MarketWatch Analyst: Tesla Dangerously Low on Cash

By · January 10, 2013

Model S

As 2012 came to a close, MarketWatch's tech investor John Shinal issued a warning about Tesla's financial condition. "Without the hundreds of millions of dollars Tesla has received from the federal government this year," he said, "the electric-car maker’s financials would be gasping for air." He portrayed Tesla as a top Silicon Valley candidate for a stock collapse in 2013, unless the company can secure additional cash.

Shinal said that the company’s financials were in worse shape than struggling post-IPO Internet outfits such as Zynga and Groupon.

“As of September 30, Tesla had cash and short-term securities of $86 million, down from $280 million at the start of the year. That leaves Tesla with less than six months’ worth of cash, given that it burned through almost $200 million during the first nine months of 2012.”

John Shinal

Shinal pointed out, "In spite of Tesla’s sketchy finances, however, its shares are up more than 30 percent since early November." Since Dec. 20, when Shinal wrote his piece, the stock price has fluctuated within a tight range between $33 and $35 a share.

The story creates a dire picture of Tesla's incoming cash not matching its expenses. This leaves the automaker in the red and in desperate need of funds. Those funds could come from sales of the Model S, the company's landmark electric luxury sedan, but Tesla will have to quickly ramp up production in order for Model S transactions to provide necessary funds for the company.

The more likely route for Tesla is to secure outside funding, either from the federal government or investors. Tesla has previously received investment from Toyota and Daimler. Some analysts speculate that Tesla could seek more help from established automakers interested in funding the electric vehicle manufacturers operations—and piggybacking on the company's growing reputation for EV innovation.

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