Bankrupt by December? New report says Tesla spend $10k a minute
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Lordy it's been a heck of a year for Tesla.
The Model 3 launched to critical acclaim, only to later be at the centre of multiple production 'bottlenecks'. It's 'autopilot' technology has been called into question after a series of serious crashes, including a recent fatal crash. And amidst these things as well as the Roadster and Semi truck they announced late last year, they also sent a car into space.
We've known for a long time that the company operate a little bit differently than others in the motoring space, and for many that's a good thing. But finances and that whole 'yet to make a profit' thing have been matters in the background. And now a new report from Bloomberg has cited that the company could be out of money by the end of the year.
The comprehensive report, which you can read in full by clicking here, shows that Tesla are carving through money like there's no tomorrow — approximately NZ$10,000 every minute or $13million each day.
Bloomberg reports that Tesla's free cash flow has been negative "for five consecutive quarters". In fact, only four quarters out of the previous 33 (dating back to late 2009) have shown positive statistics. These numbers represent just a portion of what Bloomberg uncovers, with long-term debt, employee growth, rate of revenue per employee, and customer deposits (a figure on the increase), all featured in their self-sourced figures.
Perhaps the most telling paragraph, though, is this one:
“Bruce Clark of Moody’s Investors Service recently that Tesla will need an additional $2 billion this year, and he noted that $1.2 billion of existing debt will come due by 2019. Short sellers remain convinced that Tesla is on the verge of an epic meltdown. Famed investor Jim Chanos of Kynikos Associates has predicted the company is headed for a “brick wall.””
Followed by ...
“[Jeff Osbourne of Cowen & Co.] predicts Tesla will need to raise $3 billion by selling stock during the fourth quarter and an additional $2 billion in late 2019 to keep company resources above $1 billion in cash.”
All of that increases the pressure on the company to start turning over some kind of profit, which was initially slated to come from a scheduled production of 5,000 Model 3 sedans every month. But since that number's been impossible to match thus far — assuming that trend continues — the money will need to come from elsewhere to ensure that Tesla doesn't seize up before Christmas.
Of course, bail-outs have proven common in the American motoring space in the recent past, with several US automakers pleading on their hands and knees for Government assistance after the global financial crisis. Not to mention other manufacturers exploring dire straights as profits floundered.
The difference here is that Tesla's script cannot be predicted. In the same dire straights, they took the opportunity to announce a 400km/h supercar and a semi truck ... “There’s not another CEO in America who is taking as enormous of a financial risk on their company,” says Ross Gerber from Gerber Kawasaki Wealth & Investment Management.
He's not wrong.