Elon Musk’s April Fools’ joke falls flat for Tesla investors

Months of problems making the mission-critical Model 3 sedan have risked compromising Tesla’s cash reserves. REUTERS/Lucy Nicholson

Tesla investors aren’t laughing after Elon Musk’s April Fools’ Day joke that the electric-car maker went bankrupt, as months of problems making the mission-critical Model 3 sedan risk compromising the company’s cash reserves.

After the steepest monthly drop in more than seven years, Tesla shares fell as much as 8.1 per cent on Monday, while unsecured bonds the company issued in August traded near record intraday lows. Early this week, analysts widely expect the company to report that Model 3 production trailed its projection of 2,500 units during the last week of March.

The Model 3 woes are a greater risk to Tesla than the fatal accident involving a Model X driver using Autopilot, a related US regulator’s investigation and a separate Model S recall, all of which have weighed on investor sentiment since last week.

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Analysts at Jefferies Group and Moody’s Investors Service estimate that Tesla may need to raise $2 billion to $3 billion in capital. That is in large part because the slow build of Model 3 has limited the company’s return on investments made to build its first mass-market car.

"What seemed to be a short-term issue has now been going on for more than three quarters," Philippe Houchois, an analyst at Jefferies Group, said on Bloomberg Television. "Management will need to address a proper funding plan" and "reassure investors that they've got the funds to even potentially announce some further delay in the ability to ramp the production."

Musk told employees in an email that the electric-car maker may exceed a weekly production rate of 2,000 Model 3 sedans, according to the blog Jalopnik.

“If things go as planned today, we will comfortably exceed that number over a seven-day period!” Mr Musk wrote. A Tesla spokesman did not immediately respond to requests for comment on the report.

Shareholders voted in favour of a pay package valued at $2.6 billion for Mr Musk last month. The 46-year-old billionaire's fortune has tumbled since then, with Tesla shares plunging 22 percent in March, their worst month since December 2010.

That didn’t stop him from posting some playful tweets on Sunday.

"Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt," the chief executive wrote. Another post included a photo of Mr Musk and a message that he "was found passed out against a Tesla Model 3, surrounded by 'Teslaquilla' bottles, the tracks of dried tears still visible on his cheeks".

The posts were likely to have been frustrating for Tesla's investor relations team, James Albertine, an analyst at Consumer Edge Research who recommends buying the shares, wrote in a report. He called them "poorly timed", although he added that "there is likely nothing to see here".