Matthew Waterman
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Matthew Waterman in Brand Power,

Don't Invest In Dead Ducks

So, talking about Tesla Motors (TSLA) here because I really feel like they're a great example of it. 

I wanted to give a visual example of a concept that tends to happen with companies that are built around the idea of designing technology that initially sells at a loss, but later intends to profit on the lower costs associated with the infrastructure that they are building. 

If you were to express this on a chart, what you would see are these two lines. One representing the cost to manufacture the technology, and one representing the actual profit after all costs are taken into consideration. The chart assumes an infinite timeframe, and also the impact of EBITDA, or non-GAAP accounting. If you are investing in such a company, this is the logical conclusion of buying into a company that has to take on long-term debt in order to complete that infrastructure.

The chart would sort of look like the head of a duck that was facing to the left. You would have these two lines gradually moving closer and closer together, but they would never actually meet.

Because it's a duck.