The electric automaker is a company "so landmine-filled that I think it can implode at any moment regardless of what the broad market does," Stanphyl Capital Management managing member Mark Spiegel wrote in a recent note to investors.
"We remain short shares of Tesla, Inc., which I consider to be the biggest single stock bubble in this whole bubble market," Spiegel wrote.
Among the chief concerns for Tesla are its lack of any kind of "moat," the term popularized by billionaire investor Warren Buffett which means some sort of protection in the form of substantial proprietary traits. Moats are often competitive advantages that insulate a company from rivals and solidify its large market share.
Spiegel continued to write that Tesla is hemorrhaging money, "despite relatively light competition but will soon be confronted with massive competition in every aspect of its business." The electric carmaker no longer has the monopoly on clean energy driving, with old-school firms including General Motors Co. (GM - Get Report) pledging to go all in on electric in the coming years.
Spiegel said in 2018 the high-end, luxury electric vehicle space will get even more crowded, with entrants Jaguar, Volkswagen-owned (VLKAY) Audi, Daimler-owned (DDAIF) Mercedes and Porsche piling in. "Over the next five years Tesla will have approximately one hundred 200+-mile electric competitors, and over 200 by 2025," Spiegel said.
CEO Elon Musk
"Elon Musk is extremely untrustworthy," Spiegel added.
The money manager suggested Tesla has been "committing fraud" by charging $8,000 for "software upgradeable for full self-driving" for its current systems. That's because Nvidia Corp. (NVDA - Get Report) , which Tesla contracts for its primary computer processor for its Autopilot system, announced mid-2018 availability for its first processor capable of full autonomous driving. Tesla is selling cars that are purportedly capable of upgrading to Autopilot before the technology is even available.
The company is also managing tough scrutiny after it laid off hundreds of workers at Model S and Model X production lines and SolarCity. While Tesla called the firings performance-related, it "brought itself a brand new legal problem on top of a massive number of ongoing lemon-law lawsuits, labor discrimination lawsuits and autopilot & investor class action fraud lawsuits," Spiegel said.
"Tesla is rapidly becoming sort of a 'full employment act for lawyers,' and that's even before it brings in the bankruptcy lawyers," Spiegel asserted.
Model 3 Shortcomings
Tesla delivered what Spiegel called an "awful" number of Model 3 cars in the third quarter -- just 220 made it to new owners, after Musk promised 1,500 Model 3s produced in September. What's more, the problems are expected to continue for months, Spiegel added, resulting in about one-fourth of the expected 400,000 Model 3s expected actually being produced.
"When it eventually does go into real production the Model 3 will be a huge sales disappointment, as reservation holders realize that fewer than 100,000 of them will qualify for the $7,500 tax credit (unless the new Republican budget kills even that, which is a real possibility)," Spiegel wrote.
Spiegel concluded his note by pointing out the flawed logic of allowing Tesla to report terrible earnings and still supporting it by justifying, "The great thing about Tesla is that it's really a battery company." Spiegel noted that even if it were just a battery company, that's a low-margin industry not worthy of braggadocious claims. Plus, there's plenty of chatter that Tesla is potentially buying car batteries from LG Display Co. (LPL - Get Report) and Samsung Electronic (SSNLF) .
"So in summary," Spiegel wrote, "Tesla is losing a massive amount of money even before it faces a huge onslaught of competition (and things will only get worse once it does), while its fully diluted market cap (assuming 177 million shares "all-in") now exceeds that of Ford (F - Get Report) and almost equals that of GM despite a nearly two-billion-dollar annualized net loss selling just 100,000 cars while Ford and GM make billions of dollars selling 6.6 million and 9 million cars respectively."
"Thus this cash-burning Musk vanity project is worth vastly less than its approximately $65 billion fully-diluted enterprise value and -- thanks to its roughly $10 billion in debt -- may eventually be worth 'zero.'"
When reached by TheStreet, Tesla declined to comment.