There are a lot of Tesla (TSLA) enthusiasts, but also some determined skeptics. Anton Wahlman is one of those with major doubts about the innovative electric car company.
Wahlman, a former equity analyst who’s now a private investor in Silicon Valley, recently ordered 20 Model 3 sedans using Tesla’s online order form. The Model 3, due in late 2017 or early 2018, is supposed to be the company's mass-market car, starting around $35,000, that will finally give Tesla the volume it needs to become definitively successful. Up till now, Tesla has wowed customers and critics but failed to turn a profit.
The Model 3 seems well on its way to becoming a huge hit, given that customers have placed orders for more than 400,000 of them, according to Tesla. If all of those orders turned into sales, the Model 3 would outsell perennial favorites such as the Honda Accord and Toyota Camry.
But some skeptics feel those 400,000 pre-orders may be misleading—which is why Wahlman ordered 20 Model 3s. Tesla says there’s a two-car limit per person on the Model 3, a rule Tesla CEO Elon Musk has referred to himself.
Over 325k cars or ~$14B in preorders in first week. Only 5% ordered max of two, suggesting low levels of speculation.
— Elon Musk (@elonmusk) April 7, 2016
But Wahlman found he was able to keep ordering vehicles on Tesla’s web site, as long as he used a credit card to make a $1,000 deposit each time. The deposits are refundable, so anybody with a credit card can place an order, then cancel. Yahoo Finance checked, and we were able to order four Model 3s in about two minutes—two orders of two each, using the same credit card. After each order, we got a confirmation screen with a button that sent us back to the order form.
(With apologies to Tesla, we plan to cancel the orders and get our $4,000 in deposits back. See the confirmation for one of our orders below.)
Wahlman’s research proves anybody can order at least 20 Model 3s and perhaps an unlimited number. Is that meaningful? Maybe, maybe not. It’s possible some Tesla fanatics are ordering multiple Model 3s they’ll never buy, inflating the number of pre-orders. It’s also possible Tesla itself has gamed the reservation process at a critical time for the company in order to boost its image among investors and make its prospects look as rosy as possible.
Since Tesla introduced the Model 3 on March 31, the company’s stock has risen by 8%, a sign the market is pleased with what it sees. Those $1,000 deposits also provide Tesla some badly needed revenue—$400 million, if all the deposits are legit and nobody canceled. Tesla may also seek to raise more money from investors in the near future, and a looming hit would make that easier.
But if Tesla were inflating the numbers, it would be hard to hide that down the road: If cancellations were suddenly higher than expected or actual Model 3 sales came in way below orders, it would be a disturbing sign something was wrong. It would also be dishonest and possibly illegal for Tesla to deliberately publish false order numbers, and there’s no evidence Tesla has ever deceived investors in such a way. Yahoo Finance reached out to Tesla for comment, and didn't get a response.
As for over-exuberant customers ordering more Model 3s than they’re ever likely to buy, the test will come soon, since those deposits are showing up on credit card statements now and will have to be paid or financed. If there's a phony factor to the pre-order numbers, it would probably show up in a high number of cancellations over the next few months. Meanwhile, it’s probably fair to consider anybody who follows through on a reservation and actually makes the down payment a legitimate interested customer.
Wahlman doesn’t suggest Telsa’s trying to trick anybody—he just thinks the company should offer more proof that all of the orders are legit. He argues there’s hard evidence supporting about 115,000 orders. “But after those 115,000, it gets iffy,” he wrote in a recent blog post. “There's just no evidence as to how ‘real’ the rest of the 400,000 number is.”
Yahoo Finance contacted Wahlman by email and asked why he was looking into Tesla’s ordering process in the first place. “I did it to find out whether the company was truthful in saying (or at least strongly implying) that there was a ‘max of two,’" he answered. He wouldn’t say what he planned to do with the information, but in his blog post he indicated he may short the stock (bet against it on the expectation that it will fall in price and he can profit on the decline).
We assume Wahlman doesn’t plan to take delivery of those 20 Model 3s and will cancel the orders instead. The question seems to be, how many others will do the same.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.