Charley Grant is a Heard on the Street columnist based in New York, where he covers U.S. health care and industrial companies. Charley previously was a reporter at Grant’s Interest Rate Observer. He is a CFA charterholder. @CGrantWSJ
no
00:00
start listening
Episode 38
Charley Grant
Charley Grant of the Wall Street Journal on Tesla and the Bumpy Road Towards Profitability
Charley Grant is a Heard on the Street columnist based in New York, where he covers U.S. health care and industrial companies. Charley previously was a reporter at Grant’s Interest Rate Observer. He is a CFA charterholder. @CGrantWSJ
Tesla is a kind of wonderchild. It entered the stage in the summer of 2003 with the aim of accelerating the arrival and adoption of electric vehicles. The company was founded by several Silicon Valley luminaries, most notably Elon Musk. Since its founding more than fifteen years ago, the company has transformed the way the world thinks about energy and electric cars. Despite the fact that electric vehicles have yet to see widespread adoption, they have become surrounded by a level of fanfare that is enjoyed by few other innovations.
Yet, the road ahead of Tesla is becoming increasingly uncertain and difficult to navigate.
The availability of cheap financing is showing signs of tightening amid an environment of rising interest rates. This has put a strain on companies like Tesla, which have relied heavily on credit markets to support their cash-intensive businesses. In fact, according to Stanphyl Capital’s Mark Spiegel, “Tesla’s interest expense is now at a run-rate of nearly $600 million a year, which in Q4 amounted to $4,884 per car sold.” This means that fully one-third of the company’s gross profit goes towards servicing its debt.
But more to the point, the willingness of debtors to continue to fund these losses looks increasingly doubtful, leaving equity markets as the next best source from which Tesla is likely to raise capital.
Yet, problems of funding remain. The company’s stock price has dropped more than twenty-five percent in less than a month. The volatility of Tesla’s stock makes the question of how many new shares Tesla can afford to issue less clear by the day.
And if Tesla’s financial woes were not enough, the broader equity markets may be in the processes of peaking (or may have already peaked), adding additional roadblocks to the electric car maker’s ability to raise capital.
Time, in other words, is not on Elon’s side. As such, at this stage, the single most important question any investor in Tesla must be able to answer is, “what is the path towards profitability?” Charley Grant, a columnist for the Wall Street Journal who has been writing critically about Tesla since 2015, thinks there isn’t one. In this episode, Grant joins host Demetri Kofinas to discuss why he thinks Tesla may be on the inexorable road towards bankruptcy.
As always, this episode of Hidden Forces is for informational purposes only and should not be relied upon as the basis for financial decisions. All views expressed by Demetri Kofinas and podcast guests are solely their own opinions and should not be construed as financial advice.
Charley Grant is a Heard on the Street columnist based in New York, where he covers U.S. health care and industrial companies. Charley previously was a reporter at Grant’s Interest Rate Observer. He is a CFA charterholder.
Demetri Kofinas is a media entrepreneur and financial analyst whose mission is to help uncover the hidden forces and pivotal patterns shaping our lives. His contrarian perspective and critical-thinking approach has helped hundreds of thousands of people make smarter, informed decisions. This same methodology has helped guide Demetri’s decision-making as an early-stage investor and as a creator of several innovative media properties and live events.
Demetri Kofinas is a media entrepreneur and financial analyst whose mission is to help uncover the hidden forces and pivotal patterns shaping our lives. His contrarian perspective and critical-thinking approach has helped hundreds of thousands of people make smarter, informed decisions. This same methodology has helped guide Demetri’s decision-making as an early-stage investor and as a creator of several innovative media properties and live events.
Demetri Kofinas is a media entrepreneur and financial analyst whose mission is to help uncover the hidden forces and pivotal patterns shaping our lives. His contrarian perspective and critical-thinking approach has helped hundreds of thousands of people make smarter, informed decisions. This same methodology has helped guide Demetri’s decision-making as an early-stage investor and as a creator of several innovative media properties and live events.
Demetri Kofinas is a media entrepreneur and financial analyst whose mission is to help uncover the hidden forces and pivotal patterns shaping our lives. His contrarian perspective and critical-thinking approach has helped hundreds of thousands of people make smarter, informed decisions. This same methodology has helped guide Demetri’s decision-making as an early-stage investor and as a creator of several innovative media properties and live events.
Demetri Kofinas is a media entrepreneur and financial analyst whose mission is to help uncover the hidden forces and pivotal patterns shaping our lives. His contrarian perspective and critical-thinking approach has helped hundreds of thousands of people make smarter, informed decisions. This same methodology has helped guide Demetri’s decision-making as an early-stage investor and as a creator of several innovative media properties and live events.
