From Gordon Johnson of The Vertical Group
TSLA Admits to Actionably False Statements in Prior 10-Q Filings
One of the key concerns surrounding TSLA, in our opinion, is the idea that the company could currently be in receipt of a Wells Notice (as we’ve published multiple times before), rendering its ability to raise capital difficult (we are not aware of such an action, but continue to question why TSLA has not tapped the capital markets given our expectation that its cash balance will fall below the critical $1bn threshold in 2Q18, w/ ~$500mn in overseas cash [based on our analysis/opinion] that it does not have ready access to, and its decision, days after 1Q18 closed, to drain its money market account to pay out suppliers $700mn-$800mn [based on our analysis/opinion] suggesting the company, assuming our analysis is accurate, is in desperate need of cash [and its end-of-quarter cash balance could be inflated (again, based on our analysis/opinion)]; our analysis is based on: [a] our analysis/opinion of post quarter financial SEC filings, and [b] our understanding of accounting).
Thus, based on the comments below from a new July 11th, 2018 filing (we found just today, and we do not believe is widely known by Consensus), it seems our concerns around TSLA’s inability to raise capital, at present, via an equity raise and/or 144A debt filing, could be justified. Below, without comment, we provide a few excerpts from the new July 11th, 2018 filing we just obtained (we remind our readers that TSLA is the defendant).
Exhibit 1: Page 5 of July 11th, 2018 Filing
Exhibit 2: Pages 5-6 of July 11th, 2018 Filing
Exhibit 3: Page 13 of July 11th, 2018 Filing
Tesla stock and bonds appear to be getting hit on the news…
… as the new TSLA CDS now implies 30% odds of default in 3 years:
Some more details from the lawsuit via Paul Huettner:
Shareholder lawsuit against $TSLA w/ some very troubling allegations/facts:
1. Material falsity of M3 production capability & timeline
2. Scienter confirmed by former employees
3. Loss causation following 10/6/17 @WSJ article
4. Eliminate limits on personal liability— Paul Huettner, CFA (@Paul_M_Huettner) July 24, 2018
Key passages:
“Defendants concede the material falsity of Defendant Musk’s August 2, 2017 statement, conveying then current facts, about “a gigantic machine producing – that’s meant for 5,000 vehicles a week and it’s producing a few hundred vehicles a week.”
— Paul Huettner, CFA (@Paul_M_Huettner) July 24, 2018
“Defendants tacitly concede both that Musk lied, and that the lie was material and actionable. Rather, they assert that Musk lied while responding to a question about gross margins.”
— Paul Huettner, CFA (@Paul_M_Huettner) July 24, 2018
“The Complaint adequately alleges that Musk’s statement of present fact during the May 3 earnings call that “there are no issues” with the “supply chain,” was materially false.”
— Paul Huettner, CFA (@Paul_M_Huettner) July 24, 2018
“The Complaint alleges false and misleading omissions with respect to three separate risk warnings.”
1. Delays in timelines & targets for M3
2. Omission of hand-built M3 status
3. Battery production— Paul Huettner, CFA (@Paul_M_Huettner) July 24, 2018
“Musk attended a meeting with CFO Jason Wheeler, in late April or early May of 2016…where he was directly informed by FE1, Director of Manufacturing at Tesla’s Fremont plant, that “there was zero chance that the plant would be able to produce 5,000 M3/week by the end of 2017.””
— Paul Huettner, CFA (@Paul_M_Huettner) July 24, 2018
” FE1 further stated that Josh Ensign, the VP of Manufacturing, also told Musk directly that the Company would never be able to meet Musk’s unrealistic timeline for production of 5,000 M3s per week by the end of 2017, and that Ensign was forced out of the Company for doing so.”
— Paul Huettner, CFA (@Paul_M_Huettner) July 24, 2018
Full filing below
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