(BFM Bourse) – Virulent critic of the Californian manufacturer for years, the boss of Stanphyl Capital considers that the recent spike in capitalization constitutes the most monumental financial bubble in recent years. And continues to bet accordingly, encouraged by the nearly 18% correction in three days this week.
You don't have to be successful to persevere. And if Stanphyl Capital's bearish approach to Tesla has obviously hardly benefited it so far, this hedge fund managed by Mark Spiegel is sticking more than ever to its short position, according to its latest letter to investors.
While Tesla has already posted 229% gains since the start of the year, the stock has experienced an even more impressive acceleration from the announcement on August 11 of a division by five of the par value. The stock accelerated to a total gain of 495% as of August 31, its capitalization then exceeding that of … Toyota + Volkswagen + General Motors + Daimler (Mercedes) + BMW + Ford + Fiat Chrysler + Honda + Nissan, combined .
In other words, capitalization increased by around $ 230 billion with no other notable news than the announcement of the "stock split" – an operation making it possible to make the unit price more accessible but completely neutral financially since the number of shares is increased in proportion. “Do I need to say more about the insane bubble that this action represents?” Asked the manager of the New York fund rhetorically. Obviously, Mark Spiegel does not lack arguments to be worked out.
Profits that are unrelated to sales
On the one hand, the net profit of $ 104 million posted by Tesla in the second quarter (the fourth beneficiary in a row) appears misleading since this item includes $ 428 million in resale of carbon credits, without which the activity would be therefore in deficit to the tune of more than $ 300 million over the quarter.
However, the flow of revenue linked to the sale of these credits to traditional manufacturers is set to decrease over time, according to Tesla's financial director Zach Kirkhorn (the manager still expects a doubling in 2020 compared to the 'last year). In fact, general practitioners will have less and less need to buy carbon credits due to the rise of electric power in their own range of models. "If we exclude sales of emissions credits, Tesla will be in deficit in 2020, as in each of its 17 years of existence," insists the boss of Stanphyl Capital.
Stopped revenue growth
At the same time, Mark Spiegel wonders where the growth has gone, insofar as since the end of 2018, the average level of quarterly income has barely changed.
Maintaining demand for the group's vehicles also requires price cuts such as a $ 3,000 rebate on the Model Y (now $ 50,000) since July, four months after the start of deliveries (waiving in parallel to market a version with reduced autonomy, which would have been positioned even lower).
By deducting sales in China (Tesla does not communicate the details by country) from the production level of the Shanghai plant, operational since the end of 2019, the manager believes that the level of income for the second quarter is mainly due to a big blow. necklace in this market, where Tesla has also lowered prices. The Model 3 price has been reduced by 10% to drop below 300,000 yuan (around 37,000 euros), and remain eligible for purchase subsidies granted by the Chinese government within the limit of this maximum price.
A very strong dependence on China
Outside of China, sales in the rest of the world have fallen by nearly 30%, calculates Mark Spiegel. However, the third quarter appears to be on the way to declining sales in China amid intensifying competitive pressure. According to Bloomberg, which sites official figures from the China Automotive Information Net (CAIN), the number of Tesla registrations assembled in China, which account for the bulk of sales in the country, fell 24% to 11,456 units.
Tesla's competitive position is in no way protected, therefore assures Stanphyl Capital, whose bearish exposure to the stock now represents approximately 15% of the fund, said Mark Spiegel. Not to mention the governance of the group towards which he does not have enough harsh words …
Guillaume Bayre – © 2020 BFM Bourse