Remember last year, when Elon Musk launched his red Tesla roadster into space on a SpaceX Falcon Heavy rocket?
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He’s quite the showman, and it was quite a show.
Musk even went so far as to put a mannequin in a fancy spacesuit in the drivers’ seat, next to a screen that said “DON’T PANIC!” – a cosmic inside joke for all the “Hitchhiker’s Guide to the Galaxy” fans watching.
For a couple hours, us Earthlings and other ground-dwelling types could watch the space Tesla and its spaceman passenger on a live streaming feed, up there hurtling through the heavens.
The Tesla will be up there forever, “they” say, circling the Sun, out beyond the orbit of Mars, though CNBC quoted a couple of Canadian astronomers as saying there’s a 6% chance the Tesla will crash back to Earth sometime in the next 1 million years.
Back here on Earth, Tesla Inc. (NASDAQ: TSLA) has done a pretty good job of defying gravity, too…
… but I don’t need to be an astronomer to predict this space rock is going to come down hard to leave a big, smoking crater in the ground.
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But the impact from this catastrophic reentry is going to be so big, anyone can make some money…
Yes, Musk Is Quite the Showman… That’s the Problem
By now, it’s crystal clear Elon Musk is his own worst enemy. He’s a genius, without doubt, but somehow he can’t stop getting himself in hot water with the U.S. Securities and Exchange Commission (SEC) for tweeting idiotic, materially misleading non-facts.
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But that’s not why we’re jumping on the stock, though his grief in front of regulators could knock the stock if they put more pressure on him than anyone expects.
For us, that would be a good thing, and we can only hope.
The real, proximate reason for making this move: Tesla must pay back $920 million today on a bond they hoped investors would convert into equity.
Those investors are not going to do that, because for that conversion to make sense, the stock must be above $359.
It’s not. At $294 this afternoon, it’s not even in that solar system.
The cash Tesla’s using to pay back bondholders today amounts to a quarter of its cash on hand. The company’s perennially short on cash, and just because it still has some gas in the tank, it doesn’t mean it won’t have to scrape another billion or two out by the third quarter.
Rumor has it that Elon Musk’s been mortgaging his houses and resorting to other “borrowing” schemes. The only reason that’s likely is if he borrowed to buy more Tesla shares and he’s getting margin calls. But they’re just rumors.
Tesla’s been spending money as usual, but finally recognizes it’s not capable of generating the cash flow it was managing when it was taking pre-orders. Prices on cars have been cut twice in the past six months, which won’t help cash flow.
Sales are way down since the tax credits buyers relied on were cut in half to $3,750 in January. They’ll run out completely by mid-summer. That’s not going to help with cash generation.
That’s why Tesla’s had to lay off thousands of workers.
Its roll looks like it’s about to slow down or maybe hit a wall, which makes this stock the perfect short play right now. It’s down more than 8% today, and I think it’s got much further to fall. Go get ‘em.
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