Sunday, March 19, 2017

Tesla Bankruptcy Chances Increased Exponentially With The Capital Raise

Could Tesla be getting in over its head by cutting corners? The author of this article seems to think so.

In a stunning call with investors, Elon Musk, Chairman of Tesla apparently communicated to investors that the company expects to have first cars with largely production tooling in about 1 to 2 weeks. Setting aside any Reg FD issues, we believe that this call, along with the size of the planned capital raise has fundamentally changed the risk profile of Tesla.
  • Tesla communicated Model 3 ramp to investors ahead of the capital raise has disastrous consequences.
  • The small raise means Tesla will run out of money during a bad Model 3 ramp and make it difficult to get future raises on advantageous terms.
  • On the current path, we believe there is a better than 50% chance Tesla will be reorganized in the next 12 to 24 months.