Elon Musk in the firing line over Tesla’s £8bn debt crisis after his aborted plan to take the electric car firm private
Elon Musk’s aborted plan to take Tesla private has damaged the electric car firm’s credibility and distracted it during a critical time, Wall Street analysts have warned.
They said the billionaire’s surprise announcement of a possible buyout on Twitter – and his subsequent U-turn less than three weeks later – showed the plans had not been properly thought through.
And it is feared the fiasco at a time when the company is struggling to become profitable could hinder Tesla in its battle to raise fresh funds.
Tesla boss Elon Musk’s announcement of a possible buyout on Twitter – and his subsequent U-turn less than three weeks later – showed the plans had not been properly thought through
The company has an £8billion debt mountain and is burning through hundreds of millions of dollars each month.
Musk has insisted he will not need to seek more cash from investors.
However the company’s troubles could also be worsened by rival electric vehicles being launched by European rivals.
Mercedes, Porsche, Audi and Jaguar Land Rover are all launching cars which could challenge Tesla’s dominance of the market.
Musk has been working 120-hour weeks as part of efforts to ramp up production of the company’s flagship Model 3 sedan, with the exhausted chief executive saying he was worried about the impact on his health.
Blaming the confusion around the buyout proposals, Canaccord Genuity slashed it price target for Tesla and said it had lost confidence the company would hit its production targets for the next quarter.
Analyst Jed Dorsheimer said: ‘What was at best a premature announcement has generated three weeks of distraction from one of Tesla’s most important quarters to date. We feel less confident in the company’s ability to meet its production guidance.’
Referring to Musk’s blog post last Friday, which said he was abandoning plans to take Tesla private, RBC Capital Markets analyst Joseph Spak added: ‘We think credibility has taken a hit. It has become clear that funding was not secured or there was not sufficient interest to take the company private.’
And Citi Research analyst Itay Michaeli said the debacle would refocus attention of Tesla’s finances.
Musk first tweeted his plan to take Tesla private on August 7. It caused the company’s shares to temporarily shoot up, prompting speculation about the deal – and an investigation by regulators over Musk’s claim he had ‘funding secured’.
The 47-year-old later revealed Saudi Arabia’s sovereign wealth fund was a possible backer but admitted its support was not formal yet.
Dorsheimer said: ‘Tesla will need to secure profitability by the end of the year to maintain solvency.’