Tesla has less than six months to go before the electric automaker enters complete insolvency due to chronic business problems, according to one Chicago-based investment group founder.
Analysts are blasting Tesla as the Silicon Valley company’s shares and bonds continue to flounder amid concerns about the safety of electric car technology. Tesla is not in financial condition to absorb any more bad news, one analyst told The Daily Caller News Foundation
“If you look at the financials, they are going to run out of money in less than three months,” Vilas Capital Management CEO John Thompson told TheDCNF in reference to what he sees as the company’s inability to deliver the family friendly Model 3. Tesla is making only around 975 Model 3s a week — well short of the 2,500-unit rate target by the end of this quarter.
Concern is growing over Tesla’s poor production performance. It managed to build a mere 260 Model 3s between July and September of 2017. That number is well below the 1,500 Tesla promised before the end of the fourth quarter of said year. Total orders for the wallet-friendly vehicle tumbled from a high of 518,000 to 455,000.
Production on the highly touted vehicle was expected to expand from 100 cars in August to 1,500 in September then plateau to 20,000 per month in December 2017. CEO Elon Musk promised to eventually produce 20,000 cars per month. The falling numbers coincide with Tesla’s inability to turn a profit.
“If you are losing a ton of money and you keep losing money, it’s like driving your car without a seatbelt,” Thompson said. His group is shorting sales of the 14-year-old electric vehicle company. “If you hit something, then you are dead. They are finding themselves in an unstable position.”
Tesla’s shares fell as much as 8.2 percent Tuesday to the lowest in nearly one year, while its debt is setting new all-time lows. Tesla’s stock and bonds are declining as analysts doubt the electric-car maker can reach production targets for the Model 3. A deadly Uber accident on March 19 also hurt the Tesla brand, which is inextricably tied to self-driving technology.
Shareholders approved a compensation package potentially worth $2.6 billion for Musk Wednesday in a test of their confidence Tesla’s leader. The compensation involves no salary but sets rewards based on Tesla’s market value rising to as much as $650 billion over the next decade.
Much of Tesla’s problems can be laid at the doorstep of the company’s willingness to stay wed to Musk, who splits time between running SpaceX and Tesla, tech investment group Devonshire Research Group (DRG) co-founder Matt Stack told TheDCNF.
“This is amazing. It’s a back-ended deal to himself alone. It shows profound degrees of embedded control Elon has over the board,” Stack said of Musk’s compensation package. “He’s (Musk) too commingled in the company; he needs to be replaced as the CEO immediately.”
Tesla’s move to acquire solar panel company SolarCity in 2016 was likely part of the automaker’s plan to attract “loss-tolerant” investors to avoid possible financial downturn, DRG warned investors. Loss-tolerant investors are capable of enduring massive amounts of loss in an enterprise, company or asset with or without knowledge of the loss — it’s a type of pyramid scheme, according to a report DRG published in May 2016.
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