Seen it before. Written about it before. The cult-like following among investors and buyers. Tesla is a cultivated brand — status symbol — environmentally conscientious folks who can feel pretentious and pure at the same time. The iconic CEO — Elon Musk. Written about, talked about, and quirky. Facebook posts for ending a marriage are always great fun. That classic swagger — billionaire by age 32. Iconic CEOs mean turnover in the management team. Ugly departure of the former CFO and the original founders. Oh, take a look at that executive compensation with the stock options. We have an irrational share price that cannot come from growth. Where’s the capacity for building and selling the cars the company would have to sell to justify the stock price? 500,000 cars by 2018? As of 2016, Tesla produced 100,000 cars. Stinky governance. Musk is CEO and chairman and no one has any choice about that. Tesla pays SpaceX to leases it aircraft. Tesla bought SolarCity, a company that has been unprofitable since 2012, and Musk’s cousin is the CEO. Not sure how the shareholders of Tesla benefit from the acquisition, but members of the Board do because of their investments. Kimbal Musk, Elon’s brother, may be the most independent director of all because of the investment interconnections among and between the others. The sheer number of subsidiaries is mindboggling. Numbers pressure. The cash burn rate. Investors just managed to pony up another billion in an offering. And this is a company that is unprofitable. The marketing budget has gone from $9 million in 2013 to $58 million in 2015. Divide that by 100,000 cars sold. Think what GM could do with that kind of budget per car.
You hope that Mr. Musk is just a genius and that this all works out for investors. However, Mike Jackson, CEO of AutoNation may be right — it is either the greatest Ponzi scheme ever or, the Barometer’s phrase, another Apple. The Seven Signs of Ethical collapse are evident here — and those seven signs were present in all the once-great ones: Enron, WorldCom, Adelphia, Madoff. You hope for the best, but there comes a point when you have seen the story one too many times.