Tesla Plunges $2.5 Billion After Hedge Fund Shorts Stock

Marcio Jose Sanchez/ Associated Press file
Marcio Jose Sanchez/ Associated Press file

While Elon Musk was claiming that Tesla Motors will produce 500,000 electric cars in 2018 and 1,000,000 cars in 2020, a leading short-seller on Wall Street admitted he is now betting heavily against Tesla.

Elon Musk on Tesla Motors Inc.’s earnings call told investors that after taking in 325,000 deposits of $1,000 each last month for future deliveries of the company’s Model 3 starting in late 2017, he has moved his desk to the end of the production line and stashed a sleeping bag in a nearby conference room at its Fremont, California, factory to make sure the company meets its delivery promises.

Musk allowed other company executives to dole-out the grim news that the electric automaker reported a 50 percent larger-than-expected first-quarter loss of 57 cents per share on $1.6 billion in sales revenue.

But the net day, the authoritative “Inside EVs” blog countered that Tesla’s April 2016 sales of only 800 vehicles was its worst April since 2012.

Breitbart News reported last month that Tesla was losing $19,810 on each car it sold and hemorrhaging negative cash flow of $51,344 on each vehicle it built. As a result, Tesla at year-end had a dangerous negative working capital position of -$24.7 million, despite holding $156.5 million of customer deposit cash for 31,300 preorders of their Model X and Model S luxury vehicles.

Such precarious financials would usually be frightening enough to cause vendors to only ship materials on a “cash on deposit” basis. The company admitted in early April that “parts shortages” explained why it missed its delivery schedule.

Tesla also admitted worrisome news that both Greg Reichow, Tesla’s vice president of production and one of its highest-paid executives, and Josh Ensign, vice president of manufacturing, were leaving the company as soon as replacements were found.

Although Tesla’s stock had traded as $234 a share on May 4, the stock valuation tanked by over -$2.5 billion on May 5, dropping from $234 to $211 a share after famed short-seller Jim Chanos of Kynikos Associates admitted that he is shorting Tesla.

Chanos told CNBC, “One of our historical sign posts of a company in trouble is when numbers of senior people leave over a short period of time,” adding, “Tesla fits that bill.”

He told an audience at the 21st annual “Sohn Conference” in New York City that the Tesla’s core problem continues to be the real profitability of the business. He commented that the company has never been able to forecast its deliveries even one quarter out. “Yet, everybody is confident about what they’re going to make in 2020 or 2025.”

Chanos also has no confidence that Tesla will gain a competitive advantage from its $5 billion “Gigafactory” being built in the Nevada desert, which is expected to supply lower cost batteries for Tesla vehicles and utility electric “Powerwall” storage units.

He also blasted SolarCity, another of Elon Musk’s public ventures that Kynikos Associates is shorting.

“They’re losing money on every installation and making it up on volume and that’s a problem when you have a levered balance sheet,” Chanos said. “I think SolarCity gets into financial trouble in 2016.”


Please let us know if you're having issues with commenting.