Tesla's Blowout Earnings, Deepening Criminal Probe, and Same Old Musk

Tesla posted a surprise profit Wednesday. On Friday, the WSJ Noted a Deepening Criminal Probe. Musk is Still Musk.

Tesla Roundup

On Wednesday , Tesla shares ripped higher on a Surprise Third-Quarter Profit that Beat Wall Street Expectations.

The company's earnings report, released after the markets closed Wednesday, also showed better-than expected car sales and a faster timeline on its Model 3 production. The electric car maker said its midsize Model 3 sedan, which it hopes to produce on mass scale, was the best-selling car in the U.S. when measured by revenue and the fifth best-selling car in terms of volume.

Tesla posted net income of $311.5 million, or $1.75 per share, compared with a loss of $619.4 million, or $3.70 per share, a year ago. Revenue surged 70.5 percent from $4 billion from June and more than doubled from a year ago.

After one-time adjustments, Tesla earned $516 million during the quarter. It was Tesla's third profitable quarter and compares with an adjusted loss of $520 million during the same period last year.

The bears on Twitter were mostly in disbelief, screaming fraud. They failed to make a convincing case.

The critical issue is whether profits, sales, and deliveries can be sustained. I doubt it.

Deepening Criminal Investigation

Those waiting for more fireworks did not have to wait long. On Friday the Wall Street Journal reported Tesla Faces Deepening Criminal Probe Over Whether It Misstated Production Figures.

Federal Bureau of Investigation agents are examining whether Tesla misstated information about production of its Model 3 sedans and misled investors about the company’s business going back to early 2017, people familiar with the matter say.

Action in the criminal investigation, headed by the U.S. attorney’s office in San Francisco, has intensified in recent weeks after the Securities and Exchange Commission settled separate civil charges with Tesla and Chief Executive Officer Elon Musk, the people said.

Tesla had disclosed on Sept. 18 that it had received a request for documents from the Justice Department, 10 days before the company and Mr. Musk struck a settlement with the SEC over civil charges in a separate case involving controversial tweets from Mr. Musk.

But it hasn’t been previously reported that the Justice Department is focusing on Tesla’s Model 3 production issues dating to early last year and that the criminal securities-fraud probe is intensifying.

Now the FBI is comparing the company’s statements with its production capability during 2017. Authorities are homing in on whether the company made projections about its Model 3 production knowing it would be impossible to meet the goals, people close to the situation say.

There is little doubt that Musk is a blowhard liar, but I rather doubt Tesla would put anything fraudulent into its latest earnings statement.

There may be all kinds of accounting gimmicks, but I suspect they are legal ones.

"Fine Worth It"

Late Friday, Elon Musk made a claim that the Tweet Costing him a $20 Million SEC Fine was "Worth It".

It’s arguably unfathomable that any human being slapped with a $20 million fine for a bad tweet would ever consider returning to the platform, much less continue to fire off word salad at all hours of the day and night. In the face of any logical explanation, however, one such man seemingly continues to insist that he is not owned.

Tweeting Friday evening in a thread about “criticism” and “like” ratios on Twitter’s platform, Tesla CEO Elon Musk appeared to claim that his disastrous “420” tweet in August about taking the electric car company private was “worth” the tens of millions of dollars in fines regulators levied on him in response.

Why? The likes.

Musk Will Be Musk

That Tweet shows that Musk has not changed, and probably never will.

Graveyard

I had two rounds go up in smoke.

Mike "Mish" Shedlock

Comments (13)
No. 1-8
2banana
2banana

Like Enron and GE?


"There may be all kinds of accounting gimmicks, but I suspect they are legal ones."

Ted R
Ted R

He and his ego have one foot in prison already.

Wagner_4
Wagner_4

Thesis pioneered by Bob Lutz was that Tesla was losing money on each car sold. Tesla just sold record amount of cars and turned profit. So wasn't Tesla supposed to book record loss in Q3 according to that logic?

Hint: Bob Lutz thesis was wrong because he forgot to subtract Automotive CapEx, and R&D, other Fixed costs, non-Automotive costs when calculating profit margins per car.

Now the next thesis is that demand for Model 3 will disappear in Q4.

Hint: This thesis will be soon disproved because

  1. Model 3 Total Cost of Owenership is way below BMW 3 series, Audi A4, Lexus IS, Mercedes C class type-cars. It is almost no brainer to buy Model 3 instead of any of those other cars (unless you have some personal biases against Tesla).

  2. Not to mention that Model 3 TCO also looks good when compared to cheaper cars like Toyota Camry where potential buyer has to "pony up" only few thousands more or simply drive car for 10 years to reach "TCO breakeven" point.

  3. And world Population is 7.6 Billion. US and Canada is only 0.36B. This means that 7.24Billion of world population can't buy Model 3 today even if they wanted to.

  4. There are plenty of people in the US who are postponing their Model 3 purchase because they want their current car leases to end.

.Tom
.Tom

Everyone I know who owns a Tesla loves their car. They keep talking to me about it, it’s actually Annoying. However no other car company can produce cars that make people so frantic about their products. For that reason alone I would not bet against Tesla. They have more brand ambassadors then any other car companies. It’s crazy.... especially for « apprent’y » suck a crappy product.

JL1
JL1

There were previously reports that there were lots full of Tesla's that had supposedly something wrong with them and that fact and this earnings beat got me thinking:

1. Was part of these good production figures cars made before which were just fixed so they were sellable?

2. Was part of the profits the fact that the materials for those cars sitting on lots had already been accounted for in other quarters so when they were fixed (likely low cost) this made their sales almost 100% profit from accounting perspective?

If both answers are yes then it means this earnings beat was likely engineered by Musk to goose the Tesla stock and make it possible Tesla could pay debt coming due with Tesla stock since Tesla does NOT have the cash to pay the debt coming due with cash.

Six000mileyear
Six000mileyear

Fortunately NASA follows major projects step-by-step, so I feel much better about astronauts launching in Space-X rockets. Unfortunately Tesla has no forced discipline, only after the statement investigations.

LawrenceBird
LawrenceBird

Funny how their payables went up the same amount as the cash balance. Nothing to see there, right?