WASHINGTON, April 25, 2017 – For the better part of at least two years, I’ve more or less held my opinion and my pen in check when it comes to the absurd mythological and virtually fictional character of Elon Musk, tech god and miracle worker.
That’s because all Musk has done in recent memory is promote his disastrously money-losing Tesla Motor company (and its stock, symbol: TSLA) endlessly in an appeal to tech dreamers and greedy vulture capitalists alike. They keep feeding him money to keep his fairy tale alive.
Even more problematic, however, is that Tesla (and Musk) have been heavily subsidized for years by the American taxpayer, courtesy of Barack Obama’s asinine fantasy of a fossil fuel-free world that will surely begin for all of us tomorrow.
What do American taxpayers get for their continuing subsidies? Nothing at all. The beneficiaries are Musk, his phony reputation, and, oh yes, his wealthy, virtue signaling, mostly La-La Land customers who, BTW, get to purchase their dreamy, allegedly fossil fuel-free Tesla sportscars at a deep discount, again courtesy of U.S. taxpayer subsidies.
Making matters worse for his chimera company, Musk pulled a too-clever-by-half maneuver last year by folding his other major company, the money-hemorrhaging SolarCity solar paneling business, into Tesla, thus effectively covering SolarCity’s bankruptcy-level losses with Tesla’s never-ending taxpayer subsidies and dilutive capital raises.
We won’t even address the huge subsidy provided by the State of Nevada to lure Tesla’s (and Musk’s) new, white-elephant battery factory complex to an industrial park not far outside Reno.
As this chicanery has been going on, we have lately been subjected to new stories concerning Musk’s latest brainstorm, which, we are told, will somehow enhance human brainpower by uniting it with robots. That’s just great. Looks like America’s taxpayers will next be subsidizing another loony technology that promises to end up like a cross between the Terminator and the Matrix.
I seem to have been a lone Musk Denier for years. But today, it looks like I finally have some company in high places: namely, Bank of America Merrill Lynch analyst John Murphy (via CNBC), who’s actually bored into the numbers to quantify what I’ve long been complaining about on a socio-political level.
“Bank of America Merrill Lynch cut its price forecast on Tesla shares on Tuesday, saying the electric car maker’s ‘long-term viability’ was at risk because of the acquisition of SolarCity.
“The investment firm now believes the stock will be nearly cut in half over the next 12 months because ‘positive earnings and cash flow [are] now even more elusive’ in light of the combination.
“‘We believe the SolarCity acquisition introduces material risks to the longer-term viability of TSLA, while the recent capital raise only serves to further dilute potential shareholder value,’ research analyst John Murphy said in a note to investors. He has an underperform rating on the stock.
“Murphy sees Tesla shares falling to $165, a 46 percent drop from where the stock closed Monday at $308.03 a share….”
Yes, that’s right. Tesla is apparently worth more—much more—to investors now than the shares of Ford (F), General Motors (GM), or maybe even both put together. It’s like a bad joke.
Murphy would seem to agree, according to the cited CNBC report, providing even more damning analysis of Tesla-SolarCity, Elon Musk’s premier money-burning machine:
- The [SolarCity] acquisition should “exacerbate TSLA’s serious cash burn problem, at least in the near-term.” Similarly, Murphy anticipates “the SolarCity business burning cash through our forecast period.”
- The combined company likely depends heavily on the automotive business: 84 percent of total revenue and 97 percent of gross profit, he estimates.
- The “Model S may be experiencing a typical spike and burnout” and “without an all-new or next-generation Model S, we think TSLA could see Model S volumes fade, even if prices are lowered.”
- “Shareholders seem to come second” [italics mine] as Tesla pursues its mission of vertical energy integration because the company has raised capital every year since 2008, Murphy said.
“Those shareholders may eventually lose confidence in the stock: ‘While we recognize that TSLA is a growing top-line business, we think it is unlikely that investors would continue to supply the company with incremental low cost capital in perpetuity if investments fail to generate return.'”
That’s a pretty fair observation.
I could end up being hugely wrong about TSLA shares some day. The problem is, I think I’ll end up being right, and Murphy, at least, is the first analyst I’ve read who’s begun to express such a heretical belief on Wall Street. And he’s doing it with numbers and stats that don’t perpetuate the Myth of Elon Musk’s invincible genius.
We’d all be just as invincible if fat cats and America’s taxpayers kept sending us crates of money to spend on our most cherished fantasies.