Bankruptcy Is A Serious Risk For Tesla Motors Inc Stock

  • Tesla needs a huge amount of money to run its operations and make investments. The acquisition of SolarCity will make the liquidity position even worse.
  • Tesla’s Altman Z score shows a high risk of bankruptcy. The merger will increase the probability even more.
  • Tesla stock remains very risky bet.

Since the day Tesla (NSDQ:TSLA) signed the agreement to acquire SolarCity (NSDQ:SCTY)the number of people who are predicting Tesla’s doom has ballooned. Many investors believe that the deal will be ruinous for both the companies, especially for Tesla. And the market agrees with them to a large extent. Tesla stock has slumped 14% while SolarCity has slumped more than 30%. The main issue weighing on the stocks is the cash crunch. The 2008 crisis has taught us well about the importance of liquidity. However great your vision may be, to reach there you need to survive now.

Source: Amigobulls

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