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What’s The Link Between Musk Digging A Hole At Tesla And The Boring Company?

|Includes: Tesla, Inc. (TSLA)

Two news facts this Wednesday

  • Elon Musk to join Trump Wednesday at infrastructure meeting (link)
  • Adam Jonas lowered his 2017 EPS estimate for Tesla from -$1.95 to -$3.53

The note of Mr. Jonas is quite remarkable because it also predicts Telsa will launch a highly automated transportation service in 2018. With the recent examples we've seen of how Tesla is doing with Autopilot, we have to admit we had not seen this one coming.

Meanwhile the recent 10-K has given more insight in how much money Tesla actually needs if it still plans to bring model 3 to market.

Apart from $2 billion to burn on producing and selling the existing models between now and a possible model 3 launch in early 2018, it involves over $2 billion in capex, $2.7 billion in purchase obligations, at least $2 billion to increase working capital and whatever "promise" has been made to Panasonic in regards to the Buffalo plant.

In other words, Tesla needs a lot more money. Fast.

That might help to explain why Mr. Jonas expects a highly automated transportation service in 2018.

But there is more. The amount of extra capital Tesla needs before it can even start producing model 3 is so high that for the first time, they might actually run out of fools being prepared to donate to the good cause once more.

And that's where the boring company and Mr. Musk's participation in the meeting about infrastructure comes in.

Musk has a lot of stories but in the end, he doesn't have that many tricks. He's a smart guy so he has a simple modus operandi. He sees what works, then does it over and over again. That's what has gotten him so far.

With Tesla now being in more or less the same situation as SolarCity was a year ago, my take is Musk is working on another bailout.

All he therefore needs is something big enough so it can absorb the mighty Tesla, assuming of course he lets the car company slide to a more reasonable valuation of $10 to $15 billion.

As described in "Is SpaceX Being Set Up To Bail Out Tesla?" SpaceX might be an opportunity, but as outlined in the comments, there are good arguments for Musk not to ruin that company.

So the only option left is to build another company. One that needs an awful amount of capital on one side, and is able to generate public support on the other side.

Well, ladies and gentlemen, here we are. We have a puzzle. And a final piece that might put it together. If I was Musk, I'd know what to do.

Disclosure: I am/we are short TSLA, OWNING PUT OPTIONS.