Is Nikola a fraud?

Most of you probably did see the report from Hindenburg Research which has detailed evidence about the Nikola company being a complete fraud.

The report was published a few days ago; the stock suffered (but that was already the case before the report being made public). I did cover the Nikola stock on the blog saying it will go to 0.

On the report

We have gathered extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs—detailing dozens of false statements by Nikola Founder Trevor Milton. We have never seen this level of deception at a public company, especially of this size.

What do you think? Is that report true or the guys who did publish it are talking their book (meaning they are short the stock and want it to go down)?

I dont know but I am convinced Nikola will go bust; I mean there is no product to show yet however they are valued 12$ billions. Common! When will this crazy joke stop? And btw, it is not only Nikola, but plenty of companies these days including our darling TESLA.

Regarding fraud, I point towards another famous case: Theranos. That company stated that by using a very small amount of blood, it can perform lots of blood tests very rapidly using proprietary technology. The company was valued almost 9$ billions. In the end, everything proved to be a fraud; the technology was not there and the money dissapeared. Theronos CEO was Elisabeth Holmes; she faces charges for fraud and conspiracy to commit fraud. In her defense, this so called business woman is defending by advancing mental disease so that she can escape being convicted.

As Jim Chanos puts it, today we are in the golden age of fraud.

Chanos’s hedge fund manager Kynikos Associates is named after the ancient Greek word for “cynic”. His pitch is that he can identify corporate disasters-in-the-making. The New York-based outfit employs 20 people and has $1.5bn in assets under management. Chanos also teaches a course on the history of financial fraud (“how to detect it, not how to commit it”, he quips) at Yale University, his alma mater. The syllabus stretches back to the 17th century. Today, he says, “we are in the golden age of fraud”.

Thanks to whom? I'll let you tell me...

 

Elon compensation will impact TESLA accounting negatively

You know the big boss is a rich guy, dont you?

He is in top 10 of bilionaires of the planet thanks to you my friend; yes, you did speculate with his company stock and because he did negociate the biggest bonus on WallStreet ever with his board, he is very rich thanks to the stock price levels. For more, check here.

Now that all sounds very cool (for Elon), but whats the story with the TESLA books? Well, the package is quite large; and TESLA must pay for it.

In 2018, Tesla awarded Mr. Musk a pay package which includes stock options for more than 20 million shares that vest in 12 tranches.

 

The first such tranche paid out in May as Tesla reached and sustained $100 billion in market value, according to a securities filing. The company awarded Mr. Musk shares worth nearly $800 million at the time. Tesla stock has doubled since then, and it is highly likely that other tranches will vest this quarter, which would net Mr. Musk billions more.

Now what?

However Tesla decides to treat that in its pro forma results, those option grants need to be expensed according to generally accepted accounting principles. 

For instance, the company recorded an expense of $72 million in the fourth quarter of 2019. Tesla recorded $347 million in stock-based compensation expense in the most recent quarter, which was an increase from past periods but still low enough for the company to churn out a profit according to GAAP.

Any expenses not already booked are recognized as a tranche vests, the filing says. Back then, Tesla's market value was $145 billion. As of Thursday, its market value was around $350 billion, having reached as high as $463 billion in August.

That new expense threatens to put Tesla's streak of four consecutive quarters of GAAP profits in jeopardy. Over those four quarters, Tesla has averaged quarterly net profit of about $70 million.

A third-quarter net loss of just $226 million would put Tesla in the red over the past four quarters. Given the size of the options awards and the recent gains in Tesla's share price, a billion-dollar quarterly compensation expense is within the realm of possibility.

Source: WSJ

OK, so what's about?

Well, basically in the 3rd quarter the package TESLA must pay to Elon is so large it could impact its 3rd quarter profit. How large is the package? Maybe 1$ billion.

Are you happy with that? Not that it matters...

You funny boy, you aint smoking anymore?

Hello you funny speculator!

I hope you did sell your TESLA crap a few days ago and you did not get caught in the drawdown!

The stock lost 30% in a few days; I know that thing is powerful and it will go to 15.000$ a share soon! But in the meantime it suffers a bit.

So the question is what are you doing now? Why not buying you fan boy? You're a true beliver right? That TESLA company is like no other; it will grow in China and even on Mars, right?

Common, you can do better than that! Pump that crap back up!

TESLA stock NOT added to S&P 500 list

Did you bet TESLA will be added to S&P 500? I have news for you: it wont!

Source: FX Empire

What is important is the reason behind not being added. There is speculation around accounting gimmicks

The decision will have an immediate impact on buying power because SP-500 membership would have forced tracking funds to buy more than 120 million shares of Tesla stock. Index components must have a market cap of more than $8.2 billion and report four profitable quarters in a row, according to standard accounting principles. The company has come under persistent criticism from skeptics who insist that profits rely on accounting tricks and these alleged practices may have been factored into the exclusion.

It aint pretty, right?

What does it mean for speculators? Well, these folks look only their screen and check price candles. So probably not much (until they panic and poo in their pants).

What do you think about it? 

The tech bubble will burst. By definition.

