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A Low Risk Tesla Short Play: Buy Clean Energy Fuels

May 01, 2018 9:00 AM ETClean Energy Fuels Corp. (CLNE)TSLA72 Comments
Au Contraire profile picture
Au Contraire


  • Tesla boasts staggering losses and significant production issues, yet as a story stock with a cult-hero CEO it still enjoys sky-high valuation and expectations.
  • Bears have a compelling case but shorting TSLA is still a risky trade, with short interest at all-time highs and a stock that likes to move on any news.
  • Clean Energy's tiny little nat gas fueling business has been steadily improving for years and will be cash-flow positive this year, but investors have all but abandoned it.
  • On the surface the two companies have nothing to do with each other, but Tesla's recent Semi PR stunt and fears of an electric Class-8 future have recently pummeled CLNE.
  • TSLA production delays and potential capital raise in 2018 could potentially be a major catalyst for CLNE, making this unloved small-cap an unorthodox low-risk play for TSLA bears.

I'm being facetious, of course - you aren't really shorting Tesla (TSLA) by buying Clean Energy Fuels (NASDAQ:CLNE). But the two companies are linked via the Tesla Semi, a mythical beast whose demise would be part of broader problems, sending Tesla downward and would propel Clean Energy Fuels upward. This article is something of a thought exercise exploring the likelihood of this scenario, discussing the Semi itself, and touching on the bull case for CLNE - regardless of what might happen in the near term with Tesla.

A transformative year for Tesla

Tesla's story is nothing if not entertaining. And Elon Musk is truly a showman of the first water. I love the Tesla story, love the cars, and want the company to succeed. I have also previously been long the stock, exiting two years ago with a tidy profit and content to watch from the sidelines since then. Are we nearing the end-game, with battle lines now clearly drawn between Musk ("we'll be cash flow positive in Q3 with no need for a capital raise!") and detractors ("dude, you're high!")? Grab your popcorn folks, it is shaping up to be a transformative year for Tesla.

Musk of course has a long history of grand declarations on which the company fails to deliver (at least, on the initial timelines). Yet the cult of Elon has typically reacted to each delay with a boost in the stock price, anchoring on the forward-looking statements and seemingly attributing to him the power to will his glorious future into existence. And he has inarguably accomplished some amazing things. But...

Notorious examples of production misses and delays include the infamous May 2016 guidance that "100,000 to 200,000" Model 3s were going to be produced in the second half of 2017. Model 3 sales in that

This article was written by

Au Contraire profile picture
Long-term investor with a balanced portfolio of growth and value. I subscribe to the adage that to beat the market you must invest where the average investor does not. Therefore I tend to look for unloved or overlooked companies, attempt to understand whether the market might be wrong, and find an advantage.

Analyst’s Disclosure: I am/we are long CLNE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (72)

$2.00 may be the new base but it can rise as new rigs get on the road and prove themselves! Spread is wide and widening!
James Hanshaw profile picture
Useful article today https://seekingalpha.c...
James Hanshaw profile picture
The investment by Total in CLNE is a good move. Maybe it will be a full takeover one day. The plan for LNG trucks that goes with that is good too. I bought back into CLNE today at $2.03 and will stay for the back ride up.
InvestRite#1 profile picture
“Cummins Westport’s 2018 product line offers customers ultra low emissions with reliable performance,” said Bart van Aerle, President of Cummins Westport. “The ISX12N near-zero emissions natural gas engine provides truck and bus customers with an industry-leading alternative fuel option for demanding applications.”

All CWI engines offer customers the choice of using compressed natural gas (“CNG”), liquefied natural gas (“LNG”), or renewable natural gas (“RNG”) as a fuel. RNG is pipeline-quality natural gas produced from the decomposition of organic waste, which can come from a variety of sources such as dairy farms, landfills, and urban waste treatment plants. Combining Cummins Westport’s ultra low emission engines with RNG fuel provides additional and significant GHG reductions.

Production began Feburary of 2018.

