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Tesla: Sell the Sizzle, Then Buy the Steak
So far, the most successful thing Tesla Motors (TSLA) has done is sell stock. The IPO was an absolute blowout success, far and away the best this year, with book building at $14-$16, the size increased by 20%, pricing at $17, and then trading up to $32 on the third day, giving it an impressive market capitalization of $3.3 billion. It has since fallen back to $16. It pulled this off with virtually the entire auto industry and its pet analysts pissing all over the deal from the greatest height possible, as the entire concept of a Silicon Valley based car industry is the greatest affront possible to the Detroit establishment. As if they’ve been doing so well lately.
I love this company, and I think Elon Musk is incredibly brave. Hell, if I had a billion dollars to throw away, I would probably do the same thing. But much about the new issue reminds me of the Apple IPO some 30 years ago, when it ran up to $21 before its nosedive to $4 (click here for the story at http://www.madhedgefundtrader.com/june_3__2010.html ). The ill fated DeLorean Motor Company also comes to mind. All the focus was on the products, which consumers loved, not the business model.
By its own admission, TSLA will not make any money for two years or longer, and won’t even commit to hard production dates for its crucial S-1 model. I think the way to play this stock is to skip all the hype associated with the stock floatation, as most of the buyers aren’t looking for a profitable investment, but bragging rights at the country club.
Just wait for the next meltdown in the stock market to call out the weak holders. The time to buy will be in the PR ramp up to S-1 mass production, which will be just as intensive as the IPO.
There is also a political risk associated with the stock. If the Republicans retake the presidency in 2012 they may trash all alternative energy subsidies as unaffordable luxuries, which Tesla is hugely dependent on for making its S-1’s $50,000 price competitive. Always be careful when making investments totally dependent on government subsidies for profitability. Here today, gone tomorrow. If that happens, the Tesla will be joining the Tucker, the DeLorean, and the Pontiac in the dustbin of history.
Oh, and Elon, a little fatherly advice. Don’t tell a divorce court that you’re broke a week before the market values your holdings in TSLA at $2 billion. You’re supposed to be impressing your new shareholders with the depth of your judgment. Not good, not good.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two and a half years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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Last week we had a few unseasonally hot days and it stressed out power grid to near the breaking point. Our Michigan state government repeatedly turns down requests to build new power plants. How will adding 50,000 electric vehicles which have to be charged up going to help matters? Will they only be allowed to charge them on off hours at electric company controlled outlets? Will you be calling your office to say you will miss work today because you couldn't get your car charged up?
I think they will quickly remind you that your job highly depends on your pedal power. But you're right, Michigan has done nothing but fuck things up lately. Glad I didn't hold my breath waiting to get "BLOWN AWAY".
http://www.youtube.com/watch?v=g_H58kU8q1k
Exactly right :-) But the Tesla IPO was never about creating a good car company, but making underwriters and early investors rich through stock distribution.
Unless there was an intraday high or low that I don't have access to, Apple's price started at 3.59 (Dec. 12, 1980), went down to 2.78 (Mar. 13, 1981), and went further down to 1.78 (Sep. 25, 1981).
The actual initial price was 22.00 but there have been several splits of Apple stock over the decades so the 22.00 price translates roughly to the 3.59 given above.
Thus I don't think Apple went from 21 to 4 -- the author just didn't take the splits into account.
(My comment at
http://www.zerohedge.com/article/telsa-drops-post-ipo-low-hits-1556-stoc... has more info.)
Unbelievable promo for the next National Student Marketing. "Dependant on federal subsidies" indeed.
"...with book building at $14-$16, the size increased by 20%, pricing at $17, and then trading up to $32 on the third day,..."
Is there any better example of the greater fool theory? This is one reason why so many people look at the markets as simply a giant fraud. At the same time, market professionals see absolutely nothing wrong with such business practices.
Don't forget the $465 million Energy Department loan.
if anyone is trying to buy me, i've yet to see an offer
And that's assuming $50k is a realistic price with room for meaningful net profit. But at this point I suspect there are a lot of optimistic assumptions built in. I also wonder if any manufacturing subsidies are factored in to reach that price point (in addition to buyer-side subsidies already mentioned).
are you serious? busted ipo by greedy underwriters. oh, and who the hell wants to plug their car in at night?
saab was just purchased by stryker for $400 million; only $75 million down.
for all you car enthusiasts, here's the stryker c8 reviewed by top gear:
http://www.youtube.com/watch?v=uzwXmPuSFNc
Reminds me of this.
http://en.wikipedia.org/wiki/Duesenberg
Like they say, the difference between salad and garbage is timing.
ever since 401K was rammed down the throat of the public, stocks market have been nothing more than a tool for insiders to cash out at public's expense.
