Tesla shares take a beating after string of bad news

Tesla
Tesla will provide a production update in the coming weeks

Shares in Tesla plunged to their lowest level in almost a year on Tuesday, as it faced news of a probe into a car crash last week, a downgrade by credit agency Moody's and as doubts were aired over its production targets.

Tesla's shares dropped around 8.1pc to $279.18, dragged lower after it emerged that the US National Transportation Safety Board (NTSB) is launching an investigation into a fatal crash of a Tesla Model X, which then caught fire, in California last week. 

It was unclear whether Tesla's automated control system had been activated at the time of the crash.

In a statement, Tesla said: "We have been deeply saddened by this accident, and we have offered our full cooperation to the authorities as we work to establish the facts of the incident."

Tesla's woes were compounded on Tuesday, after analysts warned that, not only might Tesla be unable to meet production targets for its Model 3 vehicles, but that car shoppers may not be interested in the cars.

This comes ahead of a production update from Tesla in the coming weeks. Tesla has struggled to ramp up manufacturing of the Model 3 vehicles – the cheapest of its electric car range – saying its sub-systems had been unable to cope with mass production, and it has had to push back targets a number of times. 

Citigroup's Itay Michaeli said the bank's analysis of Tesla's near-term risk prompted it to "open 90-day downside catalyst watch on Tesla shares". 

According to IHS Markit, Tesla is now the most shorted US stock in dollar terms, with the value of shares on loan to short-sellers currently at around $9.4bn (£6.6bn), in a sign that the market currently thinks Tesla is overvalued.

Short-sellers borrow shares to sell, then buy them back at a lower price to make a profit on those shares. 

The string of bad news for Tesla continued late into the evening, with Moody's announcing that it had downgraded the group's junk-bond rating to B3 and warning over the manufacturer's outlook.

It pointed to the "significant shortfall in the production rate of Tesla's Model 3" and said the company was facing "liquidity pressures due to its large negative free cash flow and the pending maturities of convertible bonds".

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