining Stocks And Tesla

The stock market has become a powerful political and economic propaganda tool. It’s hard to dispute the idea that economy is not “in a good place” or “booming” when the Dow goes up 100 points or more everyday. Trump understands this and has been coercive in the Fed’s decision to loosen monetary policy and re-start the money printing press. Ironically, Trump tweeted this in 2012 (as sourced by northmantrader.com):

Make no mistake, the economy nearly every sector of the economy is contracting  except consumer spending and defense spending, both of which are being driven by record levels of consumer and Government debt.

Meanwhile, the precious metals sector is getting ready for another move higher and, according to Factset, currently 45% of all research analysts either have a sell or underweight (which is diplomatic “sell”). Silver Liberties invited me onto this podcast to have some fun and discuss these topics:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Will Tesla Ever Generate A Real Profit?

The only part of Tesla’s business model that generates profitability – gross, operating and net – is the sale of greenhouse gas credits to other OEM manufactures and tax subsidies.  Neither of those sources of profitability is sustainable.

The GAAP net income of $105mm in Q4 was 17% below the consensus of $126mm. Regarding net income, Tesla generated $133mm of income from selling Zero Emission/Greenhouse Gas credits to the big OEMs who need them – for now – to remain in compliance with environmental regulations. Net of these credits, Tesla lost $28 million in the quarter (before the fraudulent accounting manipulation). Subtracting these credits from the full-year loss, Tesla’s 2019 net loss attributable to shareholders is $1.5 billion.

The problem with this reliance on the sale of these credits to generate income is that, starting this year, the buyers of these credits (GM, Audi, Chrysler, etc) will soon be selling more than enough EVs and hybrids to remain in compliance. This source of income for Tesla will thus eventually be non-recurring.

With subsidies disappearing and an onslaught of competition,  2020 could be a bloodbath for Tesla in terms of deliveries. Not only is the global auto market contracting, but the much larger, better funded and operationally credible OEMs will be flooding the market with competitive EVs that will significantly cannibalize Tesla’s market share.

There’s just no telling when this Electric Tulip will inevitably crash. But, like with any investment bubble,  the popping will happen suddenly and unexpectedly, when the bulls are convinced that the upside is limitless and the bears are in a state of terror

Tesla, Gold And Coronavirus – Fraud And Global Depression

To say the current stock market is in a bubble is an insult to the word “bubble.” Tesla experienced an insanely idiotic stock price move after reporting “shock and awe” headline numbers for revenue and EPS which “beat” estimates – estimates that had been lowered by analysts throughout 2019. But as always there’s plenty of dirt in the details which point to a reality that is far different than is represented by headline numbers and Tesla’s highly orchestrated earnings presentation.

There’s just no telling when this Electric Tulip will inevitably crash. But, as with any investment bubble the popping will happen suddenly and unexpectedly, when the bulls are convinced that the upside is limitless and the bears are in a state of terror.

Meanwhile, the physical gold market which underlies the complicated web of paper gold derivatives continues to push the gold price higher despite aggressive efforts by the western Central Bank and bullion bank price management team. In fact, data from the BIS indicates that the BIS had a heavy hand in the effort to cap the price-rise of gold during January using its physical gold swap and leasing transactions.

Paul at Silver Doctors invited me onto its podcast to discuss these issues

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Tesla’s Warranty Expense “Income”

Note: Tesla is a fascinating case in fraud and of the “wizard” behind the fraud, who has managed to pull the wool over a large population of stock gamblers. Tesla is a saga for the ages and likely the biggest Ponzi scheme in U.S. history.  The Company and its CEO are truly emblematic of the fraud and corruption that has engulfed the entire U.S. economic, financial and legal/political  system. If this country survives what’s coming, there will be semester long classes in top-10 business schools and psychology masters programs devoted to the case study of Tesla.

A long-time Tesla critic published an article in Seeking Alpha outlining the fraudulent nature of Tesla’s accounting for “warranty expense.” I did not read the article beyond the summary because it was placed behind Seeking Alpha’s subscription firewall.  But I’ve detailed this aspect of Tesla’s accounting fraud in previous issues of the Short Seller’s Journal . Tesla has been reducing its provision for warranty expenses relative to the number of vehicles it sells for several quarters. While the warranty provision should rise in correlation with the rising number of vehicles delivered, Tesla and its auditor have decided an inverse relationship between these two variables makes more sense.

