Mon Mar 18, 2019, 10:07 PM

"A Modified Ponzi Scheme": 78% Of Tesla Operating Cash Flow Has Come From Customer Deposits

An impressive, 46-page Value Investor Club write-up on Tesla was published by user jcoviedo on Monday and promptly leaked thereafter, which - not surprisingly - pitched a short thesis which sees the stock price first dropping to Musk's margin call level of roughly $200/share, after which a "massive reset" as core investors dump, sends it below $50 share.

And while Zero Hedge readers are by now familiar with many of the bearish arguments against the company, there was one striking observation that goes to the heart of Tesla's biggest weakness: its liquidity, and specifically that Tesla is nothing more than a deposit-churning Ponzi scheme, that only keeps its light on thanks to gullible buyers who front the cost of production of the next model, and the next, and so on. Here is the passage in question:

Tesla is in effect a modified Ponzi scheme. Throughout its history, the company has financed its operations by announcing a new product (originally the roadster, then the Model S, the Model X, the Model 3, the Semi, the roadster 2, and now the Model Y as well as the vaporware full self driving package) and then taking deposits for the product before it has ever designed a production system for the product. The company then spends the deposits on operating expenses and the capital expenses to manufacture the original product. When the company is close to running out of funds, the company announces a new product and takes deposits on it in order to finish the production of the first product. Since 2008, 78% of TSLA's cash flow from operations has come from customer deposits.

While it is debatable whether this practice is legal or not, there it one thing it clearly isn't, especially in the long run: sustainable.

And Musk know it. As the report's author points out, "unlike a bank, Tesla does not segregate customer deposits and in reality customer depositors are just unsecured creditors of the company. In Ashlee Vance's Elon Musk biography he has a telling scene in late 2008, Kimbal Musk worries about the legal implications of Elon raiding the customer deposits in order to keep the lights on.

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Reply "A Modified Ponzi Scheme": 78% Of Tesla Operating Cash Flow Has Come From Customer Deposits (Original post)
Troll2 Mar 2019 OP
Badsamm Mar 2019 #1

Response to Troll2 (Original post)

Mon Mar 18, 2019, 10:13 PM

1. Interest free loan from virtue signalers

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