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1/ The coronavirus disruption could have a long-lasting impact on Tesla, and may even find it difficult to maintain operations with its depleted cash reserves. Let's discuss. $TSLA $TSLAQ
cc: @montana_skeptic, @BradMunchen, @quirkyllama, @TESLAcharts https://seekingalpha.com/article/4336947-tesla-faces-coronavirus-cash-crunch
cc: @montana_skeptic, @BradMunchen, @quirkyllama, @TESLAcharts https://seekingalpha.com/article/4336947-tesla-faces-coronavirus-cash-crunch
2/ $TSLA reported $6.3B in cash at the end of '19 & raised $2.3B through a Feb. stock sale. That may seem like plenty, but it could prove insufficient to carry it through a protracted crisis. Moreover, $TSLAQ may well have less cash on hand than its financial statements imply.
3/ Tesla reported just $9.9M in interest income for Q4, which makes little sense if it really had $6.3B in cash at the end of '19. @quirkyllama has highlighted this discrepancy by comparing Tesla’s reported interest income to that of GM:
$TSLA $TSLAQ $GM https://twitter.com/quirkyllama/status/1247239692300345344
$TSLA $TSLAQ $GM https://twitter.com/quirkyllama/status/1247239692300345344
4/ What this means is that, if Tesla’s cash management operations are generally on par with those of other automakers, then it must not have had significantly less cash in the bank during most of the Q than it reported having at quarter-end.
$TSLA $TSLAQ https://seekingalpha.com/article/4336947-tesla-faces-coronavirus-cash-crunch
$TSLA $TSLAQ https://seekingalpha.com/article/4336947-tesla-faces-coronavirus-cash-crunch
5/ This sort of cash balance padding is hardly new to Tesla. In March 2019, the FT explored a long-running discrepancy between Tesla's reported cash balance at the end of each Q and the cash balance implied by its reported interest income.
$TSLA $TSLAQ https://ftalphaville.ft.com/2019/03/05/1551787633000/How-much-does-Tesla-have-in-the-bank-/
$TSLA $TSLAQ https://ftalphaville.ft.com/2019/03/05/1551787633000/How-much-does-Tesla-have-in-the-bank-/
6/ The FT determined that Tesla was likely padding its cash balance ahead of its quarterly reports by drawing on a revolving credit facility. While legal, this can give unwary investors the impression that a co.'s balance sheet is stronger than it really is.
$TSLA $TSLAQ
$TSLA $TSLAQ
7/ While Tesla current cash balance can't be known with certainty, it's possible to make a credible estimate. @BradMunchen has crunched the numbers (cc: @rschmied)
$TSLA $TSLAQ https://twitter.com/BradMunchen/status/1247241020980355072
$TSLA $TSLAQ https://twitter.com/BradMunchen/status/1247241020980355072
8/ By this calculation, $TSLA's real liquidity is ~$8.6B: $5.6B in cash & $3B in a long-standing credit facility. At first glance, that might seem like a lot. Yet Tesla has an onerous cost structure, including the extensive fixed costs that are the norm for all automakers. $TSLAQ
9/ With no production or sales, Tesla faces quarterly operational cash burn in excess of $1B, even with capital expenditure reduced to nothing, as @montana_skeptic (with a big assist from @Badger24) recently observed:
$TSLA $TSLAQ https://seekingalpha.com/article/4336213-for-tesla-coronavirus-changes-everything?li_source=LI&li_medium=liftigniter-widget
$TSLA $TSLAQ https://seekingalpha.com/article/4336213-for-tesla-coronavirus-changes-everything?li_source=LI&li_medium=liftigniter-widget
10/ Tesla has taken steps to mitigate some of its costs. It's furloughing pretty much all manufacturing staff & slashing pay of those who remain. This will reduce cash burn somewhat, but it can only slow the financial bleeding.
$TSLA $TSLAQ https://www.wsj.com/articles/tesla-cuts-salaries-furloughs-workers-under-coronavirus-shutdown-11586364779
$TSLA $TSLAQ https://www.wsj.com/articles/tesla-cuts-salaries-furloughs-workers-under-coronavirus-shutdown-11586364779
11/ Automakers are in the hot seat as Covid-19 continues to stymie economic activity. Profitable firms, with billions in the bank (& billions in credit facilities) have been subjected to intense scrutiny. Even $F's debt has been cut to junk.
$TSLA $TSLAQ https://www.bloomberg.com/news/articles/2020-03-23/ford-cut-by-fitch-as-coronavirus-batters-economy?sref=ureuRJUv
$TSLA $TSLAQ https://www.bloomberg.com/news/articles/2020-03-23/ford-cut-by-fitch-as-coronavirus-batters-economy?sref=ureuRJUv
12/ Tesla is in a far more precarious position than its leading competitors, most of which are bigger, more firmly established, better-capitalized and consistently profitable.
$TSLA $TSLAQ
cc: @TESLAcharts https://finance.yahoo.com/news/tesla-braces-delivery-collapse-amid-185453905.html
$TSLA $TSLAQ
cc: @TESLAcharts https://finance.yahoo.com/news/tesla-braces-delivery-collapse-amid-185453905.html
13/ With billions in planned capex & more than $11B in long-term liabilities, $TSLA's finances were shaky even before the crisis. If shutdowns persist, $TSLAQ may find its cash depleted, a big problem for a co. that's failed ever to post an annual profit. https://seekingalpha.com/article/4336947-tesla-faces-coronavirus-cash-crunch
