Corona Capital Investment Letter – April 2019

Moving Up the Ladder

It is a long climb upwards but March and April saw the Fund
move by several large rungs up the ladder with March
performance up approx. 35%, and April gaining by a similar
degree (with one day of trading left to go). The primary factor
driving this ascending movement was our short position in Tesla,
(TSLA). The best news to report this quarter is not the beginning
of our Fund’s recovery, but that the endgame for Tesla is clearly
in sight and already in motion.
Some time ago we had identified Tesla as one of the
singularly most exceptional asymmetric risk/reward candidates
in our asset bubble universe with very real catalysts in near
term play: deteriorating operational issues, emerging
competitive threats, and worsening and suffocating credit
conditions. Was it not for the fraudulent and manipulative
actions of Tesla’s CEO Elon Musk,(recall the ‘funding secured’ for
the farcical’$420’ buy out, among many other dubious
machinations), this story would have already been working
profitably for our Fund months ago rather than the repeated
whipsawing it subjected our returns to since late last summer.
We responded by repositioning ourselves to the point where our
short in Tesla became the central risk asset in our Fund while
hedging to neutral our gold and gold miners’ positions.
What we foresaw in Tesla was an imminent collapse in
product demand concurrent with a proximate deterioration in

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the company’s liquidity position. This prediction was validated
last week when Tesla reported a disastrous first quarter,(Q1 19
saw a multitude of bombs including declining sales, compressed
gross margins, more executive departures, chaotic strategic
operational pivots, building inventory, increased legal and
regulatory scrutiny, and declining CapEx for a supposed growth
stock), and hinted at growing liquidity concerns. It is our belief
that the end is now very near. Absent a raise of fresh capital in
the needed amount of several billion dollars,($3B to $5B), which
we believe is now a virtual impossibility,(given the needed size
of the offering, regulatory hurdles, and reputational damage),
Tesla will likely run out of money in this current quarter,(Q2 19),
ending in June resulting in a possible bankruptcy reorganization,
or recapitalization at much lower equity prices.
While the stock price reacted negatively to the terrible
March quarter results, the equity valuation of Tesla presently
bears no correlation to a company with both feet in the grave.
As a result, we have fully maintained and even expanded our
short exposure to Tesla and see it as the single most opportune
driver to the Fund’s near term recovery in net asset value. At
present levels, Tesla’s equity is absurdly valued at par with that
of Ford Motors,(F), a company exponentially larger in terms of
sales and one with substantial profitability. In our opinion,
Tesla’s equity is headed quickly towards zero which doing so will
create large and quickly evolving returns for our Fund.
Gold and Gold Miners
The decline in Tesla has given us the opportunity to begin
lifting our gold miner hedges and re-establish long exposure to
the miners at an opportune time when this group has retreated

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after a sharp early year rally. Gold and the gold miners remain
as the single most important investment opportunity for the
Fund in the long side of the portfolio. The biggest news this
quarter for gold is witnessing the evolving failure of ten years
worth of misapplied monetary policy. In just three months from
late last year the Fed has been forced to completely reverse
itself from its goals of lifting rates and reducing its mammoth
asset holdings. We had been predicting this outcome for later
this year but didn’t expect it to happen as quickly as it did. The
catalyst for this change was a quickly deteriorating global
economy heightened by incipient trade wars combined with
bloated corporate, government, and personal debt levels.
There is a new financial crisis in the making and one which
will eventually create a significant outsized bull move in gold
and gold mining equity shares. But before we get to that
juncture there will be technical debt driven shortages of the US
dollar,(both by foreign and domestic investors), which we
believe will temporarily bring about a short lived decline in gold
prices that we will in turn use as our opportunity to reload on
gold and gold miners with our investment gains from Tesla. This
repositioning has already begun and we see gold and the gold
miners bringing the Fund back to the highest rungs on the
investment return ladder and beyond.
Our Outlook
Regarding Tesla, regarding gold, and regarding the present
bubble markets: we have confidence in how all of these stories
will end. We have never been more excited for how all these
opportunities will play out for the Fund. Tesla’s stock price will
head towards zero. Gold prices will be multiples of present

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levels. And the bubble markets will come to an end, badly and
with much volatility. With short positions in TLSA, cyclical semi
conductor equities, and longs in precious metals, mining
equities, and volatility, the Fund is already positioned to
capitalize on all of these outcomes, and we will work tirelessly
to deliver these expected returns to you our investment
partners. We will not rest till this objective is completed and we
are confident that in our next quarter’s update that we will
have made our biggest strides toward that goal. We are most
grateful for your continued support, and confidence in our
investment thesis1.

Kind Regards,

John Scurci
Partner and Chief Investment Officer
Corona Associates Capital Management, LLC

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contains forward looking statements, as defined by SEC Regulation D, and the Investment Act
of 1940, which are the original ideas and best judgments of the authors. The conclusions
expressed herein are not guaranteed, and past performance is not predictive of future results.
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