Tesla Motors Needs a Charge; No FDIC Insurance

Since signing a deal in September with the City of San Jose to build a car factory in North San Jose (which I was critical of), Tesla last week announced that it will be laying off an unknown number of employees, putting its plans for the North San Jose factory on hold, and closing some of its other offices.

Now, there seems to be more trouble under the hood than many have either been told about or led to believe. An employee at Tesla has apparently blown the whistle by sending ValleyWag an email indicating the company is facing trouble and has only $9M in cash remaining, even after taking into consideration that the company has taken a fairly significant amount of deposits from as many as 1200 customers for the company’s first electric car. If the ValleyWag piece is true, people who signed up for the car and put down deposits of $50,000+ should be concerned.

I’m pretty sure founder Elon Musk and his to-date investors have deep enough pockets to continue funding Tesla, but at some point that too will run out. Given what is happening with the capital markets and the concept of opportunity cost not to mention risk, valuations could be headed down significantly, likely causing friction amongst new and existing shareholders as the new equity would likely seek to either wipe out or reduce the value of previous investments.

And all this coming amidst plummeting oil and gas prices, dismal auto sales, and general economic turmoil at the consumer level….

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