Tesla Almost Died Earlier This Year, Says Elon Musk - TheStreet

That's what you want to hear as a shareholder, right?

Elon Musk, the co-founder and CEO of Tesla (TSLA) - Get Report , said as much during an interview with Axios on HBO that aired over the weekend. In fact, Musk said the company was "close to death" as it was within "single-digit weeks" of facing big-time issues.

Because the automaker was "bleeding money like crazy," it forced management to come up with solutions in a hurry. The efforts may have paid off for the business, but they took a toll on Musk. "No one should put this many hours into work," he said during the interview. "This is not good. It was very painful. It hurts my brain and my heart."

Shares were initially lower by several percentage points in Monday's trading session, but have since reversed higher, up almost 5% to $341.50 in midday trading.

Why the sentiment change? Although Tesla was close to a near-death experience, investors seem to be relieved by Musk opening up about the matter. After all, if he still believed the company was close to running out of time, then surely he wouldn't have made this "close to death" observation now. If anything, it must mean that the issue is in the rearview mirror so to speak, and that Musk believes the company is on firm financial footing now.

Of course, the bears have a different take, one that suggests Tesla's desperation bred innovation, particularly on its financial statements. Just head over to Twitter and you won't find any shortage of suggestions and allegations about Tesla's supposedly crooked management team. Some argue that this financial situation should have been disclosed to shareholders.

Either way, what we do know is that Tesla's cash problems came in the first half of this year, as the automaker was desperately attempting to increase Model 3 production. With hundreds of thousands of pre-orders sitting in the queue and plenty of fixed costs, Tesla was under plenty of pressure to increase its production rate. As its bills piled up and revenue wasn't coming in fast enough, this led to significant draws of its cash.

Sluggish production of the Model 3 severely hindered Tesla's financial results, as costs ballooned and revenue wasn't coming in fast enough.

Eventually the company got it right, and began producing thousands of Model 3 sedans per week. In the third quarter, it drove Tesla to net profitability and positive free cash flow, which will help alleviate some of the company's financial burden.

The key moving forward? Tesla has to perform a difficult balancing act. The company has to remain fiscally vigilant, but must also allocate funds for R&D, factory maintenance and building out future Gigafactory locations.

Musk seems to have a new mindset on the financial situation, taking a more serious approach to the matter and acknowledging that Tesla should be self-sufficient at this point. This much has been clear for several quarters now and management has been much better about delivering improving results. They will need to maintain that mindset to see more success down the line. 

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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.