On Wednesday, Morgan Stanley held an investor call for clients, led by analyst Adam Jonas, supposedly due to feedback after the company’s note yesterday, which saw the investment bank lower its “bear case” target to on the company to just $10 per share. This came, ironically enough, just weeks after the company helped Tesla perform a $2.4 billion financing.
To us, nothing smells more like another potential downgrade than letting “select” investors on a call that wasn’t supposed to be for media or for the public. Yet we get the funny feeling that the media – and the public – are going to hear all about the call and discuss it widely for days, if not weeks, to come.
Adam Jonas opened the call by talking about how optimistic 2018 looked – the company was generating cash and Elon Musk was saying they don’t need to raise cash. Demand was robust and all was right with the world, at the time. Then, 2019 happened… and somehow everything went to hell overnight.
Jonas contrasted 2018 by giving his interpretation of where things are today for Tesla: “supply exceeds demand, they’re burning cash, nobody cares about the Model Y, they raised capital near lows” and there’s been “no strategic buy-in”.
“Tesla’s is not seen as a growth story, it’s seen as a distressed credit and restructuring story,” Jonas said later in the call, suggesting that the next step for Tesla is an out of court debt restructuring and/or bankruptcy (preferably a Chapter 11).
Demand was the first domino, Jonas said, echoing what he put in his note on Tuesday. Additionally, at about 6 minutes in on the call, Jonas talked about the lackluster interest in the Model Y: “Excitement level is really low. There’s not much we know about the product.”
PlainSite, which documented numerous great quotes from the call, pointed out Jonas making comments about people running scenarios for what would happen in a reorganization scenario as part of their analysis of the business now.