Tesla’s (NASDAQ:TSLA) Elon Musk Future Uncertain, Criminal Charges Maybe Ahead

Tesla’s (NASDAQ:TSLA) Elon Musk Future Uncertain, Criminal Charges Maybe Ahead

Tesla’s (NASDAQ:TSLA) Elon Musk Future Uncertain, Criminal Charges Maybe Ahead

$TSLA

CEO Elon Musk’s future with Tesla (NASDAQ:TSLA) is a bit clearer after the company settled a securities fraud lawsuit with the SEC, but there are other clouds hanging over the niche EV maker.

Under an agreement announced Saturday by the Securities and Exchange Commission (SEC), Mr. Musk gets to remain CEO but must relinquish his Chairman’s role for at least 3 years. The commission’s complaint originally sought Mr. Musk’s removal as CEO too.

One immediate challenge for Tesla is to hire an independent Chairman to oversee the company and, just as importantly, its controversial leader. The settlement is forcing Tesla into bringing in some managerial help for Mr. Musk, which some investors have been calling for.

Tesla was on shaky financial ground even before securities regulators set out to remove Mr. Musk. It has been under pressure to prove it can consistently manufacture enough cars to survive.

Tesla will soon release its production volume for the July through September frame, likely by Wednesday. The manufacturing results will provide a gauge of Tesla’s financial health going forward.

Mr. Musk told investors he expected Tesla to produce an average of 7,000 EVs per week during Q-3, enabling the company to post a profit, something it has done just once since going public 8 years ago.

Tesla’s stock is now deep in Bear territory down 30% since hitting an all-time closing high of 379.57 on 7 August, the day Mr. Musk Tweeted about possibly taking the company private in the ‘420’ transaction, Tweets that sparked the SEC’s lawsuit, and a investigation by the US Department of Justice that could result in a criminal charge if insider trading, the same charge the Martha Stewart was jailed for,

The deep dive in Tesla’s market value may have influenced Mr. Musk to have an apparent change of heart and negotiate a settlement with the SEC. Earlier, Mr. Musk had rejected a settlement offer, then the SEC sued Thursday.

Mr. Musk maintained he had done nothing wrong when he posted the ‘420’ Tweet declaring that he had secured the financing to lead a buyout of Tesla from the Saudi PIF.

Here is Tesla’s business problem.

Tesla already has accumulated more than $10-B in debt while it has been burning about $1-B in cash every 1 months. It ended June with $2.2-B in the bank, meaning the company will likely have to borrow more unless it starts making money fast.

To compound matters, about $1.3-B in debt is due to be repaid by March 2019, including $230-M in November.

Analysts’ concerns about Tesla’s financial position will dissipate if the company began to make money in Q-3, as Mr. Musk promised the company would do.

Tesla is expected to release its Q-3 financial results in early November.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 264.77 28 September 2018 -42.75 270.26 278 260.55 33,546,506
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Bearish (-0.42) Neutral (-0.17) Very Bearish (-0.56) Very Bearish (-0.51)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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