Forget about Tesla stock...Worry about its Debt.

As we all digest how Tesla Motor Co. CEO Elon Musk broke pretty much every single Securities & Exchange Commission disclosure regulation in place since the 1930s, we should not lose focus that TSLA stock price doesn't matter. Unless of course, you own TSLA stock.

Forget about how or where Musk will come up with, Oh...I dunno, $70 billion or so in cash to accomplish his plan. He has a credit card bill to pay.

Tesla took on $1.9 Billion of debt last year and has since been downgraded to Junk (B3) status by Moody's Investors Service and has roughly $1.3 billion due in various debt payments before April 2019 (Convertible debt included).

If TSLA is short one red cent on its coupon payments it is in technical default. That means immediate bankruptcy – and the stock price moves immediately to Zero (Just like Bob's doggie!). Public or private, if a company misses a debt coupon payment, the choice is chapter 7 (liquidation) or chapter 11 (restructuring).

Just last week, Bond villain/Tony Stark incarnate Musk had the opportunity to inform investors and Wall Street analysts of his plan to squeeze the short market on his company's stock in a couple of days and thus avoid violating any Federal securities laws. TSLA even had to file a 10-Q with the SEC to report earnings, where this “Forward Looking Statement” could (and should) have been disclosed.

(Disclosing “Material Information” over Twitter is unprecedented, although Netflix opened the door to this with a Facebook posting in 2013.)

Tesla's biggest challenge, however, is they can't seem to produce what it is they sell: Cars. Without getting into the specifics of battery life before a recharge, Elon Musk needs to move metal. Tesla pre-sold the Model S-3 to the tune of $1,000 cash deposits that it has yet to deliver. And refunds are happening.

Long story short, it won't matter whether or not Musk can scrape together about $70 billion in CASH (based on a $420 per share tender), if he can't make his debt coupon payment, he is out of business.

KD

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