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Why Tesla Could Go Bankrupt

Dear Rundown Reader,

Elon Musk’s vast wealth essentially backstops all his business ventures.

What happens if Tesla continues down this low-production, low-quality-when-they-do-produce path?

Well, Tesla goes bankrupt, that’s what happens. Below, we look at how it could happen.

Your Rundown for Tuesday, April 3, 2018…

Big Trouble In Muskville

Tesla’s back in the headlines.

In the worst possible way.

March was officially Tesla’s worst month in seven years, according to Bloomberg.

Year-to-date the stock has fallen over 21%.

The slow spiral over the past three months had moments of recovery. But as we move into the second quarter of 2018, things look pretty dismal in Muskville.

Over the past 30 days Tesla shares have sank 24.6% from $335.12 on March 2 to yesterday’s close of $252.48.

The chart is ugly:

tesla

Making light of Tesla’s troubles, Elon Musk tweeted Sunday that:

“Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt.”

A lighthearted April Fool’s joke, he said.

Investors saw little to laugh about.

The sell-off continued Monday as the stock dropped another 5% from Friday’s close of $266.13.

It’s no secret production woes are killing Tesla.

The company has promised to hit a production goal of 2,000 cars per month by April. Most experts are taking a wait and see approach after getting burned multiple times before.

Bloomberg estimates, “Tesla is building about 1,190 Model 3s a week as of Sunday.”

This means thousands of consumers who placed $1,000 deposits for the Model 3 will be kept waiting. How long will they wait before they jump ship?

Fool me twice then… We’ll go with Bloomberg’s assessment over Elon’s.

Tesla is a mess right now and the company has reached a crucial make or break moment.

Unfortunately, it looks like things will get worse before they get better.

According to NBC News, Tesla is now recalling almost half of the Model S vehicles it sold to date after discovering corroding bolts could lead to power steering failures.

Tesla can’t get the product out and when they do can’t keep them on the road.

According to a CNNMoney report, Tesla “has more than $1 billion in loans coming due over the next 12 months with $230 million due in November and $920 million next March.”

No product means no revenue. Tesla needs to figure things out fast or the real joke will be how Elon Musk foretold of Tesla’s demise on April 1, 2018.

Now, turning to the markets this morning…

Market Rundown for Tues. April 3

S&P 500 futures are up 17.25 to 2,592.

Oil sits at $63.40.

Gold goes for $1,343 this morning.

Bitcoin’s up a bit to $7,353.35, according to CoinDesk.

We’ll talk again on Wednesday.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown. Aaron’s been with Agora Financial/Seven Figure Publishing for 13 years. He's been covering technology and markets for over a decade.

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