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&l;p&g;It is amazing to me that Tesla stock closed the penultimate day of February above $350 per share and today is struggling to hold $295 per share. &a;nbsp;The volatility in TSLA shares has bitten the longs with a 15% decline in 19 trading days, and the bulls are struggling to make coherent arguments.&a;nbsp; That points to the most pressing issue facing Tesla and its CEO Elon Musk: time.

&l;span style=&q;font-weight: 400&q;&g;The Tesla bull case is based on the idea that TSLA will dominate a future world in which battery-electric vehicles (BEVs) and autonomous vehicles (AVs) are prevalent in global markets. &a;nbsp;The problem with that argument is that Tesla &l;/span&g;&l;b&g;&l;i&g;already&l;/i&g;&l;/b&g;&l;span style=&q;font-weight: 400&q;&g; dominates the global market for BEVs, and yet the company burned through $3.5 billion of cash last year. &a;nbsp;The Tesla Model S is the most important automotive product of this generation, it is undeniably the car of the century (thus far,) but what does that get Tesla shareholders? &a;nbsp;Nothing in terms of real economic returns.&l;/span&g;

&l;img class=&q;dam-image ap size-large wp-image-86e7bc6fb47b490a952fc4c00f79f337&q; src=&q;×0.jpg?fit=scale&q; data-height=&q;741&q; data-width=&q;960&q;&g; Elon Musk, founder, CEO, and lead designer of SpaceX, speaks at a news conference after the Falcon 9 SpaceX heavy rocket launched successfully from the Kennedy Space Center in Cape Canaveral, Fla., Tuesday, Feb. 6, 2018. (AP Photo/John Raoux)

&l;span style=&q;font-weight: 400&q;&g;It astounds me that the incredibly well-capitalized global auto sector–I delineated the size of their cash hoard in &l;a href=&q;;&g;this&a;nbsp;&l;/a&g;&l;/span&g;&l;i&g;&l;span style=&q;font-weight: 400&q;&g;Forbes&l;/span&g;&l;/i&g;&l;span style=&q;font-weight: 400&q;&g; article–let Musk beat them to the punch with the introduction of the Model S in 2012. &a;nbsp;But that&s;s history, and not a single one of my contacts at global automakers–I followed autos as a sell-side analyst for 11 years and still have many friends at the OEMs–is worried about Tesla&s;s Model 3. &a;nbsp;This is for the simple reason that Tesla simply cannot make this model in volume, and Musk&s;s target of production of 2,500 Model 3s per week by mid-year is not taken seriously by my contacts in the automotive world, including those at companies that supply components for that model.&l;/span&g;

&l;span style=&q;font-weight: 400&q;&g;So, that&s;s the temporal aspect again. &a;nbsp;Eventually Tesla will make Model 3s in volume say the TSLA bulls, but the bearish argument is summed up in one word: when? &a;nbsp;The clock is ticking for Tesla owing to the fact that the company issued $1.8 billion in debt last August. With Tesla reporting negative EBITDA for the past two quarters–and my modeling shows it will be negative again in the first quarter of 2018–something&s;s gotta give here. &a;nbsp;&l;/span&g;

&l;span style=&q;font-weight: 400&q;&g;Issuing straight debt was a colossal mistake by Tesla, and those bonds are now trading at about 92 cents on the dollar; yielding 6.65% versus a coupon of 5.3%.&a;nbsp;&a;nbsp;&l;/span&g;&l;span style=&q;font-weight: 400&q;&g;Tesla has convertible bonds expiring in June this year that were issued in 2013 with a 1.5% coupon and a conversion &a;nbsp;price of $124/share. That was a huge win for the company, and I have no idea why Tesla doesn&a;rsquo;t keep issuing converts to its legion of numbers-blind devotees on the buy-side. &a;nbsp;The only reasonable explanation is that Musk doesn&s;t want to incur further dilution as a current–and TSLA&s;s largest–shareholder.&l;/span&g;

&l;span style=&q;font-weight: 400&q;&g;Tesla needs to tap the equity markets for a follow-on offering very soon, but the fall in the value of TSLA shares means that to raise an appropriate amount of money, TSLA will need to offer more shares than it would have a month ago, thus incurring even more dilution. &a;nbsp;It&s;s a vicious circle, but if Tesla does not raise at least $2 billion, in my opinion, the company will not be able to fund its obligations in 2019.&l;/span&g;

&l;span style=&q;font-weight: 400&q;&g;So, time is of the essence for Tesla and Musk. &a;nbsp;Elon needs to swallow his male pride and swamp the markets with TSLA shares, which, other things equal, will cause the shares to decline. &a;nbsp;The alternative is for Tesla to run out of time. The company factored its leases in January, and there simply are no more financial levers to pull. &a;nbsp;If Tesla does not raise capital in the next three months, I believe it will be increasingly difficult for TSLA to convince its business partners that it is a viable entity. &a;nbsp;And let me tell you, that is exactly what the other automakers want to see.&l;/span&g;

&l;!–nextpage–&g; &l;span style=&q;font-weight: 400&q;&g;It may indeed be better to burn out than to fade away, but if you hold TSLA shares you need to prepare yourself for the very real possibility that Tesla will cease to exist within 12 months. &a;nbsp;Without fresh capital that&a;rsquo;s the most likely outcome, in my opinion. It&s;s scary prospect, but with a market valuation of $49 billion–still not even remotely priced into TSLA shares.&l;/span&g;