Let the Circus Muskimus begin?
The stock of Tesla (TSLA) is the ultimate battleground and each skirmish seems to revolve around the number of deliveries the company announces per order.The deliveries last night were light and the stock is getting hammered accordingly, because the reduced delivery-63,000 versus the 76,000 consensus, 30% fewer cars than the previous quarter -- will slash EBITDA forecast accordingly. How bad is it?
JPMorgan used the fabled "substantially worse than expected" tagline, meaning that it's a game changer.
But the company never takes anything lying down. It said it missed deliveries because of a "massive increase in deliveries in Europe and China, which at times exceeded 5x that of prior peak-delivery levels" plus there were "many challenges encountered for the first time."
These obstacles, the company says, are really to blame for the delivery shortfall.
But, more important, they call into question, with the stock down high-single-digits, how Elon Musk will be able to argue in Federal Court on Thursday that the February 19 tweet about making 500,00 cars in 2019 wasn't material.
Judging by how the stock is trading today on this weak delivery issue, you have to say that it is probably the most material issue facing the company. Therefore, the tweet should have been cleared as part of the process demanded by the SEC and acceded to by the company. It wasn't -- hence the contempt hearing to determine if he violated the settlement and what the punishment is.
Now there's always some twist when it comes to Musk. If you remember, his 7:15 p.m. ET tweet was followed up with an 11:41 tweet saying that he "meant to say annualized production rate at end of 2019 around 500,000 cars, ie 10k cars/week, deliveries still estimated to be about 400,000."
The release last night shaded that down to a range of 360,000 to 400,000 -- again explaining how pertinent even the correction was.
The bulls will say that "about" 400,000 is the same as 360,000 to 400,000. The 500,000 run rate, they will most likely say, means that everything Musk tweeted was still true.
I actually don't care what the ultimate number is. What is on the table is the incredible hubris that Musk has about how these numbers are consistent and therefore NOT material.
Judging by the numbers posted last night, they are both inconsistent and material.
Again, the bulls will say none of this even matters, it is all in the eye of the beholder.
I say yes, that may be true, but the only beholder that matters right now is Judge Nathan in the Southern District of Manhattan -- and if she beholds what I just wrote, Musk is in a whole lot of trouble today.