In just 3 months, Tesla has issued 80% of the shares ARK’s valuation model projected they would issue through 2025.

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by thri54

Their model is beyond amateurish. They missed Tesla’s diluted share count by over 100M in their newest model. And before anyone mentions possible buybacks, their model already includes a $300 billion cash pile in 2025 to pad their EV/EBITDA PT. No room for buybacks in their modeled capital allocation.

And that’s just what’s provably wrong with the model. Will Tesla create a human ride hail service with 3x more revenue than Uber in less than 5 years? Will Tesla become the most profitable insurance company in the US in under 5 years? Will Tesla sell sedans and crossovers at the same gross margins of Ferrari? I can’t say, but these are all standard assumptions made in ARK’s “bear case” — An odd context for the term.

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I wouldn’t be so crass if they actually learned from their mistakes, but they don’t. Their year end 2019 model projected Tesla would issue 30 million more shares through 2024; 900M to 930M split adjusted. They issued 55M in 2020 alone. 34M were attributable to capital raises. Maybe that would be a good time to step back and check what the diluted share count would be in the event Tesla hit their PT? I could almost forgive a hobby investor missing the dilutive effect of, at the time, anti-dilutive convertibles and stock options. Not a firm like ARK, but a hobbyist. They brazenly miss their share count estimate, take no further look as to why they missed, and, by some miracle, totally miss the dilutive share count & effects plastered all over Tesla’s filings since Q1 2020.

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To be blunt, these guys are either dumb or deceitful. To those who invest in ARK funds, this is the level of DD you get. Caveat emptor.

Sources for the lazy: www.sec.gov/Archives/edgar/data/0001318605/000156459021004599/tsla-10k_20201231.htm

www.sec.gov/Archives/edgar/data/0001318605/000156459020004475/tsla-10k_20191231.htm

github.com/ARKInvest/ARK-Invest-Tesla-Valuation-Model

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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