Tesla stock price falls 8 percent after the Moody's agency lowered the company's rating from "B2" to "B3", assigning it a "negative" future outlook. What are the reasons for this decision? Is the 8 percent drop a sign of bankruptcy? Read on and find out.
28 March, Capital.com – The reasons behind the decision were that the National Transportation Safety Board said they are investigating a fatal crash that happened last week involving a Tesla vehicle in California. This added to the pressure Tesla was already facing with expenditure and problems with its Model 3 production.
Tesla stock price falls 8 percent: A sign of bankruptcy?
Moody's noted that in the future, the rating may drop even lower. The financial situation of the manufacturer of electric cars is not stable.
Some experts even predict bankruptcy, particularly Vilas Capital Management, who think such a situation is inevitable. According to estimates of the fund, in the next one and a half years Tesla will need about $8 billion to finance operating losses, capital expenditures, debt payments and replenishment of working capital. In these circumstances, when ratings are going down, finding investors will not be an easy task.
In addition, attention is drawn to the fact that the shareholders approved a record-breaking compensation plan for the head of Tesla – Elon Musk – according to which he will receive about $ 5 billion a year, which is more than managers of all companies in the S&P 500 index have. Interestingly, Tesla is worth twice as much as Ford, however, Ford produced 6 million cars and made a profit of $ 7.6 billion in the last year.
Tesla, during the same period, produced 100 thousand cars and have a loss of $ 2 billion.
How can Investors benefit from price decline?
According to the data from capital.com investors were distracted by the unpleasant news connected to the company and a significant drop in the number of trades was seen – around 70 %. After the drop, the number of trades started to grow and has already restored more than 40 percent, with mostly long positions being opened.
Good to know! Investors can benefit not only from price growth but from price decline as well. Opening short (sell) positions on CFD (contract for difference) platforms, like Capital.com, is one way to do so. The benefits of trading CFDs with Capital.com include segregated accounts, account security and broker services, which are regulated by a financial regulator.
It’s important to remember that you trade at your own risk. You can lose all your invested capital once you begin trading. Do not, in any circumstance, trade with money that you can’t afford to lose. This commentary shall not be regarded as investment advice.
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