Tesla’s 10-Q came out April 29. There are many questions and points of interest: __ 1. "As of March 31, 2019 and December 31, 2018, no entity represented 10% of our total accounts receivable balance." Then why is A/R $1.05bn? Who owes Tesla all that money? And why would they owe them money when Tesla gets the cash right away when it sells a car? It requires payment before delivery. What kind of deals would they have going on that would give an A/R balance of that magnitude? Also, the wording is unclear. At face value, one would take it to imply that no entity is responsible for 10% or more of A/R. However, the wording simply says “no entity represented 10%”… So technically it could represent any other number – e.g., 10.1%, 37.4%, etc. __ 2. Why are international long-lived assets down $345mm q/q? They didn't sell anything or take any PP&E write-downs, so that’s unclear. __ 3. Went from “we were in compliance” to merely “material compliance” on financial covenants. Which covenants are they in immaterial non-compliance with? From the 10-Q (click to enlarge): From the 10-K published February 19: __ 4. $SCTYQ in-process R&D was written down $47mm and abandoned all further development. In other words, SolarCity is worthless and its purchase was a bailout, as anybody informed already knew. __ 5. They have $201mm in non-ZEV credit sales in the quarter. That brings overall credit sales to $216mm. They are not all greenhouse gas related most likely, so some FCA. When including service costs against automotive sales – the way it’s properly done, and the way other automotive manufacturers will typically do it – its automotive gross margins fall to negative-400bps, not the 2,000bps they claim. __ 6. Term Loan extended out to June 2019 on April 16. They’re conserving cash as much as they can. It’s only about $162mm. Tesla’s market cap is $60 billion $50 billion $40 billion so why can’t it pay such a reasonably small amount of money? Moreover, the rate on this is 6.1%. Paying 6.1% on a small bank loan is a red flag. And the fact that it was extended out only two months is even more of a red flag. __ 7. Why do they have only $11.2mm on the China loan? __ 8. Revenue recognition is different in the 10-Q relative to the 10-K released. No longer is revenue recognized when the car is delivered to the customer, as stated in the 10-K. 10-K Notice how the language has been removed: 10-Q Yet what happened with revenue despite this change? It was down 37% q/q. __ 9. Tesla capex trends: Q3’17: $1,116mm Q4’17: $787mm Q1’18: $656mm Q2’18: $610mm Q3’18: $510mm Q4’18: $325mm Q1’19: $280mm __ 10. Tesla warranty reserve per vehicle sold, rounded to the nearest hundred: Q1’18: $2,400 Q2’18: $2,900 Q3’18: $2,200 Q4’18: $1,800 Q1’19: $1,800 (A lower warranty reserve helps juice the financials.) __ 11. The blatantly bogus tripe about “1 million robo-taxis” within a year was mentioned exactly zero times in the 10-Q (i.e., CTRL+F “taxi”). __ 12. Auto revenue from US trends: Q1’18: $1,844 Q2’18: $2,247 Q3’18: $5,133 Q4’18: $5,648 Q1’19: $2,330 Growth company? __ 13. Tesla’s capex minus PP&E depreciation and amortization was north of $900mm in Q3’17. It is now less than zero. Growth company? It’s suspected and likely that to boost gross margins, Tesla stashes some of its production costs in its capex account by capitalizing them. (This was one of the primary tactics used in the Worldcom fraud.) __ 14. The reported quarter-end balance sheet is $2,200mm. If you subtract regulatory credits (~$350mm), offshore cash (~$400mm), and the ~$200mm in Europe’s VAT tax, that means cash would be working around $1,250mm. The minimum liquidity threshold on its Credit Agreement (“ABL”) is $1,215mm. __ 15. Securities litigation pertaining to the fraudulent “$420 funding secured” tweet is pending. Nine class action lawsuits are pending in the Northern District of California and six in Delaware. __ 16. They discreetly changed guidance. Instead of 500k production in 2019 – the subject of Musk’s fraudulent February tweet that landed him the SEC’s contempt motion, given it was material, not pre-approved, and made in bad faith – this target has been extended out six months. 17. Currently subject to SEC and DOJ investigations. It’s believed that Tesla can’t raise capital through the traditional channels due to ongoing criminal and civil probes that have disqualified its WKSI status. Raising equity in the low-$200s is not ideal. Raising debt would likely breach various pre-existing covenants; and with unsecured bonds where they currently are, would be likely to have yields of more than 9%. Moreover, disclosures that would have to be made would be uncomfortable for both the company and the underwriter taking on the risk. Musk no longer openly talks about reservations or orders due to low demand. Investors, underwriters, and the SEC would likely be required to provide more detailed disclosures surrounding any ongoing investigations from the SEC, DOJ, FTC, state attorney generals, and any international agencies. One more additional hint was the company was seeking “alternative financing.” What this would entail – funding from individuals, an ICO, etc. – is unknown. The “investor autonomy day” was a desperate tactic that wielded wholly inappropriate comparisons and false characterizations of competitors’ technology relative to their own. Their goal is to apply an undeveloped technology to a totally infeasible claim (“1 million robo-taxis within a year”) to generate funding interest among current and potential investors. My guess is a robo-taxi variable interest entity (VIE) is one longshot path that Musk would pursue to try to raise some amount of money. It’s indeed extremely ludicrous, but the company is in very bad shape and concocting a new fraud to raise money – with the proceeds being funneled into Tesla – and buy time is one avenue. Desperate times, desperate measures. __ Sum-of-the-parts Tesla valuation Auto: $0 Mobility-as-a-service: $0 Power: $0 Solar: $0 -------- Total: $0 -------- PT = $0 __ Disclosure: Short Tesla stock, short Tesla bonds, and short Tesla call options of various strikes and maturities