Their stock price has been highly volatile in the last year. It's "holding up," but only by the hairs on its teeth. They're hovering very close to their 52 week low when the rest of the market is having a banner year.

Management said they don't need to raise funds to cover the capex needed to ramp up Model 3 sales to 7/week, which is (as confirmed multiple times by Musk) more than needed to turn a profit. They just need to turn a profit in Q3 to get the stock price back up and then, they might raise funds to finance the next products (Model Y, truck and Semi). Why raise funds when Wall Street bet on the company to go bankrupt? Raising capital in this environment would mean that the management don't believe in their ability to turn a profit. But then, why raise further equity and make the problem worse?

Occam razor: they expect to be profitable this quarter and are more patient than short-term speculators.

"Wall Street" is not betting on them to go bankrupt. Collectively, investors value this company that produces, at best, 7K cars a week at $45 billion. The idea that one quarter of profitability achieved through slashing capex to the bone fundamentally would fundamentally change their valuation doesn't carry much water in my view.

> "Wall Street" is not betting on them to go bankrupt.

27.88% of all shares in existence are short-sold. Its one of the biggest shorts on the market at the moment.

Wall Street is CERTAINLY betting that they're going down.

There's a difference between overvalued and bankrupt.

That's a solid point, and I guess the stock market is a bad figure to talk about bankruptcy.

Instead, we can look at the Bond market for that. Moody's rates Tesla 2025 bonds at Caa1, and today the interest rate on Tesla has risen above 8.8%

The bond market certainly is pricing in the risk of default and/or bankruptcy at this point. 9%ish bonds are really bad on a 7-year bond, especially in today's market that's got relatively low-interest rate.

I work at a hedge fund specializing in corporate credit. No serious market participants think that Tesla is going actually bankrupt but does run the risk of debt restructuring. Bankruptcy vs debt restructuring would happen under very different terms. As a better metric clogged by less noise, Tesla 1yr CDS is pricing in a 12% chance of default while 2yr is 20%. The bonds you mentioned should actually be a lot lower but they had a large retail allocation and are hard to borrow to short.

BTW, you mention the "interest rate" on those bonds when I think you meant yield. Very big difference.

> BTW, you mention the "interest rate" on those bonds when I think you meant yield. Very big difference.

I'm not very knowledgeable here, but is the key difference that yield is more a result of the market (i.e. bonds fluxuate in value but the return on the bond itself is fixed, so the yield reflects the relationship between cost and payout)?

He's right. I misused the terms. "Interest rate" isn't precise at all, and since we're talking finances, the details are actually important and I should have been more careful about which terms I used.

There is a "coupon", which is the amount a bond pays each year. Which is one kind of interest rate.

There is the "yield to maturity", and since Tesla's 2025 bond seems like a normal bond, so Yield implies yield-to-maturity. This is another "interest rate" but just saying "interest rate" is meaningless.

Since coupon vs yield is ambiguous, I should have used more precise language earlier.

> bonds fluxuate in value but the return on the bond itself is fixed, so the yield reflects the relationship between cost and payout

Yes.

If I were to hear interest rate mentioned in relation to a bond, I would assume they were talking about the coupon which in this case is fixed. I think you have the right understanding, various yield methods basically are just the IRR of the security under different assumptions. If you bought at par and held to maturity, the yield would be equal to the coupon which in this case is 5.3%. Without knowing where the bond is actually trading, given that it has a yield higher than its coupon, you know that it is trading below par; the difference is how much it is trading below par under the assumption you get 100% of the principal at maturity.

I wouldn't normally refer to the return as "fixed" as that is primarily only used in reference to the coupon and because of the fact that you mentioned earlier in that sentence; bonds fluctuate in price so the yield is regularly changing given a change in price.

>Collectively, investors value this company (...)

Most large investors are just holding. The small amount of shares that are exchanged every day are bought/sold by speculators and they are backed by institutions that get paid for this intraday activity. Also, with all the short positions on TSLA, the bank are risking an almost infinite sum of money (in case of a short squeeze).

Since Tesla doesn't intend to raise capital for the foreseeable future, banks can only gain from volatility or from a major event that would force Tesla to raise funds.

>The small amount of shares that are exchanged every day are bought/sold by speculators and they are backed by institutions that get paid for this intraday activity.

The largest shareholders were dumping shares last disclosure. Do you have data that says otherwise?

Tesla is more than just a car manufacture. I doubt self driving + solar + battery + charging network etc is worth the kind premium they have over just being a car company.

But, analysis based strictly on car sales a mistake, especially as established car companies outsource so much parts production.

Agree with Jacques M on solar, and would also add that much of the battery tech is Panasonic's and self-driving is a long ways away from being road-ready.

In terms of cash flow I agree.

But, if you had a company that just did self driving and had as many cars on the road as Tesla does people would value it. Likewise for a giant battery factory, or a company putting out those solar shingles even with just a handful of installs.

Now suppose they sell those lines of business off to some other company to free up some capital. It's a path through the cash crunch that may catch people off guard.

PS: I am not saying buy the stock, but I don't think it's dropping enough to become a 45 billion dollar company any time soon.

How are they going to sell the battery factory when it's owned by Panasonic, not Tesla?

Panasonic is a partner Tesla still put up money for the factory.

EX: Several companies could sell Hulu to free up some cash. The Walt Disney Company (30%), 21st Century Fox (30%), Comcast (30%), AT&T (10%)

The Solar is a liability.