Tesla’s Extravaganza Of Fraud-Risk Indicators

Audit firms are required by their professional standards to consider the possibility that the financial statements contain fraudulent misstatements and/or omissions. The auditing standards contain a number of indicators, or “flags,” that should alert auditors to the risk of fraud. PwC is likely beginning its client retention and planning for year-end audits right about now.

PwC client Tesla (NASDAQ:TSLA) is throwing off an extraordinary plume of fraud-risk indicators that is visible from deep space; red flags, orange flags, floating pink flags at high tide. As an artistic achievement, this colorful extravaganza might make Christo and Jeanne-Claude green with envy. Somehow we don’t think PwC will have the same reaction.

SpaceX explosion puts goals of Facebook, Musk into question

On Thursday, Zuckerberg struck an upbeat tone in his post about the rocket failure, noting that the company has other strategies in the works to expand internet connectivity across the world. Aquila, the Facebook-built drone, he noted, recently undertook its first successful flight in the desert.

Still, the setback will delay Facebook’s ambitious plans and even more ambitious timetable.

Shortly after his SpaceX comments, Zuckerberg struck a cheerier note by posting some “good news” from the region: A family of baby giraffes was seen on his safari.

Yesterday, Elon Musk lost a rocket and $780 million

Thursday started badly for Elon Musk when one of his SpaceX Falcon 9 rockets exploded on the launchpad, days before it was set to take a payload into orbit. Things got worse when Mark Zuckerberg discovered his $95 million satellite was sitting on top of the rocket, and took to Facebook to express his “deep disappointment.”

But as it turns out, blowing up a multi-million-dollar rocket was not Elon’s most expensive mistake yesterday.

As Bloomberg reports, share movements and regulatory filings related to Tesla and SolarCity, two of Musk’s other companies, cost him $779 million yesterday. The stock in both those companies (which are set to merge) took a sharp drop yesterday, with Tesla down 4% and SolarCity dropping by 9%. According to Fortune, the drop was due to cash concerns in Tesla, and ongoing worries from investors over Tesla’s merger with SolarCity.

After SpaceX rocket crisis, Elon Musk also faces Tesla safety and cash-flow issues

“The Palo Alto company is also building a $5-billion battery factory in Nevada. Many analysts are wondering whether it can maintain enough cash flow to see those projects to completion.

Kelley’s Brauer pointed out that state incentives for buyers of electric cars, which have helped power Tesla’s success, will be expiring over the next few years. Brauer believes Musk “is going to run out of tax rebates before he gets to the real world consumer.”

Tesla’s shares slid $11.24, or 5.3%, to $200.11. Shares of SolarCity fell even further, closing down $1.88, or 9.1%, to $18.78.”

Ask Matt: Will Tesla run out of cash?

Tesla continues to burn cash and adding SolarCity to its operations accelerates that. Tesla burned $332.5 million from operations during the past 12 months and consumed $1.3 billion in capital expenditures. That’s a aggressive cash burn for a company with $3.2 billion in cash and short-term investments. Meanwhile, SolarCity tore through $2.8 billion in free cash flow during the past 12 months, a startling amont considering the company has $145.7 million in cash. Refinancing can shore up the cash situation in the short-term, but the combined company will need to start generating cash soon.

Why Tesla’s Cash Crunch May Be Worse Than You Think

In short, the cash being counted isn’t really cash from operations. “What they’re really saying is that they hope to get the full amount from the guarantees,” says Ciesielski. If the used car market suffers from a dearth of buyers or a glut of green vehicles, Tesla will be forced to cover the shortfall when the banks sell vehicles for less than the guarantee price, or shed the inventory it’s obliged to repurchase from the banks at a loss. In either case, it will be returning a lot of the cash that it wants investors to believe is a sure thing. “Cash flow” that’s subject to a large contingent liability, to major uncertainty, shouldn’t be classified as cash-in-hand generated from running the business.

Tesla has attracted a legion of true believers who love the vision and don’t fret much over the numbers. Non-zealots should follow the conservative reporting that the official rules require, and ignore the pro-forma stuff. That’s the best way to track Elon Musk’s progress in molding an epic vision into the greatest green profit-maker the world has ever seen.

Believe It or Not, SpaceX’s Falcon 9 Explosion Could Be Terrible for SolarCity

SolarCity’s Sugar Daddy

You might know that SolarCity actually owns most of the hundreds of thousands of rooftop solar systems it has built. As a result, it needs billions of dollars in funding each year. So the flow of debt coming into the company is vital to its very survival.

What people might not know is that SolarCity is getting a lot of funding from SpaceX and Elon Musk and family. They’re buying hundreds of millions of dollars in solar bonds that almost no one else is interested in. Below is a table that shows the large purchases of solar bonds by SpaceX, Elon Musk, SolarCity CEO Lyndon Rive, and CTO Pater Rive over the past year-and-a-half.

Stop Elon From Failing Again

THE ONE STOP DATABASE ON STOPPING ELON MUSK