Automaker Tesla Inc. (NASDAQ:TSLA) has seen its share price (and bond prices) drop dramatically in recent weeks, as a number of key catalysts have shaken investor confidence in the ability of this firm to reach the proverbial stars and truly transform the world.
On Friday, however, shares of the automaker rebounded more than 3% as investors appear increasingly ready to "buy the dip" with this company, placing their faith in the vision and guidance of one of the most inspirational CEOs the world has had the pleasure of experiencing: Elon Musk.
Mr. Musk has been glorified by investors and the media as the one with all the answers: previous debt raises and equity issuances to fund Tesla, a company which has been churning through an amazing amount of cash each year, have only sped up. Estimates are from analysts that the company has a few months more to live, given its cash reserves, before the firm will be forced to tap equity or debt markets once again.
The tough decisions Mr. Musk will have to make, besides securing Model 3 production, re-assuring a consumer base that its cars are safe, and restoring the company's credit rating which was downgraded recently by Moody's, is finding a way to come up with another couple billion dollars in U.S. currency. The reality is that Tesla's debt is trading well into "junk" territory, and short-sellers are pouncing on Tesla's equity at an alarming rate (the company has been one of the most shorted firms for quite some time now).
I'm not as smart as those institutional guys out there, but they seem to know what they're talking about. Now is definitely not the time to be "buying the dip here."
Invest wisely, my friends.