In addition, as it turns out Tesla in many instances allocates warranty expenditures incurred to “goodwill” and other non-warranty expense categories, which enables it to move the expense – a cash expense incurred – off its income statement and on to the balance sheet or to the “operating expenses” section of the income statement.

GAAP accounting no longer requires a company to amortize goodwill evenly over time as an expense on the income statement. Those of you who might know GAAP warranty accounting rules might say that the warranty expenses as they incur only affect the income statement to the extent they exceed the “provision for warranty expenses” that accumulates on the balance sheet.

However, in all likelihood Tesla is playing these games with its warranty expenditures because it has already exceeded the amount it has previously reserved for warranty expenses. OR over time if Tesla reports – fraudulently – less on actual warranty expenditures than it has reserved for them, it can “release” the warranty expense reserve into the GAAP income statement as a contra expense to boost gross margin and operating margin. This in turn contributes to the accounting manipulations used in any attempt to generate positive net income.

Furthermore, understating current warranty expenditures enables Tesla to understate future provisions for warranty expense, which should be expensed every quarter as part of the cost of goods sold. In other words, moving warranty expenditures into other expense categories or into goodwill reduces the cost of goods sold thereby artificially and fraudulently boosting the reported GAAP gross margin.

Moreover, the amount of warranty expenditures tossed fraudulently into goodwill never hits the income statement. It sits in the goodwill asset account on the balance sheet which no longer has to be amortized into operating expenses, thereby boosting operating and operating margin OR reducing operating losses. Yes, there is an accounting rule that applies to the revaluation of goodwill but don’t hold your breath waiting for Musk to adhere to any accounting regulations.

This is crucial to understanding the breadth and scale of Tesla’s accounting fraud. Tesla has made it a point of emphasis to boast about its gross margin, which is much larger than the gross margin for the legacy auto OEMs.  Also, Wall Street analysts focus on Tesla’s gross margin. When the gross margin reported is higher than expected, the stock price jumps. This accounting scheme also fraudulently boosts Tesla’s operating and net incomes. In fact, if Tesla adhered to strict GAAP accounting, its gross margin would be substantially lower and in all likelihood the Company would have never been able to report positive earnings per share in Q3.

But wait, there’s evidence that backs my assertion above that Tesla fraudulently misclassifies warranty repair expenditures. Tesla owners who have taken their car in for warranty-related repairs have been reporting that on the final invoice the warranty service repair is classified as “Goodwill – service.”  You can see a photocopy of one such example in an article published by InsideEvs.com. There are also several lawsuits filed against Tesla with documentation showing that Tesla’s misclassification of warranty service expenditures is standard operating procedure at the service centers.

As it turns out, Tesla labels warranty service expenditures for two more fraudulent reasons. First, under California’s Lemon Law, in many instances Tesla would be required either to buy back for full price the tarnished vehicle from the owner or replace it with a brand new vehicle. Likely this law is similar in most States. Second, repeated warranty repairs for the same problem would require per NHTSA regulations for a recall of the defective parts involved. But labeling these repairs as “goodwill” enables Tesla to fraudulently avoid both of these costs of adhering to the law.

Musk’s business per se is not to be sell cars but sell stock in a company that sells cars.  Musk’s accounting schemes are aimed directly at pushing the stock price higher. The primary motive behind this effort  is Tesla’s insane CEO compensation plan, which would award Musk with $364 million in stock/options if the market cap hits $100 billion (which is more than Ford and GM combined).

Though I can’t prove it without access to the actual records, I suspect that Goldman Sachs and Morgan Stanley have a lucrative fee-generating business lending money to Musk against the value of his Tesla shares.  In other words, Musk – along with Gold man and Morgan Stanley,  will do and say anything to try and force the stock higher in order to achieve that compensation milestone level and to protect the value of the collateral used secure loans to Musk.

Stock Bubbles And Dutch Tulip Bulbs

“People were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. Such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs. In February 1637, tulip traders could no longer find new buyers willing to pay increasingly inflated prices for their bulbs. As this realization set in, the demand for tulips collapsed” – “Extraordinary Popular Delusions and the Madness of Crowds,” Charles Mackay

“So yes, in a way I’m saying we can keep going up while at risk of reverting at any moment”NorthmanTrader.com

The market is melting up and indicators that a top is approaching are proliferating. This is one of the typical anecdotes that accompany markets nearing a top:   On CNBC last Wednesday morning the hosts plus a couple guests were discussing the market and one of the guests said that value doesn’t matter anymore “it’s all about momentum.” I almost fell off my chair when I heard that because the “fundamentals don’t matter it’s all about momentum” was one of the mantras in late 1999.

