Is Tesla Stock Price Going to $0

Tesla CEO Elon Musk likes to say that only two car companies have never gone bankrupt, Ford and Tesla.

While the statement is designed to inspire confidence in Tesla, it implicitly highlights the dangers of building a car manufacturing company.

Like airlines, automakers rarely survive. As Buffett often says, the utility of planes and cars is phenomenal but as businesses they are dog rough.

When it comes to Musk’s electric car company, the question has to be asked: Is Tesla Stock Price Going to Zero?

Tesla Model 3 Production Smoke and Mirrors

When the Tesla Model 3 was announced, demand was sky high. So high in fact that depositors gladly dropped $1,000 to reserve a vehicle.

Over time the optimism has faded and a significant percentage of these depositors have forfeited their funds.

And it’s really no surprise when you see recent headlines:

  • A disgruntled employee sabotaged the production line by starting a fire
  • 9% of salaried workforce fired at Tesla
  • Business Insider: only 100 cars vs 5,000 per week projected are making it off the production line
  • Fired Tesla safety director claims unreported workplace injuries
  • Morgan Stanley forecasts $3bn equity raise required by Tesla in Q3

And to compound the problems, Musk has been in the hot-seat for dismissing an analyst at the recent shareholder meeting for asking boring questions. It turns out those question were very pertinent to whether Tesla could hit its production goals for the Model 3.

 

Plus, a litany of contradictory statements have been released. On the one hand, Musk has projected 5,000 units per week by end of June and, on the other, he has claimed “radical improvements” are needed and he’s spending 24/7 at the Tesla factory.

It’s hard to rationalize that production is going well while the CEO needs to make radical improvements and is sleeping at the factory to hit his production goals.

Moreover, news headlines featuring Tesla car batteries going on fire crop up with sufficient regularity that Tesla PR personnel must be concerned about brand damage.

Elon Musk: Tesla, SpaceX, Boring Co.

 The Tesla Model 3 production issues may be a short-term hiccup. But even when these issues are water under the bridge, shareholders have much to worry about.

While Musk taunts short sellers with regular multi-million dollar purchases of Tesla stock, even he doesn’t have the deep pockets to fend off the market entirely when it turns bearish.

But perhaps more disconcertingly, Musk borrows heavily against his stock with some reports suggesting that a Tesla share price under $220 would could serious headaches for him financially.

And then there’s his focus. Musk is managing not only an electric car manufacturer but SpaceX, a private space transportation company, as well as Boring Co., which is designed to ease traffic congestion in LA and Chicago.

He’s even suggested that he would create a candy company that will make waves in the confectionary industry.

With so much to juggle, Elon Musk can only allocate a limited time to each project and perhaps that dispersion of focus is why some analysts are betting against Tesla big time. The latest analyst downgrade pegged the company’s true value at a share price under $100.

If the Tesla stock price history is anything to go by, volatility is the name of the game. Could it drop by 70% in value? And if so, could it go all the way to $0 like every other manufacturer except Ford?

The odds are against Tesla, but as Peter Thiel – early Facebook investor and partner of Musk at Paypal – stated, Never Bet Against Elon!

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