In this Special Episode of Hidden Forces, Demetri Kofinas speaks with Ed McCabe about the latest woes plaguing Tesla after the Securities and Exchange Commission (SEC) recently alleged in a federal filing that its CEO Elon Musk, violated a settlement with the agency when he tweeted in February about the electric carmaker's 2019 production targets. Midway through the episode, the two are joined by Lawrence Fossi, eponymously known as Montana Skeptic, and the three continue their conversation for the rest of the episode and into the overtime segment.
When considering the performance of Tesla’s stock in the face of sober calculations, one cannot help but be reminded of Benjamin Graham’s famous quote: "In the short run, the market is a voting machine but in the long run it is a weighing machine.” For anyone looking to weigh the merits of Tesla’s valuation, he or she would be best served by obtaining a degree in forensic accounting. For anyone looking to understand how or why the stock has remained as high as it has while the company has been busy liquidating assets, shutting down distribution points, and restructuring operations in order to keep the electricity running, he or she will likely need to rely upon the expertise of cultural anthropologists and theologians.
The immediate danger for Elon and Tesla is one of insolvency and lifeless demand. On a personal level, it was recently reported that Musk’s banker, Morgan Stanley, who likely holds most or all of his margin debt, extended itself further last December by making mortgage loans on five of Musk’s California mansions. Elon took out $61 million in mortgages: four in the Bel Air neighborhood of Los Angeles and one in the Bay Area. The loans, signed in the final days of 2018, represent about $50 million in new borrowing. Considering Tesla’s deteriorating financial position in the face of cratering demand, massive mismanagement, and continued disarray in its manufacturing and logistics operations, it is instructive to know that the CEO may conduct his personal finances with comparable degrees of recklessness and malpractice. If Tesla’s share price continues to decline, Musk will eventually need to post more collateral, which means approaching the Tesla board and asking it to waive its pledging limits of company stock. Assuming the board gives him the waiver and the stock continues to drop, Morgan Stanley will be forced to begin selling collateral to recoup some of the outstanding loan. This could cause the bottom to fall out very quickly, for both Tesla, as well as Elon Musk.
As far as demand is concerned, the picture has gone from alarming (going off a publicly available spreadsheet that tracks VIN numbers) to downright nightmarish (the rushed slashing of the Model 3 price). Pictures of lots stacked with ownerless Model 3’s have been circulating on the Internet for months. There is also a theory that the number of Model 3’s being returned to Tesla is much higher than is being reported and that this helps to explain the persistent gap seen since September between the number of Model 3’s Tesla claims to have delivered and the number showing up as registered. The theory is that this is the result of a strategic decision on the part of Tesla to delay registering newly sold cars for 3-4 weeks in order to provide an opportunity to resell the car with a “clean” title to unsuspecting new buyers. On top of all this, Tesla’s list of executive departures continues to grow by the day with the VP of Engineering, the General Counsel, the VP of Global Recruiting, and the Chief Financial Officer among the company’s latest casualties.
In short, Tesla appears to be in the midst of an informal restructuring and liquidation process being driven on the fly by a Shakespearean CEO whose personal finances and singularly large ego are so fragile that nothing seems capable of standing in his way.
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod
America 2024, Ukraine Politics, & the Ubermensch | Marshall Kosloff
The Downfall of FTX and Crypto’s Path Forward | Vance Spencer & Michael Anderson
Who is Sam Bankman-Fried and What Really Happened at FTX? | Marc Cohodes
Energy Security, Geopolitics, & the New Energy Order | Meghan O'Sullivan & Jason Bordoff
What are the Politics of a Fed Pivot? | Nick Timiraos
How Does China See the World? | Kaiser Kuo
Conspiracy Theories: Why the Rational Believe the Irrational | Michael Shermer
The Rise of the Global Dollar System | Perry Mehrling
How to Prepare the World for a Peaking China | Michael Beckley & Hal Brands
Dollar Milkshake Wrecking Ball | Brent Johnson & Michael Kao
The Battle Over Semiconductors & US-China Competition | Chris Miller
Why There Are Reasons To Be Hopeful About America | Scott Galloway
The Rise of Inflation & the Great Demographic Reversal | Charles Goodhart
Secular Inflation & the End of the Great Moderation | Nick Timiraos
Oil Market Update Report & Live Q&A | Rory Johnston
Navigating a World Trapped Between Scarcity & Abundance | Mike Green
Machine Intelligence, Humanity, & the Will to Power | Demetri Kofinas
Alex Jones & the War on Information | Alex Lee Moyer
The Price of Time in a World Without Interest | Edward Chancellor
Why Global Liquidity Matters Now More Than Ever | Michael Howell
Create your
podcast in
minutes
It is Free
The Commercial Edge: Unleash the Power of People
The emPOWERed Half Hour
U.S Property Podcast
Aligned Money Show
Gorse Culture PODcast : The H.R. Detective Agency!
The Ramsey Show
Planet Money