Whitney Tilson & Mark Spiegel discuss Tesla, Kase Learning seminar, 9/27/18
Overall SentimentBearishStrength: 95%
Overall Thesis
Whitney Tilson calls Mark Spiegel on the day SEC charges Musk over the $420 tweet. Mark puts 80% odds on Tesla bankruptcy filing in the next year and 90% odds the stock trades under $100 within a year.
Narratives
TSLATesla
Strongly BearishThe SEC just filed fraud charges against Musk over the $420 take-private tweet, no investment bank will raise capital for Tesla given billions in civil-lawsuit liability, Model 3 is a lemon with reliability 4x worse than the next-worst car, and the whole company is dependent on free money in a rising-rate environment. Death-spiral puts at $150 and $100, June 2020 $200 puts, and short common make up the position. Odds of bankruptcy filing in the next year: 80%+.
Key Arguments
- SEC fraud action against Musk + billions in civil lawsuits means no investment bank will raise capital for Tesla
- Board is liable under the $420-tweet lawsuits and may not have adequate D&O insurance
- Model 3 is a lemon — reliability 4x worse than the next-worst car, service centers already overwhelmed
- Whole nutty market is ending as rates climb; Tesla is 'completely dependent on free money in order to even exist'
- Plan A is fast bankruptcy from running out of money, Plan B is a busted growth story visible by early 2020 when competitor EVs hit showrooms
- Comparable: Valiant fell >90% after its initial 50% break — the best time to short valiant was AFTER the Philidor news, by analogy the best time to short Tesla may be right now
- Strategic buyout, if any, unlikely above $30/share — $10 extremely unlikely even in a buyout scenario
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