Tesla spends a lot more than what it earns. The electric car maker will never turn a profit, and as a result the company will go bankrupt. But that theory just got busted as investors, including Volkwagen A.G were showing interest to invest in the Tesla when CEO Elon Musk was planning take the company private.
The Example:
“That may work one more time, and then he’s going to run out of money again, and then he’s cooked. At this rate, Chapter 11 is a certainty.” – Bob Lutz.
“Lutz could be right, and Lutz could be wrong, but he’s been around the car business long enough to know when the endgames are afoot,” wrote Business Insider author Matthew Debord.
He added, “I’ve been covering Tesla for a decade, starting at about the same time the company evaded its previous brush with Chapter 11 in 2008. Lutz is right. Tesla is close to the edge. Investors need to start thinking not just about the stock tanking from its current height, nearly 1,000% of the 2010 IPO price – they need to start thinking about being how they could get wiped out. ”
What is Bankruptcy:
Bankruptcy is a legal term used when a person or business cannot repay their outstanding debts.
Why “Tesla will go Bankrupt” has become a Myth:
According to various reports, Elon Musk’s financial advisors lined up investors who were willing to fund in the tens of billions of dollars in a private Tesla.
Earlier this month, reports emerged that Saudi Arabia’s Sovereign fund had built a 3% to 5% stake in Tesla.
Tesla or any other company for that matter cannot go bankrupt when there are buyers ready to invest in the company. If Tesla gets closer to the edge, they can just sell themselves to the highest bidder.
Why Tesla will always remain a huge buying opportunity for competing automakers?
The most interesting part of Tesla’s go-private plan was the revelation that Volkswagen AG was ready to invest in Tesla. Tesla is a huge opportunity for any automaker that wants to give itself a huge electric start in the auto world.
-
At the time of writing this article, Tesla had 1,332 supercharging stations with 10,901 superchargers. The supercharger network itself will be worth in the billions of dollars and will be a huge revenue earner for decades to come.
-
Tesla Model S, with a EPA-rated range of 335 miles is still the only all electric luxury sedan to offer such long range. No other electric car in production comes even close. Tesla’s lead in battery tech is unrivaled and could be worth in the tens of billions.
-
Tesla is great hedge for companies/countries who derive their revenue primarily from oil. If push comes to shove, even the Saudis might consider taking a bigger stake from the open market.
