Tesla’s Accounting | The Acquirer's Multiple®

During his recent interview on The Acquirers Podcast with Tobias, Jamie Powell, reporter at FT Alphaville discussed Tesla’s Accounting. Here’s an excerpt from the interview:

Jamie: I think that was a good one. I’ve also been following Tesla for a long time but not so much on the new side of it although the new side of it is super fun but more on the accounts, like what they do in their accounts, how come this business– last quarter, how did Tesla’s margins go up 300 basis points while shipping costs and raw material costs were going up exponentially?

Tobias: How did that happen?

Jamie: I don’t know, but it’s worth asking the question. The good thing is an Alphaville story might just be like, “How did this happen?” That is just all. You ask anyone, any auto analyst, auto margins shouldn’t move that much quarter on quarter. For Tesla, they move a lot. Yeah, you can ask the question as well, which is one of the good things about writing a blog versus– That’s not a news story. In a news story, there’s Tesla reported better gross margins than expected, which helped them beat their earnings per share. But Alphaville story will be like, “Well, how did that happen?” I’m still skeptical of the business, but obviously, it’s been completely ruinous for those who have had money on that direction. But it’s a weird one though.

I always think that story is still ongoing, and it’s not finished. It’s endlessly fascinating. We know now in 2017 that the company was two weeks away from going bankrupt. No one was actually really wrong about that. It’s just that there was no [unintelligible [00:46:36] about that at the time, but Elon was going around having dinner saying that. It’s a fascinating one, and obviously, you get a lot of fan mail about that company, which is always quite fun as well.

Tobias: It’s a very polarizing company.

Jamie: Yeah.

Tobias: With people, just friends and family who have put a lot of money into it, and I understand their perspective on it but saving the world, it’s an EV all of this and then, Elon’s a visionary and all of us sort of things, I just have difficulty reconciling the account from quarter to quarter that’s sort of my stumbling block. But I have gone back to collapse from the 80s and looked at journalists interviewing the people who were perpetrating the fraud at the time and listened to some of the questions that they have asked. It’s interesting that they might ask 10 questions, and 6 or 7 might be just, what’s your relationship to Pinochet in Chile? Yeah, he’s a bad guy, and that’s a bad thing happening.

But that’s not what’s going to ultimately destroy this company. It’s the payments between the related party transactions and debt that’s going to sink this company and the fact that it’s a fraud that’s being perpetrated. When you’re on these stories where the powerful people who are bad dudes and they’re interested in protecting their fraud, they want that to continue going on, they don’t want to get caught.

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