Bernie Maddoff

Elements of every major securities fraud over the past century?

Let me start with an admission; following Tesla (TSLA – USA) has taken an increasingly disproportionate amount of my time over the past few months. At times, I cannot seem to look away from the unfolding train-wreck. I think this is because Tesla combines elements of every major securities fraud over the past century; along with the frenetic energy of a penny-stock promoter lurching between publicity stunts, desperate to raise enough capital to make next month’s payroll. At the same time, Elon Musk is giving you real-time Twitter updates on the increasingly reckless schemes of his failing stock-promote. For a guy like me, who’s made my career out of studying financial history; knowing that this will be the largest corporate collapse for many decades to come, and watching in real-time, is just irresistible—especially as the end is imminent. It’s like being there in the Führerbunker during the final days.

Bernie Maddoff

By Unknown (Stefeyboy at en.wikisource) [Public domain], from Wikimedia Commons

Say what you will about Big Tobacco killing off their customers; at least they have a certain level of quality control. They wouldn’t produce products on a manual assembly line, using un-trained temporary labor, in a marginally permitted wedding tent on their parking lot, in order to win a twitter boast. Tesla’s latest scheme is bound to create inferior products with unusually high fatality rates. I actually pity those who have waited over a year to pay upwards of $70,000 for their death-mobiles; complete with Soviet Yugo build qualities.

Then again, why should Tesla worry about mass tort action against them? If they cannot produce 5,000 vehicles during some week this summer and gin up a capital raise, they won’t make it to Christmas anyway—forget dreams of semi-trucks, roadsters and Model Y or whatever other schemes they’ve foisted on a gullible shareholder base who’ve alternatively been convinced that Tesla is a tech, solar, battery, energy, software, big data, AI, etc. company; only to have those dreams quashed with a new alternative reality when the last one didn’t pan out. Tesla is a penny-stock promote that has somehow outgrown the wildest dreams of the huckster who invented it. Unfortunately, when this reality collides with a vehicle built with shoddy workmanship, this scam actually kills people. It has long been known that the stock market exists to separate idiots from their money, but it’s unusually rare that a stock promote has also abetted vehicular manslaughter.

I began writing this post with the goal of giving an update on why I think Tesla’s demise is rather imminent—however, my good friend Mark Spiegel from Stanphyl Capital has clearly done more work on this scam than I ever will and he has all the links nicely curated in his most recent investor letter (published below). In conclusion, I don’t want to be sued for libel; so I won’t go as far as to call Tesla a blatant fraud masquerading as a ‘green’ auto manufacturer—instead, I’ll end by congratulating Elon Musk on his ‘ingenuity.’ Ivar Kreuger, the last penny-stock fraudster to graduate to international prominence, had to pay a double digit dividend yield to keep his scheme alive—whereas Tesla lives on an effusion of delusional, yet, zero-cost tweets. Take it away Mark…

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