Tesla Motors Inc (TSLA) Delays Reveal, Distracts From Bigger Issues

Anyone looking for an exciting new product announcement this morning by Tesla Motors Inc (NASDAQ:TSLA) is likely a little frosty after Elon Musk delayed the reveal until Wednesday.

Tesla model 3 tsla

Source: Tesla Motors

Sure, it’s possible everything is in order and Musk is only teasing TSLA fans to generate more publicity for the Wednesday drop. He certainly didn’t offer much of the way in explanation. As he said in a tweet:

“Moving the Tesla announcement to Wednesday. Needs a few more days of refinement.”

Either way, the market was clearly disappointed. Tesla stock fell as much as 1.5% in morning trades.

The mysterious product announcement has led to wide-ranging speculation. Among the more ambitious guesses, some TSLA watchers think the automaker is set to drop a new model SUV. It seems like that would be very hard to keep under wraps, however.

It also doesn’t quite go with Musk’s earlier tweet that most people would be taken by surprise:

“Tesla product unveiling on the 17th (unexpected by most), followed by Tesla/SolarCity on the 28th.”

Other Tesla fans are looking for the company to unveil Autopilot 2.0. TSLA certainly could use something to gain the upper hand on the technology’s public perception. The semi-autonomous driver-assistance feature came under criticism since it was implicated in a fatal crash in Florida.

Indeed, it has gotten so bad that Germany has asked Tesla to stop using the term “Autopilot” in its advertising. The government fears that it’s misleading.

TSLA Stock Has Bigger Headwinds

The delayed product reveal is small beer compared to other issues affecting the TSLA stock price, namely its proposed acquisition of SolarCity Corp (NASDAQ:SCTY). As noted in Musk’s tweet above, shareholders are scheduled to vote on the merger soon. Although it looks like it has a good chance of passing, skepticism about the move is warranted.

Just last week, analysts at Oppenheimer presented an argument concluding that the combined entity would need to raise a staggering amount of cash for capital expenditures. From a note to clients:

“We believe a combined entity will face cash needs in four key areas: stationary power capex (primarily solar), auto capex, working capital and operating lease obligations. In total, we expect the combined company needing ~$12.5B for capex through 2018 sourced from a combination of asset-based debt, system refinancing, tax equity and corporate debt.”

Unless Tesla has something truly astounding to debut on Wednesday, it stands to reason that the outcome and implications of the SolarCity deal will be far more important to TSLA stock in the near- to intermediate-term.

As much as Tesla might look like a long-term winner, the uncertainty over the SCTY acquisition makes it wise to stay on the sidelines. Shares could very well pop on a “No” vote, but it’s not worth the risk.

That is to say, Tesla stock holders are going to have to remain patient beyond Wednesday’s big show.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/tesla-motors-inc-tsla-delays-reveal/.

©2022 InvestorPlace Media, LLC