Monday, June 18, 2018

"Tesla short-sellers have been getting creamed, but they're still betting against Elon Musk anyway" (TSLA)

In pre-market trade the stock is down $2.87 (0.80%) at $355.30. Note the prices the stock stalled at on prior up-moves:

From CNBC:
  • Elon Musk insists Tesla does not need or want to raise equity or new lines of credit this year, but Goldman Sachs predicts it will need to raise $10 billion by 2020.
  • Tesla short-sellers say the company should, but can't, raise the capital it needs to pay off debts, fund operations and thrive in the long term.
  • Bears also believe the electric car maker is too risky for large investment banks to underwrite billions.
It's been a rough few weeks for investors betting against Tesla, one of the most-shortedstocks in the United States.

Tesla stock has rallied almost 17 percent since the company's early June annual shareholder meeting at which Chairman and CEO Elon Musk promised profitability in the third quarter. Shares kept trending higher this week, rising slightly after Tesla announced plans to lay off 9 percent of its workforce. Musk added $25 million worth of shares to his personal holdings.

Those with a positive outlook on the electric vehicle maker see Tesla's restructuring as a push for profitability. But the bears see the layoffs as yet another sign Tesla is in the middle of a cash crunch and believe it won't be able to raise the capital it needs to pay debts and fund operations.
Here's why:
Costly ambitions
Musk has maintained that Tesla does not need to raise equity or new lines of credit this year. But Goldman Sachs predicted Tesla will need to raise $10 billion by 2020 to keep going.

Darius Brawn, a hedge fund veteran who previously worked as a portfolio manager for SAC and Citadel, told CNBC he thinks $10 billion is a conservative estimate. He cites Tesla's plans to ramp up its Model 3 production, build new factories, make a new Roadster, Semi trucks and a Model Y vehicle, and to embark on large-scale production of its glass solar roof tiles.

Brawn, who has shorted Tesla personally, points out that it's highly unusual for a growth company to cut its planned investment spending, as Tesla did last quarter from $3.4 billion to under $3 billion.
Tesla's accounts payable stood at $2.6 billion as of March 31.

Without raising additional capital, Brawn said, the electric vehicle maker has enough cash to last for only a few quarters. He bases his estimates on its expected cash flow from operations, stated capital expenditure plans and credit agreements....
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