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Tesla shares sink on reports carmaker is running short on cash

Tesla shares sink on reports carmaker is running short on cash
Shares in electric car maker Tesla dipped after reports it asked suppliers for a cashback to become profitable on paper.

The Wall Street Journal sites a Tesla memo, in which the carmaker asked its major supplier to refund some money Tesla had paid earlier. Tesla characterized it as a re-investment to continue the long-term growth between both players.

Tesla was trading below $300 per share at the opening bell on Wall Street, losing over $2.3 billion off its market capitalization. The company stock was down 5 percent on Monday and is trading 10 percent lower on the year.

Tesla has never reported a profit in its 15-year history. The company reported a net loss of $2.24 billion in 2017, a significant increase on the $773 million net loss it reported in 2016. The electric carmaker has been burning through cash as it speeds up production of its Model 3 sedan. Tesla held about $3.2 billion in cash after the first three months of the year, having spent about $1 billion through March.

“This is one more sign that money is getting shorter and shorter and I am sure that Tesla needs fresh money at the latest next year,” said Frank Schwope, an analyst with NORD/LB.

Tesla expects to be profitable in the third and fourth quarters of the year after posting a loss of $709.6 million in its first quarter. In June, Tesla announced a 1,000 job cuts to slash spending.

Despite of years of unprofitability, Tesla's market capitalization is over $50 billion. It trails GM's market cap of $55 billion, but is well above profitable automakers such as Ford, which has a market cap of just $18 billion.

For more stories on economy & finance visit RT's business section

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