- 16 апреля, 21:06
- ZeroHedge. Alternative view on facts
When it comes to covering up key risks in their P&L or balance sheet, the current crop of tech names are without equal: whether it involves excluding stock-based compensation from cash flow calculations in the case of Twitter and Facebook, or building a mountain in off-balance sheet debt, as Netflix has done with its nearly $9 billion in unfunded content costs, it is remarkable how effective the extended FAANG family has been in fooling almost all of the analysts (and investors), virtually all of the time.
Now, according to an analysis released today, one more company has managed to sneak through billions in contractual obligations between the cracks: the company is Tesla, and according to Vertical Group's Gordon Johnson, the electric vehicle makes has $2.1 billion in Unpaid PP&E/Deferred CAPEX Coming Due, of which $1.4 billion is "Due Imminently."
Johnson explains his calculation as follows:
Unlike anything we’ve ever seen in GAAP accounting, when TSLA orders equip., or invests to construct a building, a portion of the associated CAPEX is deferred, a large chunk of which seems to coincide w/ the start of Model 3 production.
TSLA accounts for this as an “Accrued Purchases”, overstating/understating free-cashflow/ expenses.
Once the equip. is installed and functioning, the accrued purchase reverses & moves into accounts payable.
So how big a risk is this? Well, as detailed in Ex. 2, applying our approach to estimate deferred CAPEX, beginning in ’13, taking the difference in TSLA’s annual purchase of PP&E and cash payment for PP&E, we arrive at the increase/(decrease) in unpaid PP&E (i.e., deferred CAPEX); then, taking the cumulative of this number ’13-‘17, we arrive at $2.518bn in aggregate TSLA unpaid PP&E/deferred CAPEX.
When comparing this figure to the cumulative ’13-’17 supplemental non-cash item “Acquisition of Property & Equip. included in Accrued Liabilities” that appears on TSLA’s cash flow statement (i.e., the actual unpaid PP&E/deferred CAPEX balance) of $2.138bn, we note the numbers are quite similar (Ex. 3).
Thus, taking the $2.138bn figure exiting 4Q17, & subtracting TSLA’s reported “Accrued Purchases” of $753mn in 4Q17 – these purchases represent the liabilities, or what we see as essentially debt, on TSLA’s unpaid PP&E CAPEX which have not yet hit the threshold necessary to be converted into payables – we arrive at payables due on deferred CAPEX for TSLA as of 12/31/17 of $1.385bn.
Consequently, given TSLA’s payable days were 81.3 in 4Q17, this liability represents a “surreptitious” form of ’18 debt for TSLA due imminently.
Johnson's summary: "Based on our checks, we do not believe this risk to TSLA’s liquidity is well known at present."
But wait, there's more, because in addition to the $1.4 bn in "deferred capex", Johnson believes that the company faces another $2bn in Gigafactory 1 CAPEX likely/necessary in ‘18. He explains why below:
First, as of 4Q17 TSLA’s capitalized costs for Gigafactory 1 were a “whopping” $3.15bn vs. just $1.04bn in ’16 (a $2.1bn Y/Y increase – Ex. 5).
Importantly, we remind readers that TSLA originally estd. that total cost for Gigafactory1 would be $2.5bn, w/ another $2.5bn coming from “partners” (see this link & this link). Furthermore, with Electrek reporting in a Feb. ’18 article (link) that Gigafactory 1 is ~30% complete (Ex. 4), & TSLA’s investment of ~$2bn as of 6/17, … we see the incremental capital required to complete the facility at ~$3bn.
Needless to say, Johnson is bearish on Tesla, and specifically the company's liquidity situation. because "when adding ~$2bn in '18 Gigafactory1 CAPEX + $1.4bn in deferred CAPEX due imminently (i.e., $3.4bn in likely ’18 expenditures) vs. TSLA’s 4Q17 cash balance of $3.368bn, we see a large dilutive equity &/or debt offering from TSLA as likely in 2Q18."
What does all this mean for the company's production plans and/or stock price?
While some may assume TSLA will forgo the incremental investment necessary to bring Gigafactory1 up to full scale, we surmise that this would likely delay their ramp to 5K cars/week of production for Model 3 (i.e., a bigger risk to the story, we believe, at this point vs. incremental equity &/or debt issuance). Caveat emptor
At this point it may be prudent for Elon Musk to revise his outburst to the economist from last Friday that Tesla will be cash flow positive as soon as Q3, because if the above is correct, not only will it burn massive amounts of cash soon, but it will have to sell either more equity or debt, or both.