Elon Musk once confessed openly that Tesla was on the verge of extinction when it launched the production of the Model 3. Late last year, he reportedly warned staff at his other major company, SpaceX, that it was at imminent risk of failing if production problems with its Raptor 2 engine could not be solved. So when the centibillionaire on Wednesday sought to dispel the notion he had fallen out of love with crypto after divesting the bulk of Tesla's $1.5 billion investment in Bitcoin, perhaps he didn't realize how he inadvertently opened a new can of worms.
"This should not be taken as some verdict on Bitcoin," he told investors, attending the quarterly earnings call in his words to explain the quarter's spate of bad news. "It's just that we were concerned about the company's overall liquidity." Usually the words "concerned about the company's liquidity" should be an immediate red flag. But Musk managed to convince shareholders the worst is behind it—their primary concern going into the Q2 report—as the cash crunch ensued following the COVID lockdowns that shut down production at its Chinese factory in Shanghai.
"We have the potential for a record-breaking second half of the year," he said, even as his team cautioned that the goal of a 50% sales increase to roughly 1.4 million cars in 2022 is becoming more challenging. Shares subsequently enjoyed a 7% bounce in Thursday's session, a vital trading day even by the EV manufacturer's standards. The comment is nonetheless troubling because there should be no reason for a company with a balance sheet as robust as Tesla's to worry about cash stretching thin. Meanwhile, funding requirements do not come close to the money it holds in its treasury. Even in 2021, when Tesla doubled its annual Capex spending to build two new manufacturing plants, it still only invested $6.5 billion in cash. Nor does Tesla pay a dividend that could drain its coffers.
Just how concerned shareholders should be is a difficult judgment to make with any precision, because Musk is known as a showman with a penchant for embellishment. In a single interview last month, he managed to reveal his plants in Germany and Texas were "gigantic money furnaces," that his company was really just an all-or-nothing bet on autonomous driving, and that automakers are "desperately trying to go bankrupt at any given time" because the business is so capital-intensive.
Consequently, Musk's polarizing management style tends to attract two types of investors to the stock: those who think Tesla will overtake Apple as the world's most valuable company and those who believe it's the next Theranos.
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