Chris Marcus (Arcadia Economics) and I discuss the current stock market melt-up and whether or not it can be shorted with success and how to manage the risks of being short:

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Some of the commentary above is  excerpted from the Short Seller’s Journal. Each weekly issue contains macro economic analysis, market analysis, and short ideas.  I  To learn more about this short-sell focused newsletter, click here:  Short Seller’s Journal info

The Telsla CyberTruck Event: Elon Musk’s Travelling Burlesque Show

As many of you are aware by now, Tesla’s roll-out of its Cybertruck, an event which pushed the stock price irrationally higher ahead of time, was a complete disaster. The vehicle itself, which one commentator said “looks like the product of a DeLorean that had sex with a triangle,” was visually quite unappealing. Morgan Stanley conducted a snap poll of its email distribution list to determine viewers’ impression of the Cybertruck.  Zero percent (0%) of those surveyed thought the truck would be a success.

Whether or not the claims by Musk & Co are true that over 250k people have plunked down a $C-note to “reserve” a Cybertruck, at this point it’s unclear whether not the vehicle will ever make it to production. Notwithstanding inconvenient realities, Musk fraudulently refers to the refundable reservations as “orders.”  Electrek.co and Musk’s Twitter pimps behave as if Tesla has already pre-booked $10 billion in revenues.

But Tesla has several hurdles to overcome before this electrified Lego block on wheels ever rolls off the production line, not the least of which includes addressing a technically insolvent balance sheet and raising the $100’s of millions of capex required. Notwithstanding this, the entire auto industry, including Tesla, faces gale force economic headwinds as the sector globally plunges into recession.

Based on YTD sales through October – plus estimates for November and December – data published by EV-Volumes, a service that provides a database of sales statistics for EVs, shows that total EV sales in the U.S. will decline 4% from 2018. After 10 years of EV availability, the market penetration rate for EVs is just 2% – and ex-California it’s 1%. Think about this in the context that the Government has provided enormous subsidies for EV/hybrids, thereby lowering the all-in cost for the buyer. As the largest EV seller in the U.S. (currently but not for long), Tesla is by far the most affected by the negative trend in EV sales.

Finally, because of plunging EV sales (along with plunging sales for the entire Chinese auto market), the Chinese Government is implementing major cuts to its EV sales subsidy program. The Chinese Association of Automobile Manufactures said that weak demand for the vehicles is one of the reasons for the pullback in the subsidy program.

Eric Peter’s Autos blog captured the essence of Musk’s farcical CyberTruck burlesque show:

Thousands of affluent marks have already put down deposits, unsightliness seen. And in spite of one of Elon’s many promises about the Cybertruck revealed to be a blatant lie right in front of their very eyes – the “shatterproof” door glass that wasn’t. It’s wondrous, baffling. Elon’s mesmeritic powers are so puissant he could probably get his followers – this includes the press – to bark like dogs if he asked them to.

You can read Peter’s entire commentary here:    And So They Drooled

Tesla Is A GAAP Accounting Dumpster Fire

“If there is any brilliance to TSLA, it is in the accounting slight of hand” (from @georgia_orwell)

Unfortunately, the key regulatory agencies in the Government, like the SEC, have been co-opted by the big banks and by Wall Street lawyers who built a lucrative practices assisting big banks in  breaking the law.  As we’ve seen,  when caught the banks at worst receive a small financial wrist-slap that could be considered the cost of doing business. The same holds true with the big accounting firms. Witness this quote from a Wall St Journal article detailing the rationale used to justify burying accounting fraud in Mattel’s financials:

[S]senior finance executives and Mattel’s auditor, PricewaterhouseCoopers, decided to change the accounting treatment of the Thomas asset, effectively burying the problem…It was known within Mattel that if we took this approach, at worst we might get a slap on the wrist from the Securities and Exchange Commission” (this disclosure is from a whistleblower who was the director of Mattel’s tax reporting at the time).

Mattel considered disclosing the accounting “error” and restating its financials. But instead, the Pwc partner in charge of the Mattel account figured out a way to completely bury the issue, after which the partner was seen “walking down the hall, high-fiving people, after this decision was made.”

