From a business perspective, Tesla is a catastrophe. But why, despite a myriad of issues, does the company continue to attract investors all of whom are willing to shell out millions for Elon Musk's vision?
Jim Chanos summarized all of the reasons why during the Reuters Global Investment 2018 Outlook Summit on Tuesday.
"If you wouldn't be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes."
For years, a lot of people have been predicting the electric automaker's downfall only to be proven wrong time and again. Not that it mattered though as despite a number of problems, from failing to adequately produce its Model 3 sedan to outright failure to turn a profit, everybody still loves Tesla-the-company.
As for Tesla-the-business, well it's a totally different story. A report from Bloomberg revealed that the company is burning through capital at a rate of $480,000 an hour or roughly a billion per quarter, the same amount as General Motors.
However, unlike GM, which is currently the biggest US automaker, Tesla has yet to turn a profit. Even worse, should the cash bleed continue, Tesla will be drained dry by August of 2018. So why, despite having every financial red flag available, is the company's stock still sky high with investors lining up to throw their money at Elon Musk?
Firstly, Tesla is not a typical company. While most firms aim to make a profit as soon as possible, the electric automaker's main goal is to pioneer fleets of smart mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars.
And they are succeeding in their goals as evidenced by charging stations being put up around the world as well as the building of the world's largest factory. Little by little, all the company's goals are being met, all except financially that is. But for now, money is currently not the priority.
Of course, everyone wants the company to turn a profit at some point, Elon Musk included. It has already positioned itself as a pioneer in the industry. All that's left to do is wait for the market to catch up. Only then will investors' faith in Musk will be rewarded.