You have to hand it over Elon Musk. The multi-billionaire knows how to get the media's attention, albeit in one Michael Avenati Kind of way. Whether he had 'secured' the money to make Tesla private at $ 420 a share was sued by the Securities and Exchange Commission when he said the funding was not being made and mocked the agency after it had agreed filing him with securities fraud charges (But before a judge approves the deal, or smoke a spliff on an internet radio show, the guy is a bona fide hornet's nest for the shareholders.
At a time when we are all overloaded, like my colleague Nick Bilton Noting Musk's ability to cut through the stacks of gibberish with his own version of it was probably quite effective at drawing attention to his $ 40 billion electric car maker Tesla; Space X, its rocket ship company; and to the Boring Company, his company building an underground tunnel in California. (Good luck for you James Murdoch, a board member who is said to rise to chair to curb this behavior.)
But is Wall Street getting sick of its shit? Just as there seems to be a broad consensus in the financial cannons, it would be better if 47-year-old Musk no longer behaves like a boisterous teenager and more like a corporate boss, there is still disagreement about where Tesla is going. Is it in bankruptcy, soon in the possession of stiffened creditors, or is it on the way to the next Amazon Lite? That seems to be the burning question among Wall Street analysts right now.
Some like Maynard Um, At Macquarie Research, his coverage of Tesla on Tuesday began with an "outperform" rating and a stock price target of $ 430 per share, a shy $ 10 per share higher than the marijuana-inspired price at which Musk said he would go private companies in August. Um wrote that Tesla is a "disruptive technology growth company" in the "equally disruptive markets for electric cars, energy storage and power generation." He predicted that Tesla would achieve "profitability" in the second half of 2018, given that Tesla had an operating loss of $ 1.7 billion in the first six months of the year. Tesla's share price these days is about $ 250, so Um, and any investor who takes his advice to buy the stock, could wait a long time for up to $ 430.
Then there is the Berenberg Bank, which is in the great tradition of Henry Blodget and Amazon of yore, has a $ 500 price target on Tesla. The market, according to the small 428-year-old German investment bank, "underestimates the full extent of Tesla's technological edge … that manifests itself in the entire electronic architecture of the vehicle and the battery management system."
Perhaps the market is focusing more on Tesla's production problems, its ongoing operating losses, its impending debt payments – $ 1.8 billion of Tesla's $ 11 billion debt due in the next 13 months – and its dwindling cash balance. Fahmi Quadir, The founder of the tiny capital city of Safkhet is famous for calling Valeant Pharmaceuticals early on. Hedge fund managers Bill Ackman just as famous lost more than $ 4 billion bets the opposite would be true. In July, Quadir began to bet that Tesla's share price would fall.
Quadir told Bloomberg yesterday that Tesla is "between a rock and a hard place" because it needs more capital – some say more than $ 2 billion more in the future – and will probably be forced to raise new capital in the stock markets a discounted rate, or on the debt markets, already stifled by Tesla's debt. If Musk goes the debt path, he'll probably have to pay for it. The company's senior notes, which were issued at a rate of 5.3 percent last year, now yield 8.65 percent, which means that Musk is likely to have at least 8.65 percent and probably more pay investors to them convince them to buy a new issue of Tesla debt. "It's becoming increasingly obvious that Tesla is having trouble paying her bills," Quadir said. "I've seen a lot with Valeant."
Another indicator of problems is rising costs for investors who want to assure the risk that Tesla will not pay its debts. The premium required to insure Tesla bonds worth $ 10 million if they fail at some point in the next five years is now $ 2 million. Two months ago, these costs were under $ 1.3 million. In other words, the market is telling investors that the risk of a default on Tesla is on the increase, and if you want to do anything about whether you own the Tesla bonds or not, it will cost you $ 700,000 more this bet today than it would have two months tasted. Part of what the debt market is doing with Tesla is three threatening convertible bonds due in the next 13 months. If the Tesla share traded higher than the current price, the creditors would convert the debt into equity, and the problem would disappear. But, for example, the $ 920 million convertible bond due in March will have to be repaid by Tesla, some of the $ 2 billion, about half of what it had a year ago, unless the Tesla Stock trades at $ 360 and that seems increasingly unlikely.
If Musk cares, he will not let it happen. Last week, in an e-mail to staff, he said Tesla was "very close to achieving profitability and misguiding naysayers." He recently tweeted about Tesla's Model 3 with the "lowest injury probability" of any vehicle tested. whatever that means, he has returned the message that the Model 3 is the country's best-selling American-made car. On Sunday he also trumpeted the recent successful launch and landing of one of his Space-X missiles from an air force base in California.