Tesla Inc. has been a slow-motion train wreck.
All thanks to un-CEO-like behavior from Elon Musk.
Shares soared to a high of $389 after Musk’s tweet that he was “considering taking Tesla private”. Then shares plunged when it was revealed that he hadn’t secured financing to do so. The tweet about taking Tesla private opened a can of worms with the U.S. SEC.
Then, a couple weeks later, he accused one of the cave divers that rescued the trapped Thai soccer team of being a “child rapist”. Over the weekend, he smoked pot on a podcast.
Matters got worse when the company revealed that Chief Accounting Officer, Dave Morton has resigned over the intense public attention.
"Since I joined Tesla on August 6, the level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations," Morton said, as quoted by CNBC. "As a result, this caused me to reconsider my future."
Other members of management jumping ship include HR chief, Gaby Toledano, and Vice President of Communications, Sarah O’Brien.
A few days ago, Goldman Sachs reiterated its sell rating on the stock with a $210 price target, thanks to the company’s debt-riddled balance sheet and electric vehicle competition.
However, Tesla has managed to ramp up its Model 3 production, which could temporarily help it stop burning through its cash. With that, analysts at Oppenheimer believe the company could meet its Model 3 production and profitability targets.
Therefore, the stock is a buy, Oppenheimer noted a few days ago.
The other good news – Elon Musk tweeted, “Tesla was “1st, 2nd & 3rd in August sales'" (for U.S. electric automobiles).
Still, there are doubts on sustainability of that free cash flow.
That’s because of mounting debt issues. Net debt has almost doubled to $9.2 billion in a year. And about $7.5 billion of that debt will come due in the next four years.
Musk will tell you the company won’t need to raise more cash, but there are skeptics.
Goldman Sachs believes Tesla will need to raise significant capital in 2019.
"While we see the potential for a better near-term backdrop with growth in Model 3 production/deliveries driving positive [free cash flow] in the second half of 2018, we believe this will likely not be sustained as working capital tailwinds abate and as spending ramps back up after a period of cash conservation,” as quoted by U.S. News.
And Cowen believes Tesla will need to raise $2 billion this quarter, which could be challenging with an SEC investigation.
While there are bright spots for Tesla, recent negativity, and outrageous behavior from Musk could be damaging to the stock, near-term.
We’ll continue to keep you aware of Tesla developments.