I’m certain that the PwC partner would have never buried the accounting fraud if he thought there was any risk of an SEC audit or of a whistleblower emerging to tell the truth.

It’s becoming increasingly apparent that Tesla’s accountant, Price Waterhouse (PwC), is readily complicit with looking the other way on Tesla’s accounting frauds, if not in fact helping the Company implement illegal accounting gimmicks.

In light of the Mattel situation, I am certain that PwC is fully aware of TSLA’s openly reckless accounting.  PwC earned $9 million in fees from Mattel while the accounting fraud scheme occurred. TSLA’s revenues are 3x larger than Mattel’s so I’m sure PwC is getting paid significantly more than $9 million in fees either to look the other way or to help with the accounting deception.

The Solar City acquisition deposition was a dumpster fire for the Tesla.  As it turns out, a lawsuit file by certain Tesla shareholders who assert the deal should have never happened  is working its way through the court system.  Notes from a recent deposition disclosed that Solar City’s form audit firm, Ernst & Young, testified that Solar City was insolvent at the time Tesla’s board “agreed” to pay $2.6 billion to acquire the zombie company.

The deposition of Kimble Musk, Elon’s brother, reads like a chapter from “The Gang That Couldn’t Shoot Straight.” The skilled questioning by the plaintiff’s attorney made it clear that the acquisition of Solar City was rife with extreme conflicts of interests.

After Kimbal was deposed it was clear that the acquisition served as a quasi-bailout for Kimble and possibly Elon, as they both had Solar City shares pledged as collateral against various loans, some of which were extended by Wall St banks. Solar City may well be the Company’s undoing rather than the implosion of the EV operations.

It’s likely that Tesla will be left alone by the regulators, who serve as hand-puppets for the big Wall St banks, until firms like Goldman Sachs and Morgan Stanley – financial advisors to both Tesla and Elon Musk – have completely milked any possible fees from the Company.

Eventually Telsa’s business model will dissolve from intensifying, superior competition and an inability to service its massive and growing load of debt and other fixed obligations.  This is happening already, as numbers for October from the U.S. and the EU show a stunning decline in Tesla registrations across all three models.  The only unknown is China.  But auto sales in China are falling like a rock every month. In October auto deliveries plunged 6%. The industry fundamentals are not conducive to the fairytale told by Musk that TSLA will eventually sell 12,000 cars per month in China.

Perhaps in the end justice will be properly apportioned and served on PwC for its role in helping Tesla and Elon Musk perpetrate what will eventually emerge as a largest financial fraud in U.S. history…but I’m not holding my breath

Tesla’s Shock And Awe

The degree to which Elon Musk manipulates GAAP accounting in awe-inspiring. That the various regulators in charge of protecting investors allow Musk to commit accounting fraud is shocking.

Note: The commentary below is an excerpt from the latest issue of the Short Seller’s Journal. It’s based on Tesla’s earnings press release. In the next issue I’ll layout the facts about Tesla’s numbers based on a close-reading of the 10-Q which was filed Tuesday.

Tesla both shocked and awed short-sellers with its earnings report. The financials Musk presented to the public were produced from a contorted interpretation of GAAP accounting standards which stretch beyond legality. Any analyst with an intermediate level understanding of accounting can quickly see through the skeletons beneath what can only be described as a financial report awkwardly fit with a Halloween costume. This probably explains why Elon Musk and the CFO did not sign the quarterly letter for the first time ever.

From what has been made available in the earnings release, Musk has outdone all of his previous works of artistic accounting with his latest masterpiece in an attempt to deflect attention from declining revenues and cover-up poor earnings. On a YoY basis for Q3, total revenues declined 7.6%, with automotive sales revenues down 12.7%, with revenues in the U.S. down a shocking 39%. The difference in total vs automotive sales is predominantly revenues derived from services.

Tesla’s gross profit fell 22%, operating profit plunged 37% and net income free-fell 54%. Of the $143 million of reported net income, $107 million was Government subsidies in the form of environmental credits that Tesla sells to the large OEM’s who need to buy them to remain in compliance with environmental regulations (auto manufacturers are required to produce a certain percentage of zero-emission vehicles; if they do not meet the test, they can buy ZEV credits from companies like Tesla which generate a surplus of these credits). But the ZEV sales will eventually disappear as the large OEMs ramp up their line of EVs.

