Analyst Thinks Tesla's (TSLA) Musk is Talking Down Stock to Raise Money So it Doesn't Trip Debt Covenants
Shares of high-flying Tesla <TSLA> sank 10.3% on Friday after CEO Elon Musk tweeted that the stock price is "too high," leaving bulls scratching their heads as to why he would do such a thing. Bearish analyst Gordon Johnson of GLJ Research thinks he knows why.
In Johnson's view, Tesla is in "desperate" need of cash and at $700/share there is limited institutional demand to raise the $4-$5 billion he thinks the electric vehicle maker needs.
"So… in our opinion, E. Musk needs to get the stock price down before he potentially trips debt (etc.) covenant levels on actual cash on hand, or has to issue a going concern alert," he commented.
The analyst goes on to say that every week Fremont is down, Tesla burns $300 million. Further, he notes that based reports from the Chinese media, GF3 (i.e., TSLA’s Shanghai plant) sources just 30% of its parts from Chinese producers, with the rest come from Fremont. He is hearing that the China Communist Party is "agitated" by Tesla's delays to source more parts from Chinese companies, and, as a result, is pushing big price cuts, again, on made-in-China SR+/LR models as soon as July.
Fri, 01 May 2020 17:33:00 -0400
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