I've linked to this article before but only in a brief post. It needs to be read in full (in part to appreciate the level of snark in the paragraph I took the title from). Campling's list of red flags is devastating. I limited myself to a few (13. in particular, has become more relevant) but every one of them is damning.
Jemima Kelly writing for FT Alphaville:
Now that Wirecard has been proven once and for all to be a massive fraud and is rapidly dying away into oblivion, many of us — and you, we’re sure — have been thinking about where the next big corporate scandal might come from.
Mirabaud Securities, the equity research house whose analyst Neil Campling stood out for being the only person to put a price target of zero on the German payments processor, have been thinking about this too.
They’ve come up with 20 warning signs that they are looking out for in trying to determine the next “Big Disaster”. They are as follows:
1. Massively promotional CEO who actively looks for publicity and spends a lot of time courting Wall Street/investors etc and is very media savvy
2. Huge CEO/Senior Management compensation package NOT tied to cash flow or Earnings but just to Sales and/or the stock price, creating the possibility of egregious wealth creation if the stock goes up a lot. Huge pledging of collateral by the CEO in return for margin loans to fund a billionaire lifestyle
3. Management compensation generally way out of line with peers despite notably less profitability
4. Glossy future projections that have a habit over a long period of being proven to be too optimistic
5. Questionable product quality, ie defects (boon??) or debatable technological leads over similar products
...13. Dislike of Hedge Funds
14. Possible Narcissistic Personality Disorder on the part of the CEO. Additional points if he/she uses Twitter a lot
15. Large cabal of outcasts/weirdos/bloggers/Twitter groups who have been saying for years that everything is amiss but just get a lot of criticism because the stock keeps going up ergo they must be idiots
...19. Weak Board, preferably also small and ideally in hock in some way to the CEO, who therefore do his/her bidding. Helps if some of them are related physically to the CEO.
20. Gullible media, gullible analysts and dozens of paid bloggers who produce Price Targets out of nowhere based on “Option Value” or put another way products that are at least 5 years away from having any material impact.
Alphaville has a great record of calling a spade a spade but
it's important to note that FT is not outside the mainstream on this.
Pretty much every serious, sober analyst and business journalist who has
done deep dive into Tesla has walked away telling basically the same
story.
The company was wildly overvalued when this post came out in June of 2020, since then it has more than tripled. During that time the fundamentals have only gotten worse. Waymo's lead in self-driving technology continues to widen. VW has pushed Tesla to second place in European EV sales and market share is likely to shrink further as the other major car makers transition to electric. The picture looks even worse when you consider what EV competition will do to regulatory credits, which are the only thing that kept Tesla from losing money in 2020.
At the risk of over-sharpening the edge, the most responsible and respected voices such as the Financial Times have been warning us (in some cases for years) that Elon Musk is looking more and more like a 21st century Match King. At this point, the biggest question is why aren't more people listening?
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