Will Elon Musk Bankrupt Tesla Stock?

hey so you might remember me from the

early days of Tesla YouTube given that I

bought a model X in 2017 it was one of

the first to make full self-driving

videos on YouTube and at least review my

positive experience with the product I'm

not trying to take credit for anything

but I've been a very big and loyal fan

of Tesla now I have had my ups and downs

in terms of when's the valuation a

little rich and you know when is it low

now what I'd like to talk about though

in this video is the prospect that a

Tesla might go bankrupt I see these

videos a lot uh and I'm actually maybe I

shouldn't say I'm s surprised but I I

honestly am I feel a little surprised by

how much negative sentiment there has

been around Elon Musk and his

participation with the Trump

Administration uh fundraising for Trump

was one thing but now working under you

know basically running Doge and working

as a federal employee and unpaid federal

employee uh has has clearly pushed

buttons further than a lot of people are

satisfied with now it's unclear whether

these comments are just bot armies

online but let's put it this way the

viewership for you know Tesla's going

bankrupt and hate on Elon and commentary

about hate on Elon is at the highest

levels I I have ever seen and it's it is

very very negative so what I'd like to

do is just uh look at the financials of

Tesla and decide is Tesla a company that

could end up going bankrupt during the

Trump Administration uh what what do

their financials actually look like and

what are the odds that you know your

investment in Tesla could basically go

to zero uh vice versa is

elon's involvement with politics

potentially going to create one of the

greatest buying opportunities ever in

Tesla uh and uh something that you won't

want to miss so let's talk about that I

think the easiest thing to do is let's

just start with their balance sheet and

understand a little bit of what kind of

capital that they actually what they're

working with right and once we

understand what assets they have then we

might get a good idea in terms of okay

all right got it these are the assets

they have here's how much they're

burning here's what their expansionary

plans are what do we think can they go

bankrupt okay so with that let's get

into the financials so we'll jump on

over here and let's take a peek at what

we got so this is their balance sheet

for the year ending uh just about 6

weeks ago now we can see that they've

got about $36 billion of cash in

short-term equivalents right here we've

only got some accounts receivable 4

billion bucks inventories of about 12

prepaid expenses let's see what we've

got in the liability sector here we've

got $22 billion of uh liabilities so

these are bills on the desk of of Elon

so to speak that have to be paid uh and

then we've got some deferred revs and

some of other items here so if we just

net these out this is very conservative

by the way since they still have an

extra $16 billion of receivable rece

aables and inventory here you know that

inventory still has to be processed you

still have to pay employees to put it

together or Optimus robots whatever uh

and you know accounts receivable I see

as like a little cushion a little safety

net I usually don't like adding it in

you could discount it by 50% if you

wanted to but either way let's take $36

billion and let's subtract it from the

current liabilities so we got about $14

billion of free cash right now that's

actually really good for a cash flowing

business Tesla has enough CA free cash

right now you know excluding their

long-term liabilities which aren't due

this year uh really we don't have to

worry about these right now other than

the debt service on these long-term

liabilities just the current portions uh

of them you could add this extra 2.4

billion in here usually I don't include

leases but hey include it leaves them

about 12 billion said 11 and a half it's

enough to actually build a whole another

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uh at least the frame work has been

