Let me cut to the chase; I won a few along the way, but Elon Musk clearly won this most recent battle.
Earlier this week, Musk stared at revenue comping negative, collapsing ASPs, and abysmal margins. He had his Draghi moment where he determined that he’d do “whatever it takes.” The alternative was to let investors blast Tesla (TSLA – USA) and face a personal margin call.
Once you’ve crossed the Rubicon from screwing with accruals to outright frauding up the financials, anything’s possible. As Musk has learned, securities fraud costs only $40 million per incidence ($20 million if he didn’t micro-manage his legal team), so why not go full frontal?
I can complain about right and wrong, morals and ethics but in the end, I’m only here to make money for my clients. After a few too many glasses of Tequila, I asked myself a simple question, “What the f*ck am I doing guessing when Tesla dies? It’s clearly onto a new and more malignant post-factual phase. I’ve made fortunes analyzing when a sector like shipping would inflect. Why am I wasting my time on Tesla when I could go find the next shipping bull market and make a few times my money…Besides, ‘whatever it takes’ sent Austrian 100-year bonds parabolic. Lord only knows where Musk can push Tesla if he really puts his back into it…” Yeah, Tesla is now in the “too hard pile.”
Money has no ego. I won a few early battles by understanding the cycles of earning beats and misses. Musk clearly won this battle. Overall, I’m down a few hundred basis points over two years—no great loss. I could continue the good fight, or focus my energies someplace else. I’d be dumb not to focus somewhere else. Especially as the rules of this fight have now changed and I have no edge in analyzing the future expected occurrence of increasingly made up financials.
In summary, I have booked my entire put spread position.
Despite the insanity of analyzing Tesla for the past few years—which mostly involved analyzing Musk’s antics, I feel that I’ve become a much better investor for it. You could say that my losses were more than made up for by my improved knowledge. Along the way, I’ve met dozens of stunningly brilliant people who taught me hundreds of new tricks when it comes to primary research and data aggregation. The fine folks at TSLAQ do god’s work in terms of exposing Tesla for the scam that it is. If there is a flaw to the short thesis, it’s that the government refuses to regulate a company that lies about its financials, abuses its employees and kills its customers. Without government action, this can go on almost indefinitely. While we all know that Tesla will ultimately collapse, I have no better guess on the timing today than I did many years ago when I first started following the drama.
Early this year, there looked to be an actionable trade based on a collapsing business. I pressed that bet and ultimately was correct in my analysis, yet somehow lost money as management simply lied about the facts.
In any case, I have already moved on…
Now that I have a few hours a day back; the hell will I do with my time…?
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