Chevy Volt a Failure - GM to Layoff 1,300

If I can guess, his sole motivation was NOT to engineer a short squeeze. Although, he has tweeted so many times about the shorts and played so many games with it, that on the face of it, they should have a very strong lawsuit. Especially given that the SEC regulates this stuff and there is no proof of any financing having been lined up or him having discussed an LBO / privatization with anyone, INCLUDING his board of directors, which seemed wholly unaware.

The exchange put a halt on the stock that day. Honestly, to insure their integrity, they never should have reopened trading on the stock until they got to the bottom of it -- with him providing his sources of financing for a leveraged buyout that would be more than twice the size of any in history. ... on a company that has so much debt already that it belies belief that anyone would finance it (LBOs less than half the size of what this one would be, in previous bubbles, all ended in bankruptcy).

My educated guess isn't that he was trying to engineer a short squeeze (although that is the effect he has with his carnival act). It was him trying to prop up the price of his stock for a variety of reasons all having to do with his capital needs and his inability to borrow any more. There is something fishy about why he hasn't accessed the debt markets again the way he kept finding ways to when I was incredulous about it on this thread a few years back -- I think he's been cut off. And he is running out of cash with the way he has blown through money quarter after quarter. I also believe that when people get into his non-GAAP earnings and production / sales reportings they are going to discover that the company has been, um, less than truthful. We'll see. I hope for his sake, I am wrong about that.

Against that backdrop, though, what nearly every story is ignoring is that as his cash dwindles, the company has a convertible bond due in February (6 months away). $920 million is due on Feburary 27, unless the stock price is above $360 a share. That would put it above its conversion price, which would allow him to pay off the debt in stock instead of cash. And his (eventually) worthless stock -- he has plenty of that with all of the dilutions the sheep invested in the company let him get away with. Cash? That he's running out of.

I will bet with 99.9 percent certainty that is what is behind his behavior. It's also fraud, and not just in the securities law sense, even though the SEC should be way up in his grill right about now if they do the nonsense they say they exist to do.

 

The company's stash of borrowed money has dwindled down to close to $2 billion. And part of that cash is deposits for Model 3s, many of which people are asking for back (because the $35,000 car they signed on for was bullshit). They took in a lot of money, but they were basically, non-interest bearing $1,000 on demand notes (although good luck trying to get your money back at some point. Already there are stories of delays).

The bailout of SolarCity, taking on its debt by Tesla, was criminal (not literally). It was one of the worst examples of corporate governance ever. He bailed out one of his crappy companies that was burning through borrowed money and losing a ton of money when it did sell anything (but that had lost its ability to borrow more so was going to go bankrupt), with his other company that was burning through borrowed money and losing a ton of money (but which could still borrow based on a cheap money environment that created all kinds of misallocations of capital -- this being one of the poster children). Tesla has lost close to $3 billion over the last 2 years. Or something in that vicinity. At its current cash burn rate, it is out of money in a year, maybe a year and a half if it cuts back some more on the ridiculous spending rate. So unless he can pull another rabbit out of a hat, it is feeling awfully like he has had trouble finding lenders at this point. Otherwise, you'd have to guess he would have. With his convertible bonds coming due in February, in which they are going to need to fork over $925 million of what they have left, and his current junk-rated debt trading below par, and a rising rate environment, it is no longer an environment conducive to his brand of BS.

That plant in Buffalo? It's pretty simple. He doesn't have the money. Unless he can get government subsidies or ride a central-bank induced debt bubble to borrow endlessly. ... the game is going to be over for him. He should be praying for a crisis and QE4 right now. It's he only thing that might extend the period of insanity that even made him and his company possible.

 

I saw that this morning, and I thought of the Curb Your Enthusiasm episode in which Larry David picks up a hooker to sit in the passenger seat so he can use the HOV lane to get to a Dodgers game.