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Home / Business / Tesla's challenges are back in the spotlight after the private spectacle ends

Tesla's challenges are back in the spotlight after the private spectacle ends



It's back to "making hell" for

Elon Musk.

Now that Mr. Musk has suppressed the effort

Tesla
Inc.


TSLA -1.10%

Private, the limelight will once again fall back on the operational challenges of the automaker, namely, whether it can maintain its grueling production pace for the Model 3, around the Meet Customer Demand and

Tesla's shares fell 1.1% to $ 319.27 on Monday as investors digested the 17-day drama on August 7 with a shocking tweet from Mr. Musk, saying the company was considering $ 420 to hold private shares. As details turned out, however, it became clear that a deal was far from complete when he and Tesla's directors ran into the financial and legal teams required to set up one.

Mr. Musk plucked the plug last Thursday in a meeting with its board at the automaker's factory in Fremont, California, and then announced the decision late Friday after the market closed. Staying in the public domain means that Mr. Musk must continue to report to shareholders on a regular basis while preventing investors from shortening the company's stock.

Analysts on Monday questioned the credibility of Mr. Musk and Tesla's financial outlook The maker does not draw investors for more money.

"His credibility has suffered a blow ̵

1; that's not a question"

Gene Munster,

Managing Partner at Investment and Research Company Loup Ventures, said. "The more important question is: will it recover?"

Ryan Brinkman

at the

JP Morgan

He had already reduced his estimate of the stock price of Tesla to $ 195 per share before Mr. Musk announced that a deal was not nearly as close to completion as it had originally been.

Philippe Houchois,

an analyst for Jefferies warned clients to expect a stock split on Monday and noted "more erratic corporate behavior" by Tesla.

"We wonder if the & # 39; going private" Tesla has effectively brought into play and may lead to additional discussions with other investors, mainly companies that appreciate Tesla's vision and can help fill in gaps Growth and execution skills to bridge, "he wrote in a note.

Among those reviewing Mr. Musk's tweets on August 7 are the Securities and Exchange Commission, which examines Mr. Musk's claim to "funding secured" for an agreement.

Some analysts and investors were optimistic that Tesla wanted to remain public. ARK Invest, a Tesla shareholder, said it was "pleased" because it believes that Tesla's stock could be worth much more than a public company.

"We are not surprised that the offer failed because there were many hurdles."

Efraim Levy,

An analyst for CFRA Research said in a note on Monday. "We believe that [Tesla] will bring more benefits to staying public than going private and adding additional debt to a leveraged balance sheet."

In his late Friday night, Mr. Musk noted the distraction that the proposal had It is somewhat undesirable if he tries to focus the company on building Model 3.

"I knew that the process of privacy would be a challenge, but it is clear that it would be more time consuming and distracting than originally thought." Mr. Musk wrote Friday. "This is a problem, because we need to focus on getting Model 3 up and becoming profitable."

Tesla fought for months for his much belated goal of producing 5,000 Model 3 in a single week in late June. But Tesla had to build a general assembly line under a tent outside the factory to do it, and the effort involved Tesla employees working overtime and on the weekends while Mr. Musk was sleeping in the factory.

The fight also ate away at Tesla's limited cash, which raised concerns about the company's finances. Some suppliers have been worried about Tesla's financial strength and pay, the Wall Street Journal recently reported.

Mr. Musk has repeatedly confirmed that Tesla is on track to generate money and generate profits this quarter. Tesla's cash and cash equivalents declined from $ 1.24 billion on August 30 to $ 1.69 billion on August 12, according to internal records reviewed by the Journal.

The decline was mainly due to the repayment of a US $ 500 million revolving credit facility in July. Tesla plans to tap the same amount later in the quarter, according to the records. That, plus additional cash flow that Tesla expects to see an increase in vehicle deliveries in the second half of the quarter, will leave it at the end of September with several hundred million dollars more cash compared to three months earlier, according to the

On Friday, Board members said in a statement, her support to Mr. Musk, who has admitted that the pace at which the production of Model 3 is to be ramped up, demanded a personal tribute. He said last year that it would be a difficult process, warns of a coming "manufacturing hell," but said he did not expect it to be that difficult.

Part of the trouble involved Mr. Musk's desire to rely on automation at the assembly plant, an effort he recognized as a mistake because it overly complicated the effort.

Tesla's Next Test: Mr. Musk set a target to increase Model 3's output to 6,000 vehicles per week by the end of August. The carmaker still has a week left.

Write to Tim Higgins at Tim.Higgins@WSJ.com


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