Friday, November 11, 2022

600 billion ...

 In A self-inflicted CF,  yours truly complimented Musk on his engineering skills while at the same time, commenting, with vigor, on his disastrous purchase of Twitter, a truly bad investment of historical porportions as the man knows not his limitations in any way shape or fashion. Seems I'm not alone on this take as seen by Barry Gander's excellent article seen below.

Tesla’s stock has just dropped almost 50% to $193/share year-to-date.

Much of the drop comes from Musk’s purchase of Twitter…seen as a bad move. And now Musk wants to put Twitter behind a paywall.

Technical analyst John Roque of 22V Research says that Tesla’s $100/share is possible if things don’t start improving for the auto maker. If it reaches the $100 mark, Tesla’s market value will have fallen from a high of $1.2-trillion in January 2022 to $300-million. At its current price of $200/share, it is worth $600-billion. So even if it doesn’t drop to $100, it has lost $600-billion in less than a year.

For reference, Ford’s stock price only dropped 6% — so the problem is not in the auto market.

It gets better ...

I have nothing against Elon Musk and hope he succeeds, but let’s get real. Very few of his operations make business sense. If it weren’t for the fantasies of the stock market, he would still be a South African rich guy with pockets full of emeralds. Not a bad gig, but not the razzle-dazzle the markets are agog over.

Here’s how unhinged the investment mind-set is: Consider the business logic of the Tesla operation. The stock market puts Tesla’s value at $700-billion (down from $900-billion a month ago). This means that investors need a return of $70-billion a year for the next ten years. At a current profit margin of 15% — not sustainable, BTW, now that the other companies are in the EV game — Tesla requires sales of $480-billion. To get that, Tesla has to sell 10 million cars a year. The entire global passenger vehicle market sold under 75 million units in 2021. The largest firm, Toyota, has about a 10% market share (7.5-million vehicles). Tesla needs to sell more cars than Toyota to be worth the stock market value. BTW, currently it produces less than 1-million cars/year.

What were investors thinking, that they could get a return ten times higher than reality could deliver?

Factoids ...

Tesla in fact would not have got off the ground at all without help from the government: a $465 million Energy Department loan issued in 2010. The funds were double the amount that Tesla raised when it went public that year. This drew criticism from Republican 1.0 politicians like Mitt Romney, who called the company a “loser”. Investor Jim Chanos called Tesla a “walking insolvency”.

In the book Ludicrous — The Unvarnished Story of Tesla Motors, by Edward Niedermeyer, he notes that:

- Tesla can’t make affordable cars;

- Telsa’s ‘Full Self Drive’ function does not work;

- Tesla is not an automotive story, it’s a celebrity story

He sums it up pretty harshly, concluding that Tesla is a confidence game.

In closing, a question to ask the rich ...

Socialism, BTW, obviously does not apply to businesses. However…If you are a taxpayer making (say) $50,000 a year, then $36 of your taxes goes to support food stamps, and $4,000 goes to corporate subsidies. Which group is the socialist group? Which is really living on “economic rent”?

But you would be comforted, no doubt, by the knowledge that you were at least paying taxes and doing your part. In 2007, Jeff Bezos, then a multibillionaire and now among the world’s richest men, did not pay a penny in federal income taxes. He achieved the feat again in 2011. In 2018, Elon Musk, the second-richest person in the world, also paid no federal income taxes. Michael Bloomberg managed to do the same in recent years. Billionaire investor Carl Icahn did it twice. George Soros paid no federal income tax three years in a row.

These guys could end global hunger, eradicate homelessness, and end malaria, and still have $20-Trillion to take home and split among themselves. You know, in case the polo ponies needed polishing. They could give away $139-Trillion and still be worth as much as they were in 2000.

But Musk is a Republican, so it’s OK.

But it's not ok and, as stated before ...

The purchase of Twitter is one reason for the decline of Tesla’s value.

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