built out personally I think that is a

little bit more like I don't I don't

know that they're actually ready to

manufacture yet I think some of that is

sort of like signaling like look we're

expanding which is fine like I I'm happy

to see it finally get built out I'm very

happy about that because I do think

autonomous Trucking has a very

significant future in our lifetimes I

don't know how soon it'll come but I

think that's that's a that's money well

spent like there is a lot of demand for

that in in the trucking space uh that

said uh and you know with if we have any

more kids I'm going to need a semi truck

for my

family we have seven kids in case you

didn't catch the latest update there but

anyway we're not going to build a gig of

Mexico uh it's just not going to happen

right now with the trade Wars that are

going on and frankly we don't really

need more supply of Teslas uh mostly

because it seems like demand has roughly

matched Supply it doesn't seem like

there's this over supply of inventory

where they're massively discounting or

they're freaking out or whatever uh but

it does seem like we don't have a need

for more capacity right now so these

ideas that musk is talking with Modi for

India or visiting Taiwan or all these

other areas they create this feeling of

like oh musk might build a factory there

he's been saying that for years yes

eventually there should be a gigafactory

on every continent and we'll get there

in the longer term but not when interest

rates are as high as they are and right

now it doesn't look like interest rates

are going to come down anytime soon now

I actually believe that creates a

short-term buying opportunity for

interest rate sensitives that actually

includes real estate like I I don't

think we have a real estate recession on

the horizon we might have a layoff

recession on the horizon but I don't

think we have a real estate recession on

the horizon which actually is is

fascinating because it means you now

have a unique opportunity to increase

your exposure to real estate

assets uh and uh it's entirely possible

as rates come down we expect valuations

to then become even more unaffordable uh

because prices might go up that's my

take that's why why I kind of think now

is an interesting time to buy real

estate as rates are high uh and that's

what we're doing but anyway as far as

Tesla I actually think Tesla has a lot

of uh hope regarding Optimus and FSD

priced in which I don't think will come

to fruition as quickly as markets think

and so I think when you combine the

sales impact of musk and a delayed

Optimus in FSD future there'll be a

really big buying opportunity for Tesla

the question is just will elon's Antics

lead to share depression or will it lead

to Company bankruptcy so if we have 11

and half billion dollars of cash and

this is a company that's not actually

burning any cash you know if we go to

our free cash flow statement we are cash

flow positive uh right so we've got net

cash provided by operating activities

they basically double their cash on hand

however if we take out the Investments

they're making into New Capital

expenditures we're growing the cash pile

by about 2 and 1 half to three billion

bucks you can see that right here net

cash provided by operating activities uh

and then we're going to uh discount out

some of these um Capital expenditures

now this isn't the cleanest way to do it

because yes accounts payable will show

up here in the cash flow statement as

well when they pay these items uh so

keep that in mind uh that'll make some

adjustments so some argue that's double

counting but I like to be conservative I

look at this as it's a company that's

got about 12 billion bucks in cash and

they're adding to that pile call it $2

billion a year that's the status quo

right now so now let's make an argument

that uh Tesla vehicle deliveries don't

stay flat they actually decline 10% so

let's go to our uh net income uh and see

what the H you know what our GNA might

not change that much

uh so let's actually just do assume a

10% decline in Automotive Sales uh we

could just go total revenues over here

so let's take10 billion off at margin

well what's margin margin right now is

to the net ah go gross profit again

because of the Opex over here we've got

gross profit of 174 I've got total

revenues yes this does include some tax

credits which could get damaged by Trump

although I don't think Trump is going to

hit those manufacturing tax credits

because he made in America right but he

might get rid of some of the subsidies

which could reduce bu demand so we're at

a 17.8% margin for the year if we drop

sales by 10% we would only be shaving

off about $1.7 billion which actually

means we're still cash flow positive so

now if I double that and I take out $3.5

billion well now I lose $1.5 billion a

year but I have 12 so if I take 12

divided 1.5 I actually have 8 years of

funding Runway with just the cash they

have available and a 20% decline in

sales so eight years is going to get you

through this next Bull cycle which I

don't know how close to the top we are

in it it's going to get you through the

next recession uh it it'll get you

pretty far now if you had a 50% decline

in sales right well okay now you're

going to have layoffs so some of your

Opex is going to go down your margin

might get hit a little bit a lot more

things could happen but a 50% decline in

sales at I'll just keep the same

approximate margin that's going to cost

9

billion if that happened they would

still be sitting on $3

billion now I also think that Tesla if

it were in those sort of Dire Straits

where sales collapsed 50% for all their

revenues right that includes energy Mega

packs cars a 50% decline they still have

$3 billion left

given that they're a MAG 7 and they're

an over1 trillion

company they're let's put it this way

they're going to be able to raise more

money people will offer them convertible

bonds which is a very very common

strategy mind you uh I'll give you an

example of a convertible bond that Tesla

did uh Tesla convertible bonds I believe

it was

2014 and yeah here it is the end of

Tesla's convertible Bond area they can

actually just go back to this but in a

March of

2021 convertible bonds Tesla issued back

in 2014 will convert at a more than

800% gain so now what's remarkable about

this is they issued $600 million in 2013

2 billion in 2014 850 million in 2017

and additional 1.6 in 2019 so they were

constantly raising convertibles and

they're doing that because they're

Capital intensive business right these

are 7-year convertibles and they had a

coupon of just

1.25% some of them the 5 years in 2014

had a convertible as low as just

0.25% which is kind of remarkable

because people weren't really investing

in it for the yield the cool thing about

a convertible is it gives you preference

over common shareholders if the company

goes into

bankruptcy so they get paid back first

they get their debt paid back but a

convertible has the option of converting