Cummins Westport would like to acknowledge engine development funding support from the South Coast Air Quality Management District, SoCalGas, California Energy Commission, and Clean Energy Fuels.
James Hanshaw profile picture
Good points. I think the RNG technology comes from CLNE.
When the big rigs go to Nat Gas CLNE will grow its price and value. With Total supporting the move and the spread wide I believe it will happen very soon.
IBWO profile picture
CLNE is going to $10.00/share
With two board members TOTAL can watch CLNE's buttocks!
Jim in the NW profile picture
I assume the question of new-share issuance or open-market will be thoroughly addressed in the earnings CC this afternoon.

I found it interesting that the news was announced just prior to earnings, late last night PDT; I wonder if they needed a waiver of some sort for the usual quiet-period rules? My guess it had something to do with the time-zone difference with Total, necessitating the announcement today rather than tonight or tomorrow.
InvestRite#1 profile picture
It was a purchase outright as far as I can tell.

PARIS, May 10 (Reuters) - French oil and gas major Total said on Thursday that it has agreed to buy up to 50.8 million shares of Clean Energy Corp’s common stock for $83.4 million, to become its largest stockholder with a 25 percent stake.

Total said the two companies have entered into a broad strategic agreement to drive deployment of new natural gas heavy-duty trucks in the North American market.

It added that Total will provide a $100 million credit support for Clean Energy’s plan to launch an innovative leasing programme to place thousands of new natural gas heavy-duty trucks on the road and fuelling at Clean Energy stations. (Reporting by Bate Felix; Editing by Adrian Croft)
TOTAL just took a 25% stake in CLNE and is going to help drive the strategic mass expansion of heavy duty natural gas trucks in NA
Jack.Bolander profile picture
Is clean energy issuing shares today?
Or was it an open market acquisition?
I like to take road trips and see what America is up to..
Traveled thru cental valley of california to see how CLNE was doing.
3 stations: Fresno,Tulare,Bakersfi... All along Highway 99 between Sacramento and LA
Tulare- closed
Fresno- no NG traffic
Backersfield- no traffic and RNG plant running but could not see anyone working.
Just an observation, but would it not be nice to see something happening
Maybe they should change there name to In-and Out.
Now there is a busy place 24/7
pro8 profile picture
I'm no expert on hydrogen vehicles but I believe that NG is the main fuel for any hydrogen vehicle technology out there. It is used either directly or is the most widely used source to make hydrogen. This would seem to mean that the existing NG fueling stations would be easily used in many hydrogen fuel cell based vehicles.
InvestRite#1 profile picture
Fuel prices will continue to propel this little company in the near future.
The spread remains wide and I’m believing Q2 will see a bump in volume as the rigs are being delivered! How many and how fast is interesting. Effect is very significant.
I hope they bring back the 15L engine this year. Or, atleast announce it. That would be a huge sign long distance truckers are ready to adopt it. Either way, the cummins westport engine is going to squash tesla and nikola. Natural gas is ready and rapidly expanding http://bit.ly/2InYl5u
Saw an article this morning that renewable natural gas facilities increased 85% over the last 3 years with 96 more sites located for conversion. They estimate the facilities will create more than a billion diesel gallon equivalents of fuel for long haul trucks and will be the only carbon negative transportation fuel available. All of the gas from landfills, waste water plants, and feed lots will now be captured and turned into pipeline quality gas instead of rising into the atmosphere. As this gains mass, fuel will become so cheap, transporters will have no choice, but to switch. Especially if diesel rises any higher.
At these prices ...wprt and clne are no brainers. One swoosh of the pen from Trump or the next president and its off to the races.
hueyuh1 profile picture
At least the new list of Inst Holders for 1Q seems to have increased.
Seattle Steve B profile picture
Well written article. Thank you.
Changing times as first big rig is on the road with Natural Gas ⛽️ and more to follow! When volume rises all math changes!
I skimmed thru your article and LNG has also done wonders for me....
James Hanshaw profile picture
Good article. I gave up awaiting on CLNE but the future should be good if my views on natgas prove correct https://seekingalpha.c...
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