Last week, the green press quoted Tesla CEO Elon Musk as telling the National Clean Energy Summit in Las Vegas: "The challenge that Tesla faces over the next few months is scaling production enough to achieve a certain gross margin on our product so we can be cash flow positive. That's extremely important. If we're unable to do that, we'll enter the graveyard with all the other car company startups of the last 90 years."

When I read the Musk quote and thought back to the "cash low point" discussions in the second-quarter conference call, I couldn't help but think about barnstorming aviators in the early 1900s planning their next airshow. "We'll go into a power dive at 10,000 feet, start our pull out at 500 feet and clear the treetops by inches. It'll be epic!"

I'm an inveterate gambler and there's nothing that gets my blood pumping like a speculative stock with a great risk-reward profile. In Tesla's case, the stock is already priced to perfection, and I see very little short-term upside potential. It may hold its current value if Model S production ramps up without a hitch and the cash low point forecasts are accurate, but the price is likely to crater if Tesla encounters any of the delays, glitches and difficulties that mature companies plan for when launching a new and unproven product.

When I walk into a casino and lay $10 on the roulette table, I expect to lose $10 if things go badly and win $360 if the wheel is kind. Without the upside potential, I wouldn't be willing to play the game. Tesla strikes me as a stock with immense risk and very little potential reward, a bit like even odds at roulette.

I have no direct or indirect interest in Tesla, and I have nothing to gain or lose from its success or failure. I'm just watching the airshow from a safe distance. I'll be the first to cheer if Tesla pulls out of its power dive and clears the treetops without tearing the wings off the plane. Just don't expect me to ride up front in the passenger seat.
John Petersen, a lawyer and CPA, has specialized in advising companies on corporate finance and business development for more than 30 years. He writes the deathless prose and dire warnings investors read in offering documents and SEC reports. While Petersen has served as a board member or executive officer for a handful of public companies, the bulk of his work is behind the scenes where precision and a passion for detail are essential. Petersen�s investing style is that of �elephant hunter,� and nothing grabs his attention like a �multi-bagger� in the rough. His investing time horizon is two to four years. On the long side, Petersen looks for blood in the streets and stock prices that have been beaten down to unconscionably low levels. On the short side, he seeks out high-profile companies that trade at unsustainable levels while hype-intoxicated executives make the same tactical mistakes he�s suffered through with clients. Petersen�s sector focus is batteries and efficient transportation because he has almost a decade of experience in the industry, including a three-year stint as board chairman of an R&D-stage battery-technology developer. He�s convinced these sectors are emerging investment mega-trends.

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