CryptoLawProf (with a tax twist)

LawProf, Tax, Sec. & Biz lawyer, Expert, x-DOJ Prosecutor, x-Credit Deriv. and Tax Products Structurer, Grad of BBQ University, #HarvardKS, #UChicagoLaw, #Terps

[CryptoLawProf (with a tax twist) @CryptoLawProf]

Blockchain Law: A Pedagogical Vantage Point by Karl T. Muth https://t.co/bEF5S39xJ0

[CryptoLawProf (with a tax twist) @CryptoLawProf]

@karlykingsley Next on the list: News (not punditry)

[Maine @TheMaineWonk]

I’ve written a few campaign ads in my day.

But holy shit.

This ad from @ossoff might be one of the best I’ve ever seen.

[George Noble @gnoble79]

Last night was the biggest disaster in the history of Tesla.

Let me walk you through what actually happened on that earnings call, because the headlines are doing you a disservice:

Elon Musk got on the call and admitted (his words) that Hardware 3 "simply does not have the capability to achieve unsupervised FSD."

He said he wished it were otherwise. He said the memory bandwidth is one-eighth of what Hardware 4 has. And that's the end of the conversation.

Approximately 4 million Tesla vehicles on the road right now have Hardware 3. Many of those owners paid $8,000 to $15,000 for Full Self-Driving capability based on Musk's repeated promises (going back to 2016) that the hardware was sufficient for full autonomy. As recently as 2022, Musk was publicly assuring owners that HW3 had the processing power to get it done.

BUT IT DIDN'T

Those promises are now officially broken.

The solution is a "discounted trade-in" toward a new car with Hardware 4.

Not a refund or a free upgrade...
A discount on buying ANOTHER Tesla.

Investor Ross Gerber said it too - all HW3 owners got screwed, and with roughly 285,000 FSD purchasers affected, the potential liability runs into the BILLIONS.

But that's not even the worst part.

Musk was asked if the current FSD v14.3 was ready for unsupervised deployment. He said yes. Then immediately walked it back and admitted Tesla has "major architectural improvements" in the pipeline that would significantly improve safety.

What he really means: the software isn't SAFE ENOUGH to deploy without a human watching. Full unsupervised FSD for consumer cars is pushed to Q4 2026. At the earliest... Maybe.

How many times has this deadline been pushed? I've lost count. And trust me, I've seen a lot of broken promises. But this one takes the cake.

Now let's talk about the numbers everyone is celebrating:

Tesla reported $22.4 billion in revenue and $0.41 in non-GAAP earnings. A "double beat." The stock popped 4% after hours. Victory, right?

WRONG

Dig into the actual filing:

The number one driver of operating income improvement wasn't cost reductions, wasn't volume growth, wasn't FSD revenue. It was - and Tesla listed this FIRST in their own shareholder letter - "one-time benefits related to warranty and tariffs."

They released warranty reserves. They booked tariff refund windfalls. They stretched supplier payments by 10 days. They took on billions in new debt. Then they presented everything through non-GAAP metrics that strip out over $1 billion in stock-based compensation.

GAAP net income was $477 million on $22.4 billion in revenue. That's a 2.1% net margin. On a $1.4 trillion market cap.

Let me put that in perspective:

3.75 billion shares outstanding. Annualize the Q1 GAAP profit and you get roughly $1.9 billion. That's a trailing P/E ratio north of 700. Use the adjusted number - strip out stock comp, which is a REAL cost to shareholders through dilution - and you're still at around 250x earnings.

All of this is extremely bad, but I didn't even talk about the CAPEX BOMB yet...

3 months ago, Tesla guided to "over $20 billion" in 2026 capital expenditure. Last night they raised it to over $25 billion. A $5 billion increase in a single quarter. That's 3x their historical annual capex run rate - $8.5 billion in 2025, $11.3 billion in 2024. The CFO confirmed on the call that Tesla expects NEGATIVE free cash flow for the rest of the year.

So you have a company generating roughly $6 billion in annual free cash flow on a good year, and they're about to spend $25 billion.

The math doesn't work.

They will almost certainly need to issue equity. Which means dilution. Which means the $1.9 billion in annual earnings gets spread across even MORE shares.

The core auto business is literally deteriorating in real time:

Tesla delivered 358,000 vehicles in Q1 (missed estimates again).

They produced 408,000. That's 50,000 cars sitting on lots that nobody bought.

Inventory days jumped from 10 to 27 in just a few quarters. California (their most important US market) saw registrations crash 24% year over year.

Their market share in the state fell from 9.2% to 7.7%. That's on top of a Q1 2025 that was ALREADY weak from Model Y retooling. They're declining off a decline.

And here's what really kills the bull case...

The entire valuation rests on robotaxis, Optimus robots, and autonomy. So let's put numbers on it:

Waymo - the actual leader in autonomous driving with 15 million completed rides in 2025 alone, over 127 million autonomous miles driven, operating commercially across 6 US cities with plans to expand to 20 more - just raised $16 billion at a $126 billion valuation.

That's the market's verdict on what the LEADING robotaxi company is worth. $126 billion.

