The coronavirus disease COVID-19 crisis is a challenging time especially for companies that do not illicit net profits.
Tesla, the electric vehicle manufacturer is a case in point. For full year 2016, 2017, 2018 and 2019 Tesla reported net losses for each year of significantly more than 500 mln. USD. Or if rounded, approximately 1 billion USD losses for each of the last 4 reported years.
Tesla has approximately 6 billion USD cash on hand. But Tesla also has 16 billion in long-term debt an billions USD more in short-term debts:
https://finance.yahoo.com/quote/TSLA/balance-sheet?p=TSLA
For now, Tesla has been able to survive the above-mentioned huge cash burn by raising funds from its shareholders. Tesla is notoriously unprofitable.
If in the next 2-3 years Tesla does not become profitable, Tesla could well go out of business. Now, due to the coronavirus disease COVD-19 automobile sales are falling to a standstill for virtually every automobile manufacturer around the world. Tesla reportedly recently partly shut down its Fremont California plant or basically was ordered to do so by the California authorities.
https://www.latimes.com/business/story/2020-03-18/coronavirus-tesla-fremont-plant-shutdown
Tesla's 6 billion USD cash cushion may not last long. Tesla needs to be producing and selling cars to survive. Doing just that is almost impossible as things stand. If the coronavirus economic malaise goes on for a couple more months almost ceasing all economic activities around the globe Tesla could suffer a huge valuation setback and Tesla's stock could trade at 100 USD compared to 900 USD just two months ago. At 100 USD Tesla would be valued at just 18 billion USD, which means Tesla will trade at distressed valuation and its future as a going concern could be in jeopardy.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
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Respectfully yours,
Petar Posledovich
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