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    Shares of Tesla (TSLA) soared nearly 10% on Wednesday, closing in on its best day since November The surge came after CEO Elon.

    The Nasdaq composite led a sell-off during the week as leading tech and growth stocks and former leaders sold off. Tesla (TSLA) crashed on.

    In , the long-awaited Model X SUV was added to the lineup, enhancing sales and giving Tesla a vehicle to use to compete in the booming crossover market. Given that the Tesla story has been largely that of growth, we observe that this is a major negative news for Tesla. It also provides vehicle service centers, supercharger station, and self-driving capability. Profit secured and Musk behaving, but Tesla still has a long way to go MarketWatch 7h. The business plan at this point was for CEO Elon Musk and his team to keep the lights on long enough in order to roll out Tesla's first built-from-scratch car, the Model S sedan.

    Tesla's Q2 results were a controlled affair to get ahead of bad news and present an optimistic picture. As investors appreciated the mature Elon Musk, what they seem to have missed is that Tesla's growth story essentially died. With production from China three years away, the company has no where to go even if it survives the disastrous Model 3 launch.

    TSLA Q2 results affair was an interesting one to say the least. The shareholder letter and the earnings call were masterfully done to accentuate the positive and to minimize or avoid the negative.

    Tesla posted record losses worse than consensus, but on the biggest issue that was in focus, cash, the company showed a higher balance than expected. By stretching the working capital image below and by tapping into ABL and other financing image below.

    In addition, stock option exercises at Tesla have accelerated and will likely accelerate further due to layoffs, attrition, and concerns about Tesla.

    These options exercises may add several tens of millions of cash to Tesla's balance sheet. All else being equal, between the above three items, Tesla will be able to largely stem the negative cash flow in Q3. However, all else is not equal.

    We already know that Tesla customer cancellations are running high. Anecdotal evidence from fan sites and Twitter suggests that an increasing number of customers are cancelling their Model 3 reservations. There are also many customer complaints about refund delays as Tesla's FAQ suggests refund times of 45 business days ; very likely as a cash management measure.

    Readers should note that, with Tesla now widely opening Model 3 orders to all comers, reservations do not make much sense anymore. Consequently, we expect that the reservation levels will drop precipitously over the current quarter and possibly next quarter. In summary, if Tesla were to execute per the stated plan, there is very little bankruptcy risk in the near term. The flaw with the above discussed scenario is that it assumes Tesla performing per plan.

    We see several potential issues that make such a scenario unlikely:. Tesla claims to have over 11, Model 3s in transit at the end of Q2, and claimed in its shareholder letter to have manufactured about 5, cars a week since then.

    Thousands of Model 3s are being sighted at parking lots across California. Whether it is due to logistics problems or demand problems or quality problems or a combination is unknown. Tesla indicated that it will be shipping Model 3 to international markets before the end of the year and earlier than previously expected.



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