Some portion of the revenues was the recognition of deferred revenues. Deferred revenues occur when a company sells a product for which the complete product is not delivered but which is paid for up-front by the end user. Typically companies that derive revenues on a contractual basis have deferred revenues.

Tesla’s source of deferred revenues includes features like auto-pilot,smart summons and supercharger access which are sold up-front  but available only a limited basis or not yet available. Deferred revenues are set-up as a liability on the balance sheet and amortized into revenues. When recognized, deferred revenues are non-cash because payment from the customer was received at the time of the sale. The amount of deferred revenue recognized, for the most part, flows through the income statement to the bottom line.

In June Tesla said it planned to recognize about $500 million in deferred revenue over the next 12 months, which means Q3’s income statement contained at least $100 million in non-cash deferred revenues. The amount of deferred revenue in any given quarter shows up in the cash flow statement as a source of cash. The cash flow statement in the earnings letter did not have deferred revenues as a line-item in the cash flow statement but there should be a disclosure of the amount amortized into revenue in the 10-Q when it’s released.

The bottom line is that Tesla recognized some portion of deferred revenues in the revenue line, which means that gross profit, operating profit and  net income are overstated by the amount of deferred revenues that was used in Q3’s revenue number.

There several more highly problematic aspects to Tesla’s Q3 financials. The 10-Q will help shine light on most of the areas in which Musk and his financial goons impose the questionable interpretations of GAAP standards on s financials.

Why did the stock jump $73 in two days? Revenues missed Wall Street analyst estimates. Margins were lower than expected. Net income smashed estimates. The net income “beat” expectations because the degree to which Elon Musk is willing to commit accounting fraud is unpredictable.  It certainly can’t be modeled into an analyst spreadsheet.

I believe the move in Tesla’s stock was an orchestrated short-squeeze in conjunction with rabid momentum-chasing by daytraders and hedge fund algos. Let me explain first by sharing this tweet from Charles Gasparino (Fox News business reporter): “Senior management tell bankers they have the short sellers where they want them (on the ropes) with the latest financials.”

Assuming that’s true, and I’m 99.5% certain that it is, it shows that targeting short-sellers is one of Musk’s primary agendas. Reading between the lines, it implies that Tesla manipulated the financials specifically to cause a short-squeeze. I also believe that Musk orchestrated the short-squeeze in conjunction with a couple of Wall St banks, likely Goldman and Morgan Stanley, both of which have significant financial exposure to Tesla stock and to Musk’s personal financial health.

How to orchestrate a short squeeze.  Keep in mind when you short shares, your brokerage firm borrows shares from funds which make shares available to borrow. They do this because they can earn interest on the shares loaned. In the case of stocks with a high short interest like the TSLA, the stock loan rate can be double digits.

Goldman and Morgan Stanley would contact a few of the large “friendly” fund shareholders and ask them to recall the shares they have loaned out.  If they agree, their back office contacts the back office of the hedge fund or broker-dealer to whom the shares are loaned and asks for the shares back (a “recall”).  No reason has to be given. The entity being asked to return the borrowed shares either has to find a new source from which to borrow shares or buy back the shares in the open market to return them.

Keep in mind that, outside of Musk and his circle of friendly shareholders (Larry Ellison, Bailey Gifford, etc), the true free-float of Tesla shares is maybe 30% of the shares. A lot of those shares are borrowed and shorted as a hedge against Tesla’s outstanding convertible bonds.

In the case of a large short-seller, like Greenlight Capital (Steven Einhorn) or Kynikos Partners (Jim Chanos), it might be difficult to find a source from which to borrow the amount of shares being recalled. In that situation, the short-seller has three days to find and return the shares borrowed. It’s likely that large short-sellers were forced to cover part of their short position and then look for a new source of borrow to re-establish the short. In a situation like this, the stock can be driven up sharply in a short period of time.

The move made by Tesla’s shares on Thursday and Friday is similar to the short-squeezes that occurred during the internet bubble. Most of those internet stocks were very obviously highly overvalued and were aggressively shorted. The slightest positive news headline would cause the stocks to move 20 to 30 percent in a couple days from a short-squeeze despite the obvious superficiality of the news reported. Goldman and Morgan Stanley were two of the largest Wall Street promoters of internet stocks.

There’s no telling when the short-squeeze will subside but I think it might be running out of steam. The stock is now – per the RSI – more overbought than it was when it squeezed higher after the “funding secured” tweet by Musk. The stock dropped $120 in 20 trading days after that.

