Chevy Volt a Failure - GM to Layoff 1,300

Good luck doing another capital raise with an SEC charge hanging over your CEO.

The Board of Directors of that company has been his brother and a bunch of cronies. I have said before, anyone who invested in that company gets what they deserve, because they had the power to insist on an independent board that looked out for shareholders, not Elon Musk. You saw the result of the farce of corporate governance that company is with the Solar City acquisition -- Musk bailing out one failing enterprise of his with another failing enterprise that was still able to borrow billions of dollars because of a credit bubble. That came at the expense of shareholders -- who sat by like sheep and allowed it. They get what they deserve.

At this point, he has blown through a staggering amount of money, already defaulted on a government loan years ago and was given a pass, allowing him to do a carnival barker act and rely on private capital markets to sustain what is a ghost company. Any future for this mess relies on him being able to borrow more and more money. Despite his BS, they are out of money in a year and a half to two years tops (depending on how much he can slow the cash burn, stiff vendors, etc.) without him finding funding. That ain't happening with these headlines. On top of it, they have convertible bonds to the tune of $900 billion due in February, and their stock price isn't high enough to allow them to pawn off equity on those lenders rather than paying them in cash.

Add it all up, and they are screwed. The market should now force that board of directors to face a day of reckoning. The problem is that the con job that has been this company depends on a cult of Elon Musk. They need to jettison him. Do that, though, and the con is over and this thing gets valued as a car company (with increasing competition) that can't produce cars profitably.

 

I'm not sneering at anyone. And you really don't know me. I know what it is like to take a big loss (not investing, but on specific trades). So I would never wish that on anyone. It's a shitty thing to do. You are wishing bad things on someone else, and that is bad karma. Keep in mind, very few people (other than short sellers) have lost money on this stock, a

That said. ... Take the Solar City acquisition. I honestly don't understand how anyone who had done any amount of due diligence and knows how to value a stock could have owned that stock as a buy and hold investment (as opposed to a casino-like momentum trade) in the first place. That was a stock to trade in and out of using a momentum strategy. And even there, to a certain extent most people who try that are gambling without a methodology that gives them an edge.

But let's say you somehow evaluated the company, determined that you believed the stock was cheap or fairly valued (which would have been ridiculous, but OK). ... When that Solar City acquisition was announced, and you were finding out that you were taking on the massive debt of a company (owned by Musk too!) that was bankrupt without it being bailed out using your equity in Tesla, and this was on top of the massive debt your company had been already piling up while it missed every deadline the CEO threw out there. ... if you didn't sell immediately, you honestly are responsible for where this thing is eventually going to go (if you are still holding on). Every time Musk diluted your equity stake by issuing more shares to raise money, and you sat by staying invested in this stock and had no problem with him doing that (as the valuation went higher and higher), you needed to be responsible for your decision.

Pointing that out isn't me sneering at anyone or wishing ill will on them. But I don't look at this as gambling, or see markets as things that should be rigged so everyone always makes money (in between the crashes that creates, wiping out people's paper gains). Being an owner of a company involves risk. If you choose to purchase equity in a company at a ridiculously expensive valuation, and the management (without a board of directors putting a check on him) continually does things that benefit him at your expense, that was your choice. Saying you get what you deserve may sound harsh, so I apologize for the way I put it. I actually had in mind the institutional investors who could have squelched the Solar City acquisition and could have put in an actual independent board), As for any individual? My sentiment would be that anyone who has sat holding this stock, and continues to, has been treating their money like a spin of a roulette wheel. And it's actually worse than the roulette wheel, because given the massive debt load he accumulated, the constant chicanery and the lack of profitable products, the end game -- whenever it occurs -- has always been a forgone conclusion. It's like playing with a roulette wheel that's rigged to make your odds even worse.

 

This was the best they could hope for, honestly. He gets to stay on as chief executive. Without that, it was game over immediately for Tesla. Aside from the fact that they are going to hand over $40 million to the government between his fine and the company's, there is a chance this turns into a slap on the wrist that only has symbolic effect. Yes, two independent directors puts a bit of a crimp in the "no corporate governance" way this company has operated -- if they are really independent. I am dubious. We don't know who those "independent" people are going to be yet, and as long as people like Kimball Musk and Antonio Gracias remain on that board, it is still a joke. Given how tough the SEC talked, and how he first tried to fight them. ... this still leaves him with his board seat even if he isn't chairman, keeps the board mostly comprised of weak figures who cede their votes to him anyhow, keeps him as CEO, and keeps him as the dominant shareholder in the company. Don't think for a second that he's suddenly going to stop being a charlatan and a bully. I am sure he thinks he is going to be able to continue to bully through whatever BS is necessary to keep raising money to keep the company alive. If we get a truly independent chairman who stands up to this guy, yeah, that is a "wow." It will, by necessity, precipitate the end of this company. It has no actual business that is profitable. If it's an "independent" chairman who is as independent as the other members of this board have been all along, it's the same old shit. Musk will dominate the board still, and the company may as well be controlled by the Frankenstein child of Bernie Madoff and John Gotti.

When this all passes, there still is a looming cash crunch for Tesla. If he can somehow pull yet another con job and raise several billion dollars, the sham that is this company will continue for longer. If not. ... it won't matter who is on the BOD.

 

So much for someone vetting his tweets.

 

David Einhorn -- money manager with $9.25 billion under management -- wrote about Tesla and Musk in his investor letter. He has a really big short position. He compared Tesla to Lehman Brothers, and that got a lot of attention in stories. I actually don't think they are anything alike, except that the end result is going to be the same. But he did say something I found interesting. He did a little Freud thing and said that he thinks Musk can't admit that he can't produce the Model 3 profitably, and rather than shut it down, he is doing things to get himself booted from the company; that way he won't have to be accountable. That actually kind of makes sense.

 

I think we have a CEO who makes Elon Musk into walking voice of reason.

CEO berates analysts on conference call: 'You are a disaster...they will have to commit suicide'

The CEO is doing a conference call after earnings are released. The stock is getting hammered, and just about every analyst on the street has lowered their earnings estimate. The questions begin, and the fun ensues. The CEO threatens to do stock buybacks (which would drive up the price) to get back at everyone. Talking about "these kids that play with computers and somebody else's money," he said he would buy back stock, and "We are going to screw this guy so badly that I don't believe that they will be able to only resign. They will have to commit suicide."

Believe it or not, it kind of goes downhill from there. The transcript of the whole thing is in the story.

Here is an audio snippet.