A recent report from the Financial Times has raised concerns over Tesla's (TSLA, Financial) accounting practices, revealing a $1.4 billion discrepancy on the company's balance sheet. Critics and short-sellers of Tesla have long questioned its accounting methods, but these concerns have gained significant attention following this report.
The report highlights a $1.4 billion gap when comparing Tesla's capital expenditures in the last six months of 2024 with the valuation of its invested assets. Specifically, Tesla reported spending $6.3 billion on "Property, Plant, and Equipment" (PP&E) during this period, while the value of these assets only increased by $4.9 billion.
Accounting experts generally agree that capital expenditures should closely align with the growth in total PP&E. However, factors like asset sales, impairments, or foreign exchange could influence this. Tesla has not reported any significant changes to justify this discrepancy.
The report also points out other red flags, such as Tesla's claim of holding $37 billion in cash, despite issuing $6 billion in new debt last year. While it's not uncommon for companies with substantial cash reserves to take on debt, this strategy is less favorable in the current market environment.
Additionally, despite claiming $15 billion in operating cash flow last year, surpassing its capital expenditures, Tesla has not engaged in stock buybacks or dividends, an unusual practice for large corporations. This places Tesla in a small group of companies, including others like Temu, that follow a similar approach.
In 2022, Tesla CEO Elon Musk mentioned plans for the company to use some cash for stock buybacks, but this has yet to materialize. Jacek Welc, a finance professor at SRH Berlin University of Applied Sciences, compared these warning signs to recent corporate financial scandals, such as those involving Wirecard and NMC Health.
