Some of Tesla’s biggest fans are worried Wall Street acted too hastily when it propelled the electric vehicle company past Ford to become the second most valuable automaker in the country.
Analysts are coming out of the woodwork warning the public and investors to take a sober position on the highly-touted Silicon Valley company. They are imploring market gurus to consider the company’s financials before giving Tesla CEO Elon Musk the keys to the entire auto market.
“They really need to deliver, and that has me concerned,” Dennis Pascual, a tech industry consultant who owns two Model S sedans, told The New York Times. “I’m bullish long term, but yes, I’m worried. I’m always worried about companies executing” their objectives.
He was referring to the company’s chronic inability to produce cars on deadline.
Another analyst mirrored Pascual’s concerns, adding that Tesla investors could get caught with their pants down if they’re not careful.
It is “totally inexplicable” that Tesla and GM are comparatively valued, Michael Jackson, the CEO of AutoNation, said Tuesday after Wall Street investors pushed the company’s value above Ford.
One Tesla investor has taken an even more dire stance.
Pete Cordaro, the owner of a vending-machine company, drives a 2015 Model S but thinks the company’s poor financial footing could mean ruin.
“I think there’s too much enthusiasm in the market like with any growth company,” he said to the Times. “I think it’s a bubble.”
Jackson, for his part, also believes Tesla might work out for investors, or it could become “one of the great Ponzi schemes of all time.”
His comments are not unprecedented.
Devonshire Research Group, a tech investment group, for instance, warned last year that Tesla, because of the exotic tools it uses to hide its financial stability, is “operationally vulnerable to setbacks.” It suggested that there is an 80 percent probability that Tesla’s Model 3 will tumble into a fiery heap because of the company’s Ponzi scheme-like business operation.
The nuts and bolts of Tesla’s financial base, according to Devonshire, is a type of pyramid scheme called Future-Earning Pyramidal Financing (FEPF) wherein the company raises capital to cover future losses rather than future profitable returns.
“When performed maliciously with intent to defraud,” the report noted, “FEPF forms the dynamic underlying illegal Ponzi, pyramid” schemes.
Tesla has reported losses in each of the past five years, and must invest heavily to achieve Elon Musk’s goal. It had $3.4 billion in cash at the end of 2016, but some $7 billion in debt after its SolarCity acquisition. It must continue to make debt payments, so any problems with the Model 3 production could mean catastrophe for investors and Tesla.
Tesla’s SolarCity merger complexity, meanwhile, played a part in Goldman Sachs’ recent decision to downgrade the company’s position. Prior to the merger, auto analysts covered the electric vehicle maker, but now they’re being asked to fold a solar panel provider into their market forecasts.
Neither of these industries are likely to have a logical meeting point upon which to make an accurate forecast, Goldman Sachs analyst David Tamberrino said in February. Mixed in will be the energy-storage and battery-manufacturing components of the company.
Other investors believe the hoopla is absurd and a result of the coolness factor.
“It’s ridiculous,” Philip Davis, a co-founder of PSW Investments, told The Daily Caller News Foundation earlier this month after Tesla stepped in front of Ford to become the second most valuable auto company in the country. He believes many investors don’t care a wit about whether Musk can produce a viable product.
GM and Ford make more cars in one week than Tesla has in a year – to pretend that they are comparable in any way is “crazy,” he added. Ford and GM produced more than 1 million vehicles in 2016, while Tesla sold only 80,000.
The company accepted $1,000 deposits in 2016 for the pre-order of more than 400,000 Model 3s, which have yet to be produced.
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