The following commentary on Tesla (NASDAQ:TSLA) is an excerpt from my latest Short Seller’s Journal—I’ve hit several home runs over the last year, including DraftKings (NASDAQ:DKNG), Robinhood Markets (NASDAQ:HOOD), Zillow Group (NASDAQ:Z), and Direxion Daily Homebuilders & Supplies Bull (NYSE:NAIL). There’s still a lot of money to be had on the short side before the stock bubble fully deflates…
Another interesting week for Tesla. It’s starting to feel like the world around Tesla was unraveling, Musk inclusive. It was revealed in a footnote disclosure in Tesla’s 10-K filed last week that the SEC issued a subpoena on Nov. 16, 2021, seeking information about Tesla’s compliance with the settlement that was reached in 2019 over Musk’s tweets—specifically the infamous "funding secured" tweet. Neither Tesla nor the SEC provided information about what might have prompted the subpoena.
In response to this, both Musk and Tesla accused the SEC of "unrelenting" harassment. Quite frankly, Musk is fortunate that, for whatever reason (likely pay offs), the SEC doesn’t open up a thorough investigation into Tesla’s accounting. It will likely wait until Tesla hits the wall, like the SEC did with Enron (it was known among those who dig for the truth that Enron was committing fraud many months before it filed for bankruptcy—I was short the stock at the time).
It was also reported that the NHTSA, after receiving 354 complaints about Tesla’s well-documented "phantom braking" problem, has opened up an investigation to determine the "scope and severity of the potential problem and to fully assess the potential safety-related issues." The probe covers approximately 416,000 Model 3s and Ys. This is the second ongoing investigation of TSLA by the NHTSA.
Whether or not Musk has sprinkled enough cash around the upper echelons of the NHTSA to deflect potential regulatory crackdowns, there’s been so many complaints and fatal events involving Tesla’s auto-pilot that the agency at the very least has to give the appearance of investigating the Company. That in and of itself is a PR problem for Musk.
In addition, Insideevs.com, which has been a Tesla cheerleader for a long time, admitted that the Semi won’t happen in 2022. Recall Musk originally said in 2017 that the Semi would go into production in 2019. That was later pushed to 2021. Then 2022. Car and Driver reported the Cybertruck, Roadster, and Semi will not happen in 2022. Insideevs then finally capitulated, though it still reported that PepsiCo (NASDAQ:PEP) is expecting a few of the Semis the Company ordered by the end of 2022. I hope the PepsiCO CEO isn’t holding his breath waiting…
With respect to Tesla losing market share, Consumer Reports designated the Ford Motor Company's (NYSE:F) Mach-E as the magazine’s "Top Pick" for an EV in 2022. Among the attributes that set apart the Mach-E from the Tesla were reliability, quality control, and the "hands free" driving technology. Overall Tesla dropped from seven to 23rd place in CR’s ranking of 32 major auto brands. It’s the poorest showing in the seven years that Tesla has been included in the Top Picks issue.
Adding fuel to the nascent Tesla dumpster fire, India has declared that it will not award Tesla any special concessions because of Tesla’s refusal to manufacture its vehicles locally. Note that Tesla will soon have a demand problem for its Shanghai vehicles (having exported the majority of January’s production to the EU) and was looking to export Shanghai production to India.
Worse, the German Government appears to be somewhat hesitant to issue Tesla the required permits to start production at the Gruenheide “Gigglefactory.” Last year Musk horrified the local community with his flippant, if not hubristic, remarks about the water supply.
I believe that the walls are starting to close in on Tesla and Musk. I think institutional investors are reaching the same conclusion, as the latest data from the NASDAQ shows that institutional holdings are down to 40% as of the end of 2021 from as high as 76% in Q1 2018.
A high percentage of that 40% represents shares held by passive index funds. TSLA’s shares have underperformed both the SPX and the NASDAQ since the beginning of November 2021. I expect this under-performance to accelerate this year.
In my opinion, based on extensive analysis and observing the Tesla saga for over four years, the share price is headed below $100 sometime within the next 12-24 months.
Musk horrifies the local Gruenheide community:
