With Goldman BUY, Model S and Tesla shares zooming, what will short sellers do?
The Tesla Model S is one of those "bet the company" moves that can make or break a company. It is Tesla Motors' second car, following its iconic Tesla Roadster, and is the first car Tesla's engineers have designed themselves. There are a lot of questions about the success of the Model S launch and what it will mean for Tesla's success, or failure, as a company, as well as Elon Musks personal standing as a CEO and Investor. The huge short interest in the company, 43% of the "floating shares" have been sold short, speaks volumes about the number of people who see Tesla as a goner. On the other hand, Elon Musk predicted that by the end of 2013 Tesla would be cash flow positive based on Model S sales of just 8,000 vehicles, and Goldman Sachs Analyst Patrick Archambault issued a BUY recommendation and raised the target price, prompting a stampede for TSLA shares.
The Tesla Model S is an all electric luxury car built to Tesla's "no-compromise electric car" strategy. That means its acceleration and top speed can, depending on the options installed in the car, match many sports cars, while offering a 300 mile electric driving range, backed up by the most flexible charging system imaginable, the potential for integrating solar electricity with Tesla's proprietary fast charging system, and other amazing features in every corner of the car.
The company had sold 2400 or so Tesla Roadsters (built on a car body provided by Lotus Engineering) and hasn't sold a new car for many months because Lotus stopped making the donor car. That's left Tesla with very little income, largely from components sales to Toyota and Daimler, and financials that's bleeding red ink from all the losses.
Losses in 2011 were over $250 million, up from $154 million in 2010, and the company has never been anywhere near solvent. By the end of March 2012 accumulated losses had built up to $759 million. Instead it has traditionally relied on deep pocketed investors such as Elon Musk, as well as the Department of Energy loans that helped Tesla put together the capital to bring the Model S into production.