Tesla shares plunge after reports it is seeking refunds

Posted July 25, 2018

Tesla shares have fallen by more than 5% following a report that it is seeking refunds from suppliers.

The memo was sent by a Tesla global supply manager and described the monetary request as "essential to Tesla's continued operation", and "characterized it as an investment in the auto company" according to the Journal.

Telsa took another financial hit on Monday, with shares in the electric carmaker dropping nearly 5 per cent after it was reported to have asked some U.S. suppliers to return payments made by the money-losing company.

In June, Tesla said it was cutting several thousand jobs to become sustainable profitable without endangering the ramp-up of Model 3 production. Mr Musk has said the company does not need to raise cash this year, but several analysts have predicted that the electric vehicle maker would need to raise capital soon. In the first quarter, as the company was pushing to get the Model 3 production line going, it went through more than $1 billion, according to data compiled by Bloomberg.

Apparently, fewer than 10 of Tesla's suppliers were asked to provide a retroactive discount, and the company assured Digital Trends that there was no widespread memo sent to all of its business partners.

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Of course, this news won't make Tesla investors happy.

Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016, according to the memo.

"It's troubling", David Whiston, an analyst with Morningstar in Chicago, said in an interview on Monday as Tesla's stock declined, closing off 3.3 percent.

Efraim Levy, a senior equity analyst for CFRA, said he found Tesla's request unusual.

Chief executive Elon Musk has said that Tesla will reach a profit in 2018's second half. As one manufacturing consultant who isn't involved with Tesla told the WSJ: "It's simply ludicrous and it just shows that Tesla is desperate right now. It would not be correct to apply historical cost savings to current quarter". Tesla's stock prices have taken a tumble since reports emerged about the request.

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