Elon Musk Tempts the Gods with April Fool’s Day Bankruptcy Tweet — BONDS CONTINUE TO SINK

You might want to bookmark this one for future reference.

Tesla Goes Bankrupt
Palo Alto, California, April 1, 2018 — 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. So bankrupt, you can't believe it.

— Elon Musk (@elonmusk) April 1, 2018

Now look at this.

Tesla bonds keep falling. pic.twitter.com/sdcZaGDRWc

— Lisa Abramowicz (@lisaabramowicz1) April 2, 2018

Here is the issue at hand.

Tesla has more than $10 billion in debt and a shrinking capital base, as the stock descends into anarchy.

With the recent fatal accident involving a model 3, which led to a recall of 123,000 vehicles. Many believe this will hurt sales. If sales are hurt, then the burn rate increases. If that happens, TSLA will need to raise cash, which will be hard to do as the stock banks lower and the bonds drop in value.

This is, essentially, a death spiral.

More from UBS.

“Not only do you need to ramp this product, but you are going to have to make sure the quality improves as you ramp it,” Langan told CNBC Monday.

“[There are] a lot of challenges ahead. This is really a very important year. This is the future of the company with the Model 3, and it’s not starting off very well,” Langan said on “Squawk on the Street.”

“The Tesla Autopilot crash … is obviously raising concerns about that system, whether it’s fully safe,” said Langan. He said having the word “autopilot” as part of the name may not be wise since drivers are still required to have some level of awareness while driving in autopilot mode.

“That raises concerns about liability and that system,” he said. “Maybe it needs some form of driver monitoring to ensure that the driver is aware.”

Langan said investors are also worried about Model 3 production.

“And on top of it, some of the initial reviews from customers, they’re finding issues with this car,” he said. “They’re going to have to work those out.”

Langan said Tesla should increase production of the Model 3 by 2018’s third quarter or it will have to raise capital.

“I think the way that they’d like to do it is ramp the Model 3 and then raise the capital for the Model Ys,” Langan said. “If they can’t get it ramped that puts them in a more challenged position than [Tesla has been] historically.”

He said Tesla will likely have to raise more than $1 billion.

“The billion will keep them going,” he said. “It bides them more time to ramp the Model 3.”

On April 1, Elon Musk tweeted an April Fool’s joke that Tesla had gone bankrupt.

Langan said the company is far from going bankrupt.

But he said, “I don’t think it’s something I would be joking about.”