Nissan is getting ready to kick everyone's ass in the EV business. Without much fanfare, they are setting up production lines and a battery factory in KY, and they will be selling two affordable vehicles, in quantity, by Q2 of next year. The sedan model (Leaf) is half the price of GM's Volt, and the delivery van will establish a new category for business vehicles.
The Chevy Volt will be the latest embarrassment to hit General Motors since they attempted to sell a vehicle that transfoms into a tent - the Pontiac Aztec.
http://2.bp.blogspot.com/_sdQst1lg-xI/ShycQY5uYiI/AAAAAAAAAKM/tV1bii76ing/s400/Aztec-truck-tent-na.jpg
The Volt is a $20,000 vehicle being sold for nearly twice the price. It will take a decade or more of driving until your gas savings surpasses the green premium that you paid for the vehicle.
GM's press releases boast that the Volt will get over 300 mpg. That statistic, though, is only good for the first 50 miles. The vehicle is fully electric for the first 40 miles, using no gas whatsoever. After that, the combustion engine powers the vehicle. So the unbelieveable mpg calculation is only factoring 10 miles of gas usage during the first 50 miles driven - that is why you have an out-of-this-cosmos mpg figure. The further you drive past 50 miles, the further the mpg collapses. It's incredibly misleading. GM is trying to lead everyone to believe that you can drive 300 miles on one gallon of gas. Considering GM's poor engineering history, I'm not certain that you could drive a Volt 300 miles without having some sort of electrical/mechanical problem.
Unless you're Cameron Diaz or Al Gore, most people that are buying hybrids or electric vehicles are doing so to save money and gas. At $40K, the Volt will completely miss its target audience with a tight budget.
And those that are still dumb enough to buy it will certainly be confronted with typical bullshit GM craftsmanship.
It's a loser, by any measurement.
Agree. They should have just claimed an infinite MPG as long as you don't drive more than 40 miles.
But more sinister is GM's (US) calculated self destruction. It cares no more for the US market as Apple cares to produce in the US. It's honey pot resides in Asia where growth is almost a certainty. The rust heap has already been dumped onto the NA taxpayers in a treasonous act of deception.
http://www.saicmotor.com/english/gsgk/qyml/gtkzqy/2706.shtml
I'm surprised the US and Canadian tax payers don't also demand ownership of the GM stake in SGM.
Precisely, ... targeting the greenie, save the gay whale types who are too lazy to ride bicycles. Those of us who are genuinely interested in sustainable living wouldn't touch this POS with the Obamanations dick.
The whole thing is a fraud. Tesla is the new Delorean. Steer clear of it.
Do you have a cell phone? How long does the battery last before it has to be replaced? 2 years? How much does a replacement cell phone battery cost? $30?
http://www.teslamotors.com/display_data/TeslaRoadsterBatterySystem.pdf
Every two years $21,000 worth of batteries have to be removed and replaced for one car. Gimme a break.
It's a ashame that probably a trillion dollars has been spent on marketing oil and gas, and less than a billion has been spent on the development of batteries.
I prefer this steak extra extra well done. Maybe charred remnants of the original cut. This is a classical case of dressing mutton up as lamb.
tesla is rolling in his grave.
http://keelynet.com/energy/teslcar.htm
Outrageously expensive electric sports cars? Seriously? This business makes chinese solar stocks seem like blue chips.
Compared to this POS, chinese solar stocks are blue chips. I recently visited a store selling solar power solutions and I confess I was impressed by some of the products developed by the chinese firms. Solar water heaters, solar powered air conditioners, lights, security systems etc. I do not know how good the products are but they are definitely headed in the right direction. On the other hand, what is the value of a solar powered Car that you cannot take on a roadtrip because no one else can fix it if it breaks down. The Chinese create products designed to meet needs. Americans produce products designed to sell stock.
You mean "Americans produce products designed to net government subsidies," because that's all there is any more.
I was thinking the exact same thing. But people like to throw money away on stupid things. Even regular car companies are hard pressed to make a buck, how these guys are going to do it is beyond me.