Tesla just months from total collapse, says hedge fund manager

Another Tesla demonstrates the makes built in barbecue feature neds some work (picture source: Zero Hedge
Another Tesla demonstrates the makes built in barbecue feature neds some work (picture source: Zero Hedge

The American electric-car company Tesla will be bankrupt within four months unless its CEO Elon Musk “pulls a rabbit out of his hat,” according to hedge fund manager John Thompson. “Companies eventually have to make a profit, and I don’t ever see that happening here, this is one of the worst income statements I’ve ever seen and between the story and the financials; the financials will win out in this case.” the head of Vilas Capital Management told Market Watch.”

Thompson manages $25 million and his Tesla short is the fund’s biggest position. He has been betting big against the electric automaker for years.

Last April, Tesla stock hit a record high of around $300 and continued to grow to $389.61. Nevertheless, Thompson’s fund still managed to churn out a 65-percent gain for the year. Since then, Tesla has fallen sharply and Thompson is confident his bet is about to pay off. Tesla shares were down more than 8 percent at Wednesday closing to $279.18. The hedge fund manager said that if his prediction comes true, his fund could surge by another 50 percent. He noted that he is investing $500,000 of his own money.

“Tesla, without any doubt, is on the verge of bankruptcy,” Thompson told clients in an email. He explained that funding will be hard to come by in the face of problems in delivering the Model 3, declining demand for the Model S and X, extreme over – valuation on the stock market, and a likely downgrade of its credit rating by Moody’s from B- to CCC.

Another fatal crash earlier this month that left a Tesla Model X smouldering on the shoulder of the southbound lane of Highway 101 in Mountain View has hammered Tesla shares to their lowest level in a year while pushing the yield on its debt above 7% (though an ill-timed downgrade from credit rating agencies also had something to do with that).

Once again, Tesla finds itself under scrutiny from the U.S. National Transportation Safety Board. The last brush with the regulator ended without incident – the agency ruled that a fatal Florida crash was the result of driver error, and that Tesla’s controversial autopilot software (which has been implicated in several fatal accidents) was not at fault, though this verdict should be treated with some scepticism as it is based on the fact that the car was on autopilot, which is not a technology sold as offering full vehicle autonomy. It seems odd therefore that a judge can say the driver was at fault when in fact the car should have a failsafe mechanism to prevent stupid drivers from abusing what is intended to be an electronic assistant.

As two teams from the NTSB sift through the evidence gathered from the site of the latest demonstration of Tesla’s self – immolating feature, the company said in a blog post published Tuesday night that it hasn’t been able to analyze any of the data collected from the scene – and therefore doesn’t yet know what caused the crash – because the car was so badly damaged, as Bloomberg reported.

The company hasn’t been able to retrieve the vehicle’s logs and is working with authorities to access them. Tesla hasn’t disclosed whether the driver had engaged Tesla’s partially autonomous driving system, known as Autopilot, when the crash occurred.

Interest in the effectiveness of self-driving technologies is at crisis thanks to a deadly Uber Technologies Inc. accident that happened days earlier involving an autonomous car and a woman who was crossing the street with her bicycle.

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