Outside of the spotlight of Tesla’s recent unveilings, there exists a dark void known to very few of its shareholders: at the rate that the company is burning cash, it could be broke by August.
While the company’s stock price has been on a rally, being valued at above $300 per share since April of 2017, if Tesla doesn’t take action in the next few months, that rally will quickly come to an end. As a growing company, Tesla technically still has yet to make a profit as the manufacturing and research & development teams continue to plow through cash in search of the next big innovation in the electric cars industry.
What does this mean for Tesla’s army of engineers and their general, CEO Elon Musk, who recently signed on for another ten years? If sales and revenue don’t increase promptly, they will have to either accrue more debt to keep the company afloat, or raise more cash from shareholders, an unlikely and last-resort option.
Even so, people have been predicting Tesla’s death for years. About twenty percent of the company’s shares are being sold short right now, and even in 2015, a group of Auburn University business students released a 35-page manifesto detailing all of the reasons to go short on Tesla. If you had followed that manifesto’s advice, you would have lost more than 150% of your original investment.
Tesla’s (ticker $TSLA) stock performance over the past year.
Data courtesy of Google Finance
At this point, a great deal of Tesla’s success rests on the Model 3, which has been hailed as the company’s way of tapping into the economy car market. According to a recent report by Business Insider, if the Model 3 reaches the sales target that Tesla has set, then the company will eventually become more financially efficient than General Motors, the automotive behemoth. Tesla’s reputation for succeeding despite all odds certainly makes it difficult to give credence to reports of its imminent failure.