Expectation of -0.15/share turned into 2.90/share while the entire accounting leadership leaves?

Hmm ok.

Ah, thank you.

Somebody should probably check on Jim Chanos. His fund runs 190% long and 90% short, and their biggest short is TSLA. Probably down 10%+ today.

i'd say he's fine. probably having some nice dinner somewhere right now.

i would guess if you've managed a short portfolio this last 30 years this doesn't rattle you.

Jim Chanos is fine, he gets his 2 and 20 every year. His investors, probably not so fine.

So let's talk accounting fraud. The big claim was that TSLA was wrongly allocating opex to SG&A. That would artificially inflate their gross margins, making it look like they could turn the corner once they achieved enough volume. I don't see any evidence of that in this report. If they had been doing that, SG&A would have risen proportionally to revenues. Revs are up 125% YoY, but SG&A up only 10%.

Okay, they probably also did some tricks where some customers paid for their cars and waited until after the quarter for delivery. I've certainly seen credible anecdotal accounts of non-delivery, but it's never been clear how widespread the strategy is. For every car they did that with, they'd boost revs and profits by, say, $45,000. So even if they did it with 5000 cars (vs. 50,000 delivered), that'd be $225M, vs. $740M positive cash flow.

And cash on hand goes to $3B. Everybody's been concerned about debt payments of $1.2B between now and March. I don't think they'll have a problem with that.

Unless this is just outright fraud, where they're blatantly making things up, I think this pushes any question of bankruptcy off the table for at least a year.

they'll be fine too.
2.5 months ago this was trading at 380 and supposed to go private at 420.

QoQ increase in avg shares outstanding of 8m


How is that possible?

Apparently the numbers were so good that nobody wanted to talk about them during the CC and Tesla chose to let them speak for itself. Also, did Deepak speak at all??

Everyone was afraid to say, "are you SERIOUS with this scam?" because their investment bank wants a piece of the refinancing gravy train that's coming soon.

Positive operating+investing cash flow.

That alone guarantees TSLA will get whatever it needs to refinance debt coming due AND a big capital raise for whatever (plant in China?)

SG&A is basically unchanged and it's still higher than last year. Not really that important anyway.

It is pretty loltastic to me that they cite ~18 days inventory as much better than competitors. Other manufacturers are shipping over the ocean and keeping inventories for unpredictable demand. Tesla is literally just trying to figure out how to get cars into customers' garages and kind of failing.

But whatever, it's not that important.

TSLA just needs to keep growing. It's already a viable company that will almost certainly survive in some form. The day of reckoning (if it ever comes) will come when it stops growing and shifts toward cash cow stage... making it impossible to justify what will possibly be 100+billion market cap by then.

I'm 99% certain Tesla internally is aiming for 25% profit margin on Model 3s and beyond that they are just trying to sell as many units as they can. Their optimization function (at least in short term) isn't profit maximizing, it's production maximizing with revenue and profit as secondary objectives.

So to summarize:

- It used to take 30 days to deliver a car, requiring $75 million/day in held capital.
- It now takes 20 days to deliver a car
- That's a $750 million improvement
- Deepak just said in response to a question that this change comes through as COGS in the financials/automotive gross margin.

To the accountants, does this explain $750m free cash flow improvement? Add on a $600 million increase in accounts payable, a couple of hundred million from deliberately delayed deliveries after taking payment, you've got $1.5 billion in improvements QoQ.

What are the chances that this is all a giant accounting fraud? I mean they've had so many people quit from their accounting department recently and suddenly they come up with amazing quarterly numbers.

It seems they've chewed up high end up high paying close-by deliveries to bring down their capital holding requirements substantially, while not paying bills and taking payment and delaying delivery into Q4.

This is may be why Europe is so put off (late Q1 at best) despite the high price sales potential, higher than the US. They can't afford the capital to have cars on ships for weeks. It also explains "delivery hell" - they need to move cars faster to juice the financials and reduce capital needs.

Deepak has done a great job. This is a legitimate trick to cope with lack of capital availability...the only thing is that the bill comes due down the road. There is zero chance they meet guidance next quarter.

Assuming it is, we should wait until after Q4 earnings to buy puts?

That doesn't make sense. Fewer days in inventory (especially during WIP) does have some impact on COGS but it wouldn't be that big.

Decreasing days inventory does give a one time shot in FCF but that's countered by other effects in this case (namely just much higher production.) TSLA's inventory is basically unchanged at 3.3 billion. The story is more accurately construed as Tesla finding a way to deliver **** more ontime so they didn't need to find another billion bucks to finance inventory (which they would have had to if they couldn't get days inventory down.)

100% Musk can get line of credit to finance shipping to Europe/China if he wanted to. He just can't be bothered to (yet) or he really wanted to prove the naysayers wrong by putting up a rather impressive days inventory number. May or may not be shareholder value maximizing.

They did get ~500 million from squeezing suppliers (increase in AP).

EDIT: actually, 500 million in AP isn't that big considering how much higher production was. If anything, it suggests overall TSLA is paying down payables faster.

They're selling crappy cars that cost about $40K to make (+ ~10K fixed costs) for $62K. Numbers seem perfectly reasonable. In addition the S/X have nice margins.

The bear case is that high end high margin demand dries up, profitability and FCF goes negative again, and then they have to tap capital markets for >$10 billion to just survive next year while keeping new product lines and factories ongoing.

They had such nice numbers and yet didn't want to talk about it at all. My BS meter went off the charts and exploded.

Elon is not going to rub the results in shorty's face? Given everything we know about Elon's opinion on shorty, that just cannot be possible. There's something deeply wrong here; maybe the 10-Q will be a complete dumpster fire.

I am adding to the short tomorrow morning. Thesis has not changed.

Stone cold lock there are multiple law partners and associates doing everything they can to muzzle Musk. With a face mask of coke if need be.

The fraud calls are a bit desperate imo. Could easily get there working through the high-margin backlog plus end of quarter window dressing. Here was one short's estimates that ended up pretty damn close...

Will be trying for 2 week, ~7% OOTM puts tomorrow. Ratio of good:bad news at this point seems very favorable, 320-350 feels like a ceiling.

No real financials talk, no victory lap by elon, lots of ducking questions. So bizarre after blowout numbers. Everyone was muzzled it seems, so strange.

Tomorrow is the day to get short again.

Early release of quarterly is already unusual although not unheard of. Chances are lawyers (including some from SEC) had conversations with Tesla's board, management, and Elon Musk himself.

Other than what appeared to be his goodbye speach? Man something is up

I agree with this combined with tax credit/competition issues

I have a lot to post, but SGA as % of revenue is the real question i have


I will admit def went through a "could i be wrong" process tonight but summary is i dont think anything changed. A raise will hurt puts a lot tho

"Tesla will operate its own ride-hailing services and compete directly with Uber and Lyft, obviously." Musk said.

Tesla’s platform, which is not yet operational, will give customers the ability to “offer their car, add or subtract to the fleet at will,” Musk said. Tesla plans to run a company-owned fleet of autonomous vehicles to pick up passengers wherever or whenever there are not enough customer cars to be lent out, he said comparing this service to the peer-to-peer lodgings business of Airbnb.

https://www.cnbc.com/2018/10/24/elon...-and-lyft.html

Driven under the influence will be the new dui... Wonder how long it takes for Elon to run this commerical: