Friday, July 27, 2012

Musketeers Riflemen and Being on the Mark

The world of green was turned upside down this week. Our friends at Tesla reported their quarterly results and people are now beginning to realize that the Green Machine had it right about Tesla being a touch and go company. $500 million in US DOE funding and they are now producing 10 cars a week for the super-rich out of their Fremont California assembly facility. Of course Elon the Musketeer pontificated to Wall Street in the conference call that he would produce 500 cars in the next quarter and 4,500 in the final quarter of 2012.

His losses for the second quarter were over $100 million and he produced perhaps only 30 of the Model S in the month of July. Yet he will produce 470 in the remaining two months of the third quarter and then 1,500 a month in the fourth quarter. His company is walking on the edge and he will have to raise more equity to pull off the manufacturing miracle he needs. It will be really interesting to watch the story over the next three or four months. Of course the Green Machine will report as soon as any news crosses the wire.

Here is more on the Department of Entropy and their green energy debacles. A 123, my favorite target of being the poster child of Chu chewing on too big a piece of horse meat, announced today that an important member of their Board of Directors resigned . He is Dr. Paul Jacobs who is the CEO of Qualcomm. Dr. Jacobs had been on the board of A 123 for approximately 10 years and is a well-respected high tech guru. His departure today caused A 123’s stock to drop to 49 cents at the close of trading. I have often opined over the past three or four years that this company would flat line and that all the money given to them by the Department of Entropy will be wasted.

A 123 is actually a far bigger story than Solyndra even though the money the DOE wasted will only total $129 million. The money given to A 123 was in the form of a grant and not a loan guarantee. We the tax payers have no claim on the equipment, IP, or other assets that A 123 has. A 123 took out a loan recently from some pay day sharks for approximately $50 million. The $50 million has to be repaid in $2 million chunks each fortnight. This means every two weeks the company has to come up with cash or issue stock in the value of the $2 million with each share being valued at only 82% of the closing price. As an example with the stock closing at 49 cents today and assuming the company will issue stock rather than paying $2 million in cash, the company will need to issue approximately 5 million shares to loan sharks just for the loan repayment of this two week period.

The more the shares of A 123 dive the more the existing shareholders become diluted and the more percentage of the company the loan sharks own.

OK a sad story for A 123 but what is the big deal that makes this bigger than Solyndra? The big deal is A 123 is a shareholder and supplier to Fisker. Fisker is the wonder child of Al Gore and his team at Kleiner Perkins. Fisker received over $180 million from the DOE for engineering of their Karma that is not even produced in the USA. As A 123 goes flat line, Fisker will also have to raise more money. Fisker is not public and I doubt Kleiner Perkins wants to lose more money. The equity sharks Fisker previously used to raise private equity, a Chicago company called Advanced Equity is under SEC investigation and I doubt any money can be raised for Fisker except perhaps directly through one of KLeiner Perkins in house funds. Even Chu cannot give them more money. The fitting out of Fisker assembly plant in Delaware is on hold. So who will save Fisker? I doubt Al can call DC for any further help with his DC electric car. The Chinese may not want to steal this technology for a song and the Europeans have their own problems.

What a mess. A 123 probably will trade for even less next week, Fisker will never equip the Delaware assembly plant, and Elon is walking the tightrope in Fremont, California. Had all listened to the Green Machine including my Congresswoman, the Senate Committee that I gave outside witness testimony to, and the numerous movers and shakers in Silicon Valley that I contacted, then this mess could have simply been avoided and we could have let Coda Blue simply import the few thousand electric cars from China and we could have laughed at how dumb the Chinese were to believe millions of electric cars would ever hit the road.

Before the election, there is still a chance for the President to fire Chu and for him to distance himself from this mess by saying that he the President never claimed to be the guru in thermodynamics and he was given horribly wrong advice from Stevie Wonder who was clueless at the helm of the Department of Entropy. As for the Green Machine, I admit the mistake I made. I thought these clowns who have so much political power would keep A 123 alive beyond the election and that this would just be a post script in January or February of next year. Now I think that Tesla will be that post script. If Tesla implodes, It will be interesting to see how Elon can handle the failure or whether he slinks back to the new South Africa and claims he had to leave the USA because we wanted to have him serve in the US Army to pay back the country for all the DOE money he wasted on his non tail pipe dream.

Note a Musketeer was an early form a rifleman soldier in European armies. Our Musketeer is proud to admit he ran away from South Africa at age seventeen to avoid compulsory national service in the South African Army. At age seventeen the Green Machine did not run away and served my compulsory national service in the South African army as a rifleman. I guess I got to be a marksman at picking up on thermodynamic infiltrators at a young age by being trained as a rifleman. It might have served Elon well to actually have done some National Service he may have learned some thermodynamics by taking some heat marching around under the hot African sun.