into shares usually at higher share

prices and boom you get the upside with

downside protection it's kind of cool

it's actually we looked at Tesla uh to

do that with house hack so think about

that for a moment with with house hack

we offer a 5% coupon right now it's to

accredited investors over at house

act.com but we're releasing the non

accredited round soon and we're just

going to dump money into real estate

basically if you have questions you can

always email us at IR house act.com but

anyway 5% coupon even for the non-ac

credited uh converts at the current

valuation you know in in a few years uh

so you don't actually need to see the

company go up in valuation more than

like a penny and then you could convert

to shares in the future but it gives you

that downside protection and a 5% yield

uh per year right which is kind of cool

uh and and really what we did is we

copied the Tesla Model except because

we're collecting rent and we can pay out

5% we're paying out 5% so it's kind of

cool anyway that's that's just a little

bit of a comparison over here but the

reason I mention that is because Capital

intensive businesses that build

factories or buy real estate similarity

there uh they can raise they have the

capacity to raise money and then they

could use that raised money to diversify

to uh you know continue their business

operations to get through great times to

get through bad times whatever they need

to do uh and then that could convert in

the future and like they did over here

rewarding investors with more than 84%

return they give people an opportunity

to have downside protection and a yield

and upside side which is kind of cool so

this is a uh this is an option that they

have on the table to raise money this

doesn't even consider that they could

also just straight up sell shares so

there are a lot of things they could do

to get by but really if they could get

through a 50% sales decline there's

basically no chance Tesla's going

bankrupt because sales aren't going to

decline 50% these are the best EVS that

exist they're great Vehicles do I wish

they came out with a lower cost car of

course do I think they're overly

optimistic on the time frames on Optimus

and FSD absolutely

do I wish they had apple carplay and is

that why maybe Elon Musk retweeted uh

Tim Cook saying we have a new partner

coming into the family or whatever I

think so H Mars thinks no fine

everybody's going to have their

different opinion but do I think Tesla's

going to go bankrupt no I just think

there's going to be some sales

disappointment not only globally but

also in the United States with tariffs

and high rates for longer I think the

next year to two probably be more

challenging at getting some of these

these things ramped and so I see them as

sort of like nibble opportunities buy

the dip opportunities increase exposure

opportunities uh and I think there will

be opportunities to buy cheaper how much

cheaper we don't know we I mean we we

have seen that stocks can run really far

past uh a fundamental valuation uh like

one of my favorites my ogs of artificial

intelligence paler which you know we've

been reviewing the course member live

stream for years and saying these people

have a crazy good balance sheet and

amazing margins well you know they

valuation is cooky now and their growth

isn't that high to justify their

valuation but that's okay markets can go

through these weird times and it's sort

of like Warren Buffett says you know

imagine you're getting ready to swing a

bat and people are pitching at you you

want to buy Tesla at 400 nah bro you

want to buy Tesla 500 nah bro you want

to buy Tesla 300 nah bro you want to buy

Tesla 200 hell yeah you want to buy

Tesla 150 back up the truck right just

an example that's that's sort of the

Warren Buffet impression I think that's

why he sits on cash so much because he

sort of waits for blood in the street

and panic and we're not in that sort of

case right now but the whole point of

this video is to say even if we were in

that case now because of elon's you know

Antics or call it whatever you want uh

you know we could talk separately about

Doge and now doge is getting involved in

the uh Internal Revenue Service Doge

officers have showed up to the IRS this

is this is like entertaining this is

this is like a drama show is pretty

incredible we talk about this every

morning in the one and a half hour live

stream we do every single morning uh

including weekends now in the course

member live streams get lifetime access

to those over at me kevin.com but uh

this is fascinating I do not see a

chance of a Tesla going backround you

would have to have a

foreign Eevee maker and competitor come

in and basically destroy Tesla and Trump

is just never going to let it happen we

have two protectionists of a government

so we're not going to see that we're not

going to see a homegrown like a Nicola

or a lucid take over Nicola is about

bankrupt uh and um yeah honestly even if

you're holding shares now and you're

like okay so like do I sell and rebby

look not personalized Financial advice I

just be straight I don't I don't think

it's necessary to try to be perfect with

timing it just it leads to too much of a

likelihood of making mistakes my point

is you know maybe just keep some money

for those dip days you know we di down

to 318 like I said what happened in the

alpha report we bounced off that so

freaking hard we bounced right up to 355

last 2 days in a row were great you know

2 and a half yesterday and 5.7% today

really good and the Market's just

overall very optimistic because you know

tariffs are kind of coming on slowly

there are a negotiation point the

economy keeps chugging along so far

layoffs aren't showing up in the jobs

report I mean I don't know if bitcoin's

trying to tell us something but you know

that's all like anybody's guess at this

point but as far as Tesla I don't see it

going bankrupt obviously I'll let you

know if anything changes I can't give

you personalized Financial advice but I

hope this is helpful for you sort of my

opinion of of where we stand the margins

are too good and even though you know

battery margins are declining for their

energy business the more battery margins

decline for their energy business the

more competitive the batteries become

for their car business right and the

cheaper it is for them to sell cars with

batteries so anyway optimistic long-term

shortterm hey Anything Can Happen

doesn't take much of a shock anyway

thank you so much for being here really

appreciate you uh I'm working on my best

to bring in as much content as possible

we'll see you all soon thanks so much

folks goodbye and good luck out there

why not advertise these things that you

told us here I feel like nobody else

knows about this we'll try a little

advertising and see how it Go

congratulations man you have done so

much people love you people look up to

you Kevin P there financial analyst and

YouTuber meet Kevin always great to get

your take