Is Tesla the New Enron?

April 16, 2018 James Heinsman Company Spotlight

Photo of Elon Musk courtesy of
OnInnovation.

Some analysts are wondering if high-flying Tesla will end up being the huge disappointment Enron turned out to be: one of the biggest failures in Wall Street history.

Harris Kupperman of Praetorian Capital has been wondering out loud if Tesla is on its way to oblivion. Short-seller Jim Chanos said something similar about Tesla near the end of 2017. Kupperman has some graphic evidence to support his prediction, an overlay chart comparing Enron’s spectacular fall during the year after it hit its all-time share-price high of $90 on August 23, 2000, with Tesla’s stock’s behavior since its all-time high on September 18, 2017 of $385 per share and now.

A casual observer not looking carefully at the overlay graph might indeed think something spooky is going on, but a closer observation of the two graphs is not particularly convincing.

Here is what Elon Musk, Tesla’s fearless leader, Tweeted about what one worry-wort at the Economist stated, that Tesla will need to raise $2.5 billion to $3 billion this coming year.

“The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money,” was Musk’s response.

Kupperman was not persuaded by Musk’s assertion, however:

“He hasn’t hit on any target or deliverable with any sort of reliability for years now. Why should I believe him now?” he writes. “Remember in 2016 when he said they’d be profitable and didn’t need any more money? Or when they said that in 2017? He’ll probably be saying the same thing at the bankruptcy hearing.”

Musk supporters like Global Equities Research analyst Trip Chowdhry informed his clients a week ago that Tesla is a rock-solid investment:

“Betting against Elon Musk is not only insane but total stupidity — equivalent to committing a ‘career suicide.’”

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