Tesla’s Questionable “Free Cash Flow” Claim

In last week’s earnings release, Elon Musk made the claim in the headline release that Tesla generated $614 million of “free cash flow,” which he defined as “operating cash flow less capex.”  Additionally, in the 2nd paragraph of the earnings release Musk states that, “As a result of this growth and operational improvements, we generated $614 million of free cash flow (operating cash flow less capex) in Q2.”

Notwithstanding that fact that Tesla has slashed its capex spending to what appears to be the bare minimum, and setting aside Musk’s claim of “operational improvements,” a careful dissection of the cash flow statement, balance sheet and footnote disclosures calls into question Musk’s assertion that the Company generated $614 million of “free cash flow.”

The graphic above is from the operating cash flow section of Tesla’s cash statement. I use the earnings release version to make comparisons YoY for Q2 and Q1 2019 easier (the 10Q only shows the YTD 6-month numbers in the cash flow statement). You’ll note that Tesla’s capex was $30 million less than Q1 2019 and 59% below the capex spent in Q2 2018. Strange for an automotive OEM that is building a factory in Shanghai, developing a new model (the Model Y), reconfiguring its OEM facility in the U.S. to accommodate the new model and planning an OEM facility in Europe.

However, the big source of Musk’s alledged “free cash flow” comes from the “changes in operating assets and liabilities.” The netted number shows $287 million provided by changes in the various balance sheet accounts. But a detailed analysis of the accounts that provided this “cash flow” would call into question the reliability of Musk’s assertion. In fact, most of the cash was generated from “accumulator” sub-accounts that can be found in the footnote disclosures. These accumulator accounts are liability accounts which account for near-term cash payment obligations which would have used up all of that “free cash flow” had Musk signed the checks to make the payments by June 30th.

The graphic above shows the liability section of Tesla’s balance sheet. I’ve highlighted the liability accounts in question.   The “accrued liabilities and other” account increased from Q1 2019 by $346 million, meaning that it contributed $346 million in cash to the “changes in operating assets/liabilities” number in the cash flow statement.  Most of this is a “current liability” for which Musk is obligated to make payments in the near term. Tesla does not disclose the breakdown of “accrued liabilities” in its 10-Q, but it shows the contents of this account in the 10-K.  In 2018, the two biggest items were payroll and taxes payable, which represented 21.4% and 16.6% of accrued current liabilities.

The second largest contributor to the “free cash flow” calculation was the change in “other  long term liabilities” from Q1.  The details of this account are disclosed in Note 9 of the 10-Q.  This account contains longer term cash payment obligations like “accrued warranty reserve” and “sales return reserve.”  Again, this is an “accumulator” account that accumulates future payment obligations.  This account increased by $180 million from end of March, meaning the accumulation of cash payment obligations contributed $180 million to the “change in operating assets/liabilities” account in the cash flow statement.

Finally, there’s “deferred revenue.” Deferred revenue for Tesla is derived from the portion of the revenue for each vehicle sold which is attributable to access to the supercharger network, internet connectivity, autopilot (LOL), full self-driving (LOL) and software updates.  In other words it represents some portion of the revenue which is paid up-front which is contingent on Tesla delivering performance obligations.  It’s revenue received but not earned.  It also means that Tesla did not recognize the corresponding expense that needs to “amortized” against this revenue source. Thus, it’s a source of cash.  This contributed $121 million in “cash flow” to Tesla’s Q2 “free cash flow.”  But in reality it’s not free cash flow.

The point of this analysis is that Telsa is on the hook to make cash payments on obligations and liabilities incurred well in excess of the amount to which Musk refers as “$614 million  of operating cash flow less capex.”  Most of the money – payroll, taxes, facility lease payments – will be due on or before the end of July.  Some of it will have be paid out of Tesla’s cash balance over the course of the next several months.  But to make the claim that Tesla generated $614 million of “free cash flow” is highly deceptive.

Tesla, Gold, Silver And A Historical Stock Bubble

“Tesla’s headed for bankruptcy. It’s got a flawed business model; costs are way too high for the price charged for the vehicles and its riddled with accounting fraud. But the regulators will look the other way until it’s too late.”

Silver Liberties invited me on to its podcast to discuss reality. We spend 35 minutes trying to blow away the Orwellian “smoke” that is engulfing the United States’ economic, political system:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a miniumum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information