When you bet against Tesla and Elon Musk, you had better bet small and that is just what I am doing. I am a veteran speculator with more than forty years in this racket. For the last two years, I have hesitated against shorting this stock because of my awe of Elon Musk and his achievements. Since Elon arrived in this country from South Africa with almost nothing his career has been one stunning triumph after another. He started out as a founder of Zip2 and sold out for $22 million. He then quantum ai elon musk became a cofounder of Paypall and cashed out for $165 million. In rapid succession, he then became a cofounder of SpaceX, Solarcity and Tesla. Solarcity is now the nation's largest provider of solar power systems. If I were asked to vote for America's greatest living entrepreneur, I would vote for Elon Musk.
Why then am I betting against the storied Tesla his most famous creation? I am betting against it because the numbers are nuts and I am not the only hard-nosed investor to come to this conclusion.
In the last three years, Tesla has been one of the market's most heavily shorted stocks. In 2014, the shorts were taken out and shot as Tesla skyrocketed in price and the shorts frantically covered their positions. In spite of this carnage, the short position is still a very high number about 25% of Tesla's total stock float. Why do the shorts continue to short this stock in spite of the fact that they are getting killed? It is because they are looking at the numbers, which are truly awful. Tesla is currently selling for $267 a share and contrary to popular belief, it has never earned a profit. In its last quarterly financial statement, it reported a loss of $62 million or fifty cents a share when using official GAAP (Generally Accepted Accounting Principals) numbers. These are the only numbers that are recognized by the SEC. The hysterically hailed $16 million profit and earnings of 11 cents a share were bogus non-GAAP numbers. Why the SEC allows companies to publish fantasy non-GAAP numbers in their earnings statements is beyond me but they do. What is even worse is that so-called professional investors keep quoting these bogus numbers on TV as if they were valid.
Tesla is perceived as an infallible company destined to revolutionize the car industry. Tesla needs stunning performance results to justify its current price. It is disturbing that it is now producing about 35,000 of its highly acclaimed cars a year and is selling them at an average cost of about $100,000 each and it still can't earn a profit. It has already announced that it does not expect to earn a profit in 2014 using official GAAP figures.
The $64,000 question is how many green zealots are there out there who are willing and more importantly able to pay $100,000 for an electric car with its very real range limitations. The zealots say hundreds of thousands. I think not. Signs are beginning to appear that Tesla is struggling to find 35,000 buyers a year. Buyers who can afford to pay $100,000 for a car don't grow on trees. Where are the 35,000+ annual buyers next year and the year after that coming from? What finally quantum ai elon musk drove me over the edge were the repeated assertions by proud Tesla owners who resemble nothing so much as a religious cult that there were hundreds of thousands of panting new buyers out there. Buyers who will gladly pay $100,000 so that they can be driven into a state of ecstasy every time they floor the accelerator because Tesla can accelerate from 0-30. I don't know what that means. I do know that I would not pay a dime extra for this exalted performance. If this is the best argument that they can come up with then they have no argument.