I'd never heard of his guy until now, and after reading the comments by readers and his responses at seeking alpha, it will be the last time I bother reading anything he writes.
Someone mentioned Tesla using deposits for working capital... I really doubt that. They were refundable and anyone cancelling a reservation would get the money back. I originally thought the same thing, they would use the money, but when I asked was told that money was set aside. They could have lied but assuming they didn't. My guess is that the reservation money is not considered income until the order is fulfilled. Based on my limited knowledge of tax accounting. So in that case the basis for the article is wrong. I like how all these analysts try to pretend they know the answer... they don't know anymore than we do! Wait for the facts, don't jump to conclusions based on half truths and rumors!
"The interesting question is why he writes article after article". Agreed, but I have promised myself not to spend to much time on it, though it really is, potentially, fascinating. The simplest would be if someone would just present conclusive evidence that he is on someone's (possibly John Petersen's) payroll - then we could put him to rest and stop speculating about his motivations.
Let's drop him for now, please :-)
Ignore everything John Petersen writes, which is much the same story recycled. He has a large interest in Axion Power (used to be the chairman). Axion makes lead-acid batteries for hybrids and start/stop ICE systems, therefore all BEV makers (that don't use lead-acid), all LiIon tech, and Tesla in particular (as a leader in both) are a thorn in his side.
As he doesn't mention Axion in the aricle, the disclosure statement is legally correct. It doesn't mean he has no interest in the subject.
He's in Switzerland, btw.
John Petersen has issued a cash warning a few months ago, and more recently he pointed out that if there are ramp up issues / delays or other problems (most of the time there are, especially when launching such a complex product with a completely new factory), the cash cushion is not deep enough.
Few listened. Today we find out Tesla is issuing 4-5M shares. Maybe he knows something after all. It pays to think about both sides of an argument.
By no means I claim Tesla is doomed or something, more like a bump in the road and a buying opportunity (beer cannot be diluted with whiskey, right?). I just don't like knee-jerk answers and labeling people, that's all.
If John Peterson is right about Tesla needing a secondary offering, then so is Elon Musk, since he discussed the possibility in the 2nd quarter earnings conference call.
The difference is the apocalyptic manner in which John Petersen practically predicts the end of the world for Tesla if they should need a secondary.
See this quote from: http://seekingalpha.com/article/785981-knight-capital-group-an-object-le...
"Despite its abysmal financial condition, Tesla's market capitalization was $2.98 billion, or roughly 100 times its estimated book value, at yesterday's close.
I believe Tesla's management team has probably been seeking additional financing for several months because it's the only responsible thing to do. I also think they've probably received several term sheets with discounts that were far deeper than management could stomach. I'm convinced it's only a matter of time until there's simply no choice.
Reckoning day will not be pleasant for Tesla's existing stockholders."
Closing price August 2nd when the above was written: $26.10
Closing price September 25th after the secondary announcement: $27.66
my worst fears
great product, but production/cash flow issues.
As of 9/14/2012 the short interest has risen to a new all time high of 30,079,911 shares.
This is an increase of almost 4 million shares sold short in 2 months time.
A secondary of about 5 million shares including the 10% over allotment will not help the shorts that much.
Obviously somebody, or a lot of somebodies has a big incentive to talk the stock down.
Not saying it is John Petersen, but maybe somebody he knows....
I'm not John Petersen fan, quite honestly the guy is an idiot, just read his research.. however fact is that TSLA is looking for cash.
Keep in mind
- Tesla built / busy expanding factory
- 3,000 top notch employees on California payroll (Could be about $20M/mo)
- Very little money is rolling in past 3 quarters
- They won't make 5,000 units in 2013 (more like 3,000)
All this and you're burning through cash at amazing rate... hence need to raise more capital, selling another 5,000,000 shares via Goldman announced today that would raise another $150M
Great company, but unless Model S ramps up to 400/week pretty quick it's be an uphill battle folks.
I think you meant "2012" in the current production est. ?
Tesla is burning through a lot of cash, including the supercharger network, which are investments in the future. However, if they continue to experience problems in the ramp up and have to come back to the market a second time for more cash, things could get pretty dicey.
That said, once the ramp up achieves Elon's stated targets, Tesla could go from Cinderella to queen of the ball pretty darn fast, leaving the perpetual skeptics eating supercharger dust!
The S/C network is pocket change for TM. A few hundred chargers, Solar City installs the panels and manages the network to make money off the FIT on the excess generated (on average, over the year). It's a high-return marketing gesture.
It is possible for JP to make a correct prediction with faulty analysis. I'll strongly agree with you that his analysis chops are severely lacking, but I don't give him any credit for recognizing a cash-flow problem. Elon has said as much, and even the analysis by MS that JP cited show the same problem. In fact one of them showed a worse problem than JP's analysis, but he latter edited the post to remove that part. Even in the face of the poor cash problems, MS gave them an overweight. The crux of the issue is simple. Demand is still not an issue. If they build it, they will come. So, the question is will Elon let Tesla go bust because it is 10s of millions short on working capital?
I don't think anybody can predict the future, it's still a gamble.
Too few cars have been on the road for too little to make any conclusions at this point.
They can easily go bust like Solyndra and Delorean, and Musk himself admits it.
Unlike GM they can't afford a single failure, every car they make today has to be successful.
Solyndra went bust on exec extravagance and overcommitment to a narrow tech edge, which was never subjected to cost "trial by fire" before the bottom fell out. Deloreans had numerous shortcomings in areas Delorean was not expert in.
Elon's risks are different; no collapse of demand is (as far as can be seen) in the cards. But supply chain narrowness is still an unavoidable 'low volume' issue, and can't be addressed until the mass production stage is reached -- a bit of the 'chicken and egg' dilemma. Vertical integration only goes so far, so far.
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