Tesla: Potential Liability From Unintended Acceleration Events Ignored
Deep Value, Foreign Companies, Nano-cap, Long Only
Contributor Since 2012
As a mathematician (Ph.D.) I use 7 quantitative strategies with statistically extremely high returns. I select these cheap companies with software comparing thousands of global stocks on value metrics, liquidity, quality metrics, and momentum. I focus on global nanocaps and net-nets. Check Turning Rough Stones: turningroughstones.substack.com
That a car drives into a building or similar structure at relatively high speed is extremely rare. That someone dies in such an accident is even rarer. Often the cause is a slippery road with a house in a curve. You would not expect a car hitting a wall in a parking garage. Well, it can happen but that it happens at high speed causing the death of the driver or passenger is another story. And how likely is it that this happens twice, with a car of the same brand?
Yet this is exactly what happened. See here, here, here and here. I expect it to happen more often with the increasing numbers of Teslas on the road and as these cars get older. See also this similar accident in Beijing. I think it happened recently as well.
Of course this is not so unlikely at all if these cars have a known defect. Like the sudden unintended acceleration events with Tesla (TSLA) cars. This is a serious issue. I expect it will lead to a recall of all Tesla's cars, globally. The reason Tesla has not recalled any cars because of this could be that the company does not know how to fix it. In that case the liability would be enormous. The stock market ignores this risk.
Other service and quality issues
This is not the only quality and service issue with Tesla cars. See this long Twitter thread with recent issues. As cars age it will only get worse, and more dangerous, see here.
Signs of financial distress
With more than $15 billion in reported cash excluding the most recent equity raise of $5 billion it is a stretch to think Tesla is financially distressed. Yet here is a tweet suggesting Tesla Insurance sends uncovered checks.
Bottom line
For these reasons my opinion on the stock is still: strong sell.
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Disclosure: I am/we are short TSLA.