Tesla Debt Downgrade Worse Than Crash Investigation

Tesla Model S at Cypress Mountain British Columbia Canada

Tesla Model S at Cypress Mountain British Columbia Canada

Shares of Tesla fell 8.2 percent Tuesday to the lowest in nearly a year after the safety board announced the investigation, the second this year into a crash involving the company's auto.

Moody's said Tesla was targeting weekly production of 2,500 Model 3 vehicles by the end of March, and 5,000 per week by the end of June, down from the company's year earlier production expectations of 5,000 per week by the end of 2017 and 10,000 by the end of 2018.

On Tuesday, credit-rating firm Moody's downgraded Tesla, citing missed production promises for the Model 3 sedan, negative cash flow, and almost $1.2 billion in convertible bonds coming due by March 2019.

"There's just so much bad news right now", John Thompson, the chief executive officer of Vilas Capital Management LLC, which is shorting Tesla shares, said by phone.

Tesla has $230 million in convertible bonds maturing in November 2018 and $920 million in March 2019.

Tesla stock tanked on Tuesday and continued to dive on Wednesday, falling by about 9% to its lowest level in a year.

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"What could be scary for Tesla is anything that would be indicative that demand is falling or might fall for their product and that there might be an end for investors' desire to buy more shares in the company".

The vehicle caught fire before two other approaching cars hit it.

Tesla rolled out the Autopilot function in 2015. It is not clear whether the driver-assistance system equipped in Tesla's vehicles may have played in the crash.

In a statement posted to Twitter, the NTSB said it is unclear whether the automated control system was active at the time of the crash.

The safety board's probe into the Mountain View crash is the second this year involving the company's vehicles. Some investors are losing confidence in serial entrepreneur and angel investor Elon Musk, who despite his history of beating the odds, has continually delayed targets for his Palo Alto, California-based automaker at a time when it faces heightened competition from traditional auto companies and EV startups.

In January of past year, the US Transportation Department closed an investigation into the fatal 2016 crash in Florida of a Tesla on autopilot, finding that no "safety-related defect" had caused that accident.

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The California Highway Patrol said the electric-powered Tesla Model X crashed into a freeway divider on Friday and then was hit by a Mazda before colliding with an Audi. But in any case, the accident raises questions about safety battery packs of electric vehicles. Regulators are also investigating the fire that happened after the Tesla crash and looking into the steps needed to safely move the vehicle from the scene of the accident.

In terms of the fire that broke out after the crash, Tesla wrote its battery packs are created to help fires spread slowly in case a fire breaks out, which appeared to be the case in this instance.

Tesla shares continued their selloff from a day earlier, tumbling 8% in trading Wednesday on news that US investigators were looking into a fatal March 23 crash involving a Tesla vehicle, and ongoing worries about the company's cash crunch.

The NTSB can make safety recommendations but only NHTSA can order automakers to recall unsafe vehicles or fine automakers if they fail to remedy safety defects in a timely fashion. The agency couldn't tell how long an investigation would take; usually such investigations last from 12 to 18 months.

Tesla's Autopilot allows drivers under certain conditions to take their hands off the wheel for extended periods.

Tesla (NASDAQ:TSLA) last released its quarterly earnings results on Wednesday, February 7th.

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