To support the previous article on TESLA as the most dangerous stock on Wall Street, here is a hedge fund guy, way more intelling and experienced than me and you, saying basically the same thing: we have a bubble, and by definition, it will implode.

But you my friend, as a speculator, dont care about this right? What you want to know if when and the path we take to go there. Will it burst tomorrow? Will we go up another 1000% then burst? Well, unfortunately I dont have an answer to that.

We are clearly seeing a correction, Arnott said last week, pointing to the FANG+ stocks [Facebook, Amazon, Netflix, Google parent Alphabet and Microsoft among others] taking a beating recently.

It’s a bubble. Bubbles burst. The FANMAG bubble will be no exception.

To put things in perspective, here is how crazy the bubble on Apple stock is going these days.

At its recent highs, Apple was worth more than the entire FTSE index. In other words, the one stock was worth more than the entire publicly traded British economy.

It’s a fantastic company with great products and superb management. But, it will not produce more profits for its shareholders in the decades ahead than the entire London stock exchange

Maybe these things dont matter; until they will!

 

TESLA - the most dangerous stock on WallStreet

Its not because the TESLA cars are ugly or dangerous or whatever (to be honest, some models are not that pretty...)

No; its because of stupid valuations and the disconnect between the fundamentals and the share price. That TESLA is way more valued than Toyota, the most efficient car maker on the planet selling 30x more cars than TESLA is no secret for you. We did talk about it here several times.

See here and here.

The current stock price implies a market share between 40% and (hold your breath!) 110%. That means TESLA will sell not only to humans but also to people from Mars planet (which to be honest they already did start doing).

Allright, so at what level, based on current fundamentels, should the stock be? Probably 10x lower than current if we believe this analyst. Remember, that's a good valuation for TESLA; in huge bubbles like the one we currently have (which can baloon even further to be clear!), when prices correct they tend to go under fair value. So it is not impossible to find TESLA stock to much lower prices below 50$ per share.

Whatever best-case scenario you want to paint for what Tesla’s going to do –  whether they’re going to produce 30 million cars within the next 10 years, and get in the insurance business and have the same high margins as Toyota, the most efficient car company with scale of all-time – even if you do believe all that is true, the stock price is still implying that profits are going to be even bigger than that

We think this is a big, big – one of the biggest of all time – houses of cards that’s getting ready to fold.

I think around a 10th of what it is is probably appropriate if you look at, you know, kind of a reasonable level of profits. Tesla doesn’t rank in the top 10 in market share or car sales in Europe for EVs and that’s because the laws changed in Europe that have strongly incentivized the incumbent manufacturers to crank up hybrids and electric vehicles. The same is coming in the United States. I think realistically we’re talking about something closer to $50, not $500, as a real value.

There you have it; whether you believe or not, I dont care.

TESLA stock is a monstrous bubble that will implode. I dont know when (1 month, 3 years or 3 decades from now, make your guess).

There is a kind word for Elon in the article however 😁 

Trainer does credit Tesla CEO Elon Musk and the company for accelerating the trend and making electric vehicles more mainstream.

Good luck you speculators!

 

 

 

The whale pumping tech stocks in August revealed

Maybe its no secret for you that last weeks were quite impressing in how much stocks (and in particular tech stocks - including TESLA) did go up. And they did it without pause, defying fundamentals - but that its no surprise to you - but also speculators.

Well, the large whale behind this pump scheme has been unmasked by FinancialTimes. It is a japanese bank called SOFTBANK.

SoftBank is the “Nasdaq whale” that has bought billions of dollars’ worth of US equity derivatives in a series of trades that stoked the fevered rally in big tech stocks before a sharp pullback on Thursday and Friday, according to people familiar with the matter. The Japanese conglomerate had been snapping up options in tech stocks during the past month in huge amounts, fuelling the largest ever trading volumes in contracts linked to individual companies, these people said. One banker described it as a “dangerous” bet. The aggressive move into the options market marks a new chapter for the investment powerhouse, which in recent years has made huge bets on privately held technology start-ups through its $100bn Vision Fund. After the coronavirus market tumult hit those bets, the company established an asset management unit for public investments using capital contributed by its founder, Masayoshi Son.

Ok, now what? Will they dump now they have been unmasked? The last 2 trading days have been quite volatile; TESLA stock did lost about 30% from its peak at a moment. That's ok as 60% is still left to go back to earth from hyperloop (or whatever that crap technology is).

We dont know of course what Softbank will do but by any measures, they did try manipulating stocks they own via derivaties (call options). What's sad about these stories is the day when these schemes are revealed, the federals intervene to help these idiot risk takers and save them. Either with your children money of by debasing. That's how the markets function these days (unfortunately).

The surge in purchases of call options — derivatives that give the user the right to buy a stock at a pre-agreed price — has been the talk of Wall Street, as the sheer size of the trades appears to have exacerbated a “melt-up” in many big technology stocks over the past few months. In August alone, Tesla’s share price shot up 74 per cent, while Apple gained 21 per cent, Google’s parent Alphabet rose 10 per cent and Amazon 9 per cent.

And of course TESLA stock was on SOFTBANK's buying list.

Nothing new under the sun; business as usual...