Double, Double Turmoil And Trouble For Tesla

| About: Tesla Motors (TSLA)

Summary

Tesla has been caught in a veritable maelstrom of bad headlines this week.

Autopilot accidents and government probes, Musk's public denial of the severity of the failure of the technology, and the company's proposed merger with SolarCity add up to serious questions for investors in the beleaguered car maker.

What's your take on Tesla: disaster or opportunity?

There's been a flurry of headlines about Tesla (NASDAQ:TSLA) this week, the majority of them less than favorable. Of course, the big deal after hours yesterday was the Wall Street Journal report that the SEC is investigating Tesla in connection with a securities law violation that the company should have issued a disclosure to investors regarding May's autopilot-related crash. According to a Seeking Alpha report from earlier today, Tesla denies that any disclosure was necessary, however. Despite concerns about its autopilot technology, speculation on CEO Elon Musk's Secret Master Plan 2 and the proposed SolarCity (NASDAQ:SCTY) acquisition, which raises more questions about the future of both companies than it answers, Tesla shares were up slightly (0.03%) as of this writing.

There's no shortage of opinions and analysis on this highly controversial stock on Seeking Alpha, so we gathered the latest for you here:

On Cheddar TV today, we discussed the innovation angle for Tesla. In response to investors' question, "Why does Tesla need autopilot technology at all?" tech expert and writer Jack Smith from Mic.com says there's higher expectations for the company:

"... Tesla just doesn't have to be the tech-focused car company. They have to be the tech-focused car company in the age of everyone showing a much more vested interested in autopilot, self-driving... this is something everyone is playing with, regardless of whether or not they're Silicon Valley-focused...

... People are always going to be asking for the horror stories... self-driving cars a futuristic idea, so people are trained to imagine dystopia... it's horrifying. I think that speaks to a double standard for Tesla."

Click on the video below to hear more of Smith's commentary on Tesla.

What's more, longtime Tesla watcher and bear Paulo Santos spotlights the NHTSA's expanding probe into the company's autopilot technology and the safety of such technology in general, offers an explanation of what he deems "Tesla's big lie" about its safety, and details how the highway and traffic safety agency might catch the company in its own web of deception:

"Obviously, accident data collected and classified according to such criteria would be mind-bogglingly misleading. It is here, that NHTSA's widening of its autopilot probe can gain a lot of relevance. It can gain relevance because, if Tesla doesn't pull the wool over NHTSA's eyes, NHTSA can get data on the actual autopilot safety (to which it would still have to apply numerous statistical adjustments). How could Tesla still pull the wool over NHTSA's eyes? Well, by providing it data only for accidents where autopilot was still engaged right on impact. Let's hope NHTSA is more intelligent than that."

Montana Skeptic dissects the logistics of the SolarCity acquisition in his usual in-depth fashion. He consults with a few Seeking Alpha experts, including contributor UncleBrian Research, and concludes, despite Musk's assertions to the contrary, that the car tech giant will, in all likelihood, have to float SolarCity some sort of bridge loan before the acquisition process concludes. Skeptic then delves into Tesla's asset-based revolving loan agreement "ABL" situation to assess the feasibility of such a loan and its impact on the company. And therein lies the meat for investors - the lenders may play a bigger role in the acquisition's success than previously recognized, and they potentially hold a lot of power. It's quite a feast, and one those hungry for a multi-faceted examination of Tesla's proposed SolarCity purchase won't want to miss.

"Can Tesla borrow money from the ABL lenders and then advance it to SolarCity?

The answer, while not without doubt, is probably yes. Section 8.08 requires Tesla to use all loan advances only for working capital and general corporate purposes, but defines those corporate purposes broadly enough to include "Acquisitions" like Tesla's acquisition of SolarCity.

To defend a re-loan of ABL loan proceeds, Tesla would contend that the bridge loan is integral to its acquisition of SolarCity...

... So, given Tesla's history of burning through cash at a rapid clip, and having to return repeatedly to capital markets, can it be said that Tesla taking $500 million or so of available cash and dishing it off to a chronically money-losing Affiliate would materially adversely affect either Tesla's assets or Tesla's ability to repay its lenders?

I won't try to provide an answer here, but I feel reasonably confident the ABL lenders are now asking themselves that question."

Tesla short Orange Peel Investments believes the SEC probe is immaterial - unless the agency can prove Tesla is at fault for the autopilot crash and deliberately covered it up (a wild card at best in the author's opinion) - and won't have any ill, long-term, significant impact on the company or its stock. OPI says at worst, Tesla will likely end up settling for a hefty fine, but that doesn't change their bearish thesis on the electric car maker:

"Despite us not thinking this is the angle that fries the company, we are still markedly bearish on the company due to its horrendous financials. We may initiate a short position in Tesla at any point."

Finally in today's coverage, EnerTuition analyzes Musk's public commentary, which claims that the autopilot data is not statistically relevant - utter absurdity, in the author's opinion:

"It is mind boggling that the Chief Executive of a multibillion dollar auto company is claiming his company's products are safe with a data set that he admits that is not statistically significant. This, while admitting that the sufficiency of testing will be unknown even after the next six months.

In the interest of not misleading the customers and investors who believed the Company's claims about safety using statistically insignificant data, can Tesla put out a press release that more accurately depicts the technology's status?

We will not hold our breath waiting for Tesla to do the right thing here and will instead focus on what is wrong with this new set of tweets from Mr. Musk."

What's your take on all of this Tesla turmoil? Do the company's purported sheisty shenanigans have you running for the doors, or backing up the truck? Comment below and let us know your thoughts on the latest Tesla drama.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.