And Waymo is YEARS ahead of Tesla in actual deployment.

Tesla has 3.75 billion shares outstanding. So even if you assign $126 billion in robotaxi value (giving Tesla full credit for matching Waymo despite being nowhere close) that's $33 a share. Add the auto business at generous auto-industry multiples, maybe $20 a share. Throw in energy storage and services, $10-15.

Sum of the parts gets you to roughly $65-70 a share if you're feeling generous. Maybe $50 if you're not.

The stock is $387.

So what exactly are you paying for?

You're paying for a STORY. You're paying for PROMISES that keep getting pushed back, technology that keeps falling short, and a business plan that requires spending $25 billion a year while the core product sells fewer units at declining margins in a market where California sales just fell 24% and the federal EV tax credit is gone.

I managed the number one mutual fund in America. I founded two billion-dollar hedge funds. I've been doing this since 1981.

And I am telling you:

Tesla at $387 is one of the most egregious mispricings I have seen in my entire career.

THE CRASH WILL BE EPIC

[Hyperliquid Policy Center @HyperliquidPC]

Non-custodial front-end interface providers are not brokers, as the SEC rightly clarified in its excellent Staff Statement on April 13.

Today, HPC joined DEF (@fund_defi) and dozens of others in requesting that the SEC formalize that Statement in notice-and-comment rulemaking.

[Sarah Miller @sarahmillerdc]

When Lina Khan ran the FTC, she spotted this *exact* scenario and launched an investigation

The very first thing Trump’s FTC Chair did when he took over was kill it

[Wendell Pierce @WendellPierce]

The Trump Administration’s Justice Department has accused the Southern Poverty Law Center, which is best known for investigating hate groups, of unfairly targeting conservative and Christian organizations like the KKK. They are being charged with fraud for paying informants to infiltrate white supremicist groups. It’s obscene how racism is institutionalized in this country.

[CryptoLawProf (with a tax twist) @CryptoLawProf]

@RealJohnGaltFla @DMichaelTripi Probably not :-). trump stablecoin (USD1) has market cap of $4B, and the yield on those assets goes straight into family pockets b/c Genius Act prohibits paying it out. Curiouser and curiouser.

[CryptoLawProf (with a tax twist) @CryptoLawProf]

The same UAE that helped fund the trump stablecoin that allows the trump family to earn interest on the yield on those stablecoins because the GENIUS Act prohibits paying it out as yield or rewards???

[Dominic Michael Tripi @DMichaelTripi]

NEW: Trump administration is considering financial bailout for the United Arab Emirates over economic losses sustained from US war with Iran. -WSJ

[Coin Center @coincenter]

Code is Speech.

New report: https://t.co/SFv7oxX1I7

[Neeraj K. Agrawal @NeerajKA]

New Coin Center report. We lay out exactly why the fact that code is "functional" speech doesn't make it any less protected by the 1st amendment.

[Peter Van Valkenburgh @valkenburgh]

https://t.co/AxTeaCG6dw

[CryptoLawProf (with a tax twist) @CryptoLawProf]

2023 will be even better!

[GoodWill Yunting @GoodWillYunting]

We got our 2022 stats & they are unreal! Top 5% of most followed & shared pods on @Spotify. I'm so honored to host this pod & see others find value in it. Thanks to all our guests & a special thank you to all our listeners. This pod is possible because of all u degen legends

[CryptoLawProf (with a tax twist) @CryptoLawProf]

@RepFrenchHill @FinancialCmte Good luck!

[French Hill @RepFrenchHill]

I am delighted that in the 118th Congress, I will serve in the pioneering role of Chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion of the @FinancialCmte, and as Vice-Chairman of FSC.

My full statement, below:
https://t.co/Tz4S8obetR

[CryptoLawProf (with a tax twist) @CryptoLawProf]

And the best goes on...

[U.S. Securities and Exchange Commission @SECGov]

Today we charged Genesis Global Capital, LLC and Gemini Trust Company, LLC for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.

For more:

[CryptoLawProf (with a tax twist) @CryptoLawProf]

@KorokRay Congrats and welcome to the club!

[CryptoLawProf (with a tax twist) @CryptoLawProf]

The drama continues...

[Brian Quintenz @BrianQuintenz]

The CFTC filed for default judgement against Ooki DAO - likely their strategy from the beginning so that their unsupported and legally dubious rationale and overly broad assertions of liability could not see the light of day. This is not how good government should work.

[Brian Quintenz @BrianQuintenz]

The CFTC filed for default judgement against Ooki DAO - likely their strategy from the beginning so that their unsupported and legally dubious rationale and overly broad assertions of liability could not see the light of day. This is not how good government should work.

[Drew Hinkes @propelforward]

@IRSnews, in Rev. Proc. 2023-3 (IRS RPR), 2023-1 I.R.B. 144, announces it will not issue a letter ruling or determination letter on whether the securities loan rules or 1001 sale or exchange rules apply to the below transaction involving #virtualcurrency; /1

[CryptoLawProf (with a tax twist) @CryptoLawProf]

@Prof_STillman Have fun. I haven't taught that class for 6 years but it was my favorite.