While Thomas Edison is arguably the best-known American inventor, a cult following has grown up around Nikola Tesla, the Serbian engineer whose skills as an inventor, perhaps superior to Edison’s, were undermined by his inferior business sense.
And this cult MAY have reached its peak on June 29, when the electric car company named Tesla Motors (TSLA) came public, raising $226 million from investors large and small who see great profit potential in the business.
I say MAY because there’s a POSSIBILITY that it will be years before this stock (TSLA) closes higher than it did on its very first day of trading.
And I say this because of three basic facts.
First, while every other automobile company on the planet has a market capitalization of LESS THAN one year’s revenues—they range from 33% of revenues for Ford to 59% of revenues for Honda—Tesla’s market capitalization is now more than $1.9 billion, which is more than 17 times revenues. In other words, TSLA is 38 times as expensive as the average automotive stock.
Two, while the company has posted cumulative revenues of $148 million by selling 1,063 two-seat electric sports cars (currently priced at $109,000) to customers in 22 countries, it has yet to make a profit, and it has no proprietary technology that can prevent other companies from competing, especially in higher-volume lower-price mass markets. In fact, it now looks like there will be a substantial time gap (and thus a revenue gap) between its two-seat Roadster and its four-door Model S (priced at $56,500)—promised for delivery in 2012; driving into this gap will be the Chevy Volt, the Nissan Leaf and others.
Three, and most important, the stock’s chart isn’t going up, which tells me that the public’s appetite for the stock has been satisfied for now.
Now, I hope I’m wrong. I admire Tesla’s Roadster, impractical though it is for my lifestyle. I’ve toyed with the idea of reserving a Model S. And I do expect to see some Teslas on the road in the years ahead.
After all, there’s already serious money behind the company. Elon Musk, the founder of PayPal, is a major investor as well as the company’s CEO; he’s in for about $75 million. Also on board are Google co-founders Sergey Brin & Larry Page, former eBay President Jeff Skoll, Hyatt heir Nick Pritzker, Daimler AG, Abu Dhabi’s Aabar Investments, numerous venture capital firms, and the United States Department of Energy, with $465 million from its Advanced Technology Vehicles Manufacturing Loan Program.
Also, management’s decision to launch with a high-priced niche product—the same model used by the electronics industry—and then grow by driving costs down and targeting larger markets—has proven smart. Hopefully, they’ll make many more smart choices in the years to come.
But it’s important to remember that the stock is not the company. Even if the company does well, the stock may not.
The ideal investment, in my book, is an unheralded company whose products are in increasing demand, whose profit margins are large, and whose public perception grows as its business succeeds.
The risks of investing in Tesla today are that the company is already well-known, and well-thought-of, thanks to its A-list connections, and that increasing competition may make the road ahead bumpier than anticipated.
If I had to invest in a car company, I’d invest in the one with the strongest chart. That’s Ford (F), which broke out to recent highs on Thursday and Friday after a great earnings report and is the cheapest of the bunch.
These car guys just lie and lie.. Chrysler and GM said “Oh everything will be rosy if you just give us billions in bailout and now we know they fully knew they were going to go bankrupt, they were just hyping it up in order to grab some more cash, Tesla is the same but more. So let me get this right, the Tesla head guy paid GQ magazine to write an article about how arrogant he is and ditched his smart wife and left her with 5 kids for a teenie bopper that he was cheating with. He hires tons of escorts that blog about him afterwards. They announced a battery deal to raise their valuation when they really only signed a generic MOU.
They have multiple lawsuits against them by other companies and the founder. They may have a car that causes cancer from battery EMF. They have created a pool of past staff that write endless blogs about how bad they are. They raised prices on customers who had already paid because they had no idea how to build a car. They lied to the City of San Jose about their factory plans. They applied for their only source of funds from the federal ATVM loan without even reading the rules that told them in advance they should never try to build a factory and is trying to sell an insanely expensive car in a depression while every investor has deeply reviewed them and turned them down and Musk won’t even put his money in (of which he has hundreds of millions) and all of their technology has now been superseded by Fisker, Bright and others with cars that do more for 2/3rds less money. They only got their ATVM money because the two local guys from the DOE big accounting consultancy knew the Tesla people. Tesla employees are so ready to jump ship that Musk spies on them with fake internal email. The head executive there put shills inside of other competing electric car companies to sabotage their funding and technology efforts and screwed up Aptera, Zap, and others. So:
Marty, the founder of Tesla, has said that Musk is a “liar”, “cheat”, “manipulator” and has “no idea what he is doing”
Musk abandoned his wife and kids for a teeny bopper actress and cheated on his marriage vows
Musk blew tens of millions of dollars on wasted engineering and office fluff that has never been, and never will be, used in the car and that has been proved to be wrong by the new engineering staff.
Tesla has sent a pitch letter to almost every VC on Earth and not a single one of them will invest in Tesla because their investigations in due diligence showed the company to be so poorly managed and to have one of the worst debt and financial structures in industry.
Musk had his PR liaison pay GQ magazine to write an article about him about what a stud muffin he was so he could get more dates.
The company has increasing numbers of lawsuits against them and most of those are for ethics issues.
The company needs to sell 1000 cars per day to even come within a hair of meeting their investor, financial and operational costs. They are barely within 5% of that figure.
Now that so many people have quit or left GM , they have revealed that the EV1 (Who killed the electric car) was recalled and crushed because the battery pack was shown to cause cancer. When Musk was told the Tesla battery pack could also cause cancer, he told the engineers to “not dwell on non-issues”.
Tesla conned the city of San Jose and other politicians to write letters for their DOE loan knowing full well they were never going to put a factory in San Jose because it was too expensive to ever do that.
Tesla applied for the DOE loaned even though they do not have the viability or debt ratio to qualify. Tesla has worse financials than Chrysler.
Fisker, Shelby, Bright and dozens of other companies now offer more EV, faster EV, more features in an EV for less money, so there is no reason to buy a Tesla now.
No customer is going to install a 220V or 440 V extra plug on their house and pay for that and the extra energy in any volume.
Musk spied on his staff unethically and created a work environment where nobody cares about the company or the car so the quality is in the hole.
Darryl Sir, Marty the founder, and hosts of famous people have left and blogged or tattled at tech parties on the extreme ills of Musk.
Musk spends almost 400K per month on PR services to exploit his name instead of his company brand.
Tesla changed the prices after customers bought cars because they still are too screwed up to figure out how much their only product costs. If they can’t figure out the cost, then they can’t figure out the engineering so expect a wheel to fly off at 70MPH. Look at how many Tesla’s have already been wrecked. Many times more than Fiskers.
Tesla has wasted so much money that they can never make money so that now Musk funds the company from his PayPal money but it is running out.
Musk’s ex wife does not want to make direct trouble in order to not screw up the alimony but she writes on blogs as “Nancy” or “Ellie” to reveal the true inside stuff she knows about Musk and it isn’t good.
If you buy a Tesla you must REQUIRE an audited copy of their financials, signed, if you want to protect your money.