Submitted by Gordon Johnson of Vertical Group
TSLA is effectively “robbing Peter to pay Paul”, in our view, and it’s being positioned in the media as “Delivery Hell” because that’s what Elon Musk is calling it.
TSLA has been doing this for a while, but it seems to be picking up in 3Q18 (i.e., TSLA is filling new orders and then keeping older ones pushed out; i.e., if you are pre June 30, 2018 you’re still waiting). Why is no one in the media covering this? Why aren’t the experts on TV talking about this?
HOW DOES IT WORK? In our opinion, what TSLA may be doing by saying they are in “delivery hell” is, in an attempt to generate a lot of cash in 3Q18, taking a payment from “customer a” (in the form of a deposit for a car and/or configuration deposit with a promise to deliver a car by a certain date), then selling what “customer a” paid for to “customer b” (who is a new buyer), thus double booking cash – this trick is done by delaying the date you promised “customer a” they’d get their car in order to originally get their deposit, thus allowing you to temporarily boost your cash balance by selling the same thing (i.e., the rights to a car) twice.
In turn, you delay what you promised “customer a”, and call it “delivery hell” and have the celebrity CEO promise he’s fixing it. Another way of saying… we’re using accounting chicanery to double-book cash on car sales to boost free-cash-flow in 3Q18 to get our stock price higher (again, this is our opinion of what’s happening).
Do we know this for certain? Nope. But we've spent a career looking at, and undressing, accounting chicanery (SunTech; SunEdison; Yingli; Tainergy; etc.) and been to “the magic shows they put on”; we know how they hide a bunny in a hat and make a pile of liabilities look like a pile of cash.
Someone needs to ask TSLA these questions and/or investigate.