Nothing Elon Musk has done has stopped the bleeding at Tesla — and things look like they're going to get worse

During the last few months, Tesla CEO Elon Musk has shut down stores, lowered prices, had layoffs, pivoted the business, and raised billions but none of it seems to be able to restore investor faith in Tesla.

The company's stock is down by around a quarter since the start of 2019.

What's more, it doesn't look like any of Tesla's lines of business are going to provide the revenue to grow it out of its financial troubles, and there may be more legal troubles on the horizon.

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Tesla just raised $2.7 billion and it still looks desperate as — once again — financial and legal questions surrounding its survival mount.

This is in large part because it seems the market could not care less about this $2.7 billion — or $2.3 billion net of hedging and fees to be precise. Over the last month, Tesla's stock has fallen by around a quarter while analysts up and down Wall Street have been chopping stock price targets and forward-looking estimates at a steady clip. Wedbush Securities called it a “code red.” Evercore said Tesla can only justify its current valuation with “supernatural growth.”

This is all to say that Tesla should be enjoying a post capital raise honeymoon with Wall Street, but it's not. According to the company this capital raise was merely supposed to shore up Tesla's balance sheet during an “air pocket” in sales. In the first quarter, Tesla delivered only 63,000 cars, a roughly 31% drop from the quarter before. And most devastatingly, Tesla was hit the hardest on its most lucrative cars, the luxury Model S and Model X, which saw their sales cut in more than half. As of March 31, its working capital deficit alone was $2.2 billion.

This after the two previous quarters had been the first consecutive profitable ones in Tesla's 16-year history. Those gains would be completely wiped out by Tesla's Q1 loss of roughly $900 million.

Spartan diet

Nine hundred million dollars isn't “air pocket” money, and according to experts had Tesla tried to raise capital last year instead of going on what CEO Elon Musk called a “Spartan diet,” things might look different.

“Tesla could've more easily gotten money last year when the stock price was high,” former SEC Economist and Carnegie Mellon Professor Chester Spatt told Business Insider.

It also could've gotten more money without raising as many eyebrows, Spatt said. But in its weakened state asking for more “would've been an adverse signal.”

Tesla's financials are not the only thing ailing the company either. Tesla has stopped pushing its $35,000 Model 3 — the margins just don't work.

Reports of changes at Tesla's Giagfactory 2 in Buffalo, New York also indicate that Tesla is having issues with its solar business. Reuters reported that most of the solar cells produced there will be sold overseas — not used to make Tesla's solar rooftops — and that the factory would be used to make other products for Tesla's cars.

Then there's China. Tesla is building a third Giagfactory in Shanghai to produce and sell Model 3s and Model Y cars to the Chinese market — but it's a market under extreme stress. In April car sales fell 17.7% from the same time a year before. And according to researcher Gasgoo, Tesla's Model 3 didn't break into the top 10 new energy vehicles sold in China for the month. That means it sold less than 3,000 cars. Tesla did not respond to Business Insider's request for comment on that figure.

In the past, the Chinese government has come to the rescue when auto sales turned down, but this time any relief is likely to come in the form of a more general tax cut meant to speed up the domestic economy. If that's the case, some analysts fear that relief wouldn't translate to more car sales.

“I don't think buying a car will likely be something that [Chinese consumers] would do with the money,” said Tu Le founder consultancy of Sino Auto Insights.“Remember that the average salary is still low when compared to the United States.”

On top of all of that Tesla has had some major technical scares. Over the last few months, there have been multiple reports of Tesla Model S's spontaneously combusting while parked. One incident took place in Shanghai, another in Hong Kong, and yet another in San Francisco. And last week, the National Highway Transportation Safety Agency determined that when one Tesla owner died after crashing into a semi-truck, the car's Autopilot function was engaged.

What is it all for？

Autopilot's function will be critical for the destiny of the company. In a private call with investors earlier this month CEO Elon Musk said that robotaxis are the future of the company. He said they would turn Tesla into a half trillion dollar company and that Tesla would have a million of them on the road by spring 2020.

Everything else in Tesla's business, he said — solar roofs, $35,000 Model 3s, the China build out — takes a back seat to that.

The idea that Tesla's Autopilot technology — or even AutoPilot technology in general — is ready for wide use has been met with skepticism from almost all of Tesla's competitors. But on the call Musk claimed that getting regulatory approval for the robotaxis would be “relatively easy.”

That was just on the call, though. None of the public documents Tesla produced to the SEC or investors mention Autopilot, or this robotaxi plan. The plan received just a passing mention on Tesla's first quarter earnings call and some discussion during the company's Autonomy Investor Day in April. Neither of those instances firmly attach Musk's grand and detailed robotaxi vision to the $2.7 billion offering.

Underwriters Citigroup and Morgan Stanley declined to comment on the difference between the private call and the offering documents. Tesla's law firm, Wilson Sonsini Goodrich & Rosati, and its auditor PriceWaterhouse Cooper declined to comment as well. Goldman Sachs and Tesla did not respond to multiple requests for comment on this matter.

Legal experts have found the investor call's departure from the offering documents strange. As attorney Tom Gorman, a partner at Dorsey and Whitney LLP and specialist in securities fraud, told Business Insider: “If you go out to people and say you're going to use the money for something and then you use it for something else, that's a big no-no.”

That is why, he said, “this deal looks weird.”

What Gorman said was even weirder is that a company of Tesla's size and resources would have a discrepancy like this. Investors bring charges against companies that spend money on purposes outside of what executives stated all the time, but usually, those companies are much smaller than Tesla's $50 billion market cap.

“If it was some microcap company created out of a reverse merger you'd say 'probably a fraud,' but that doesn't make sense for a company like Tesla,” Gorman explained. “You're asking to get sued into oblivion... there must be some logical reason for this. I can't imagine what that is, but it's just silly.”

Musk seemed to further depart from that stated purpose when he told employees in an email that the money the company raised was only enough to get Tesla through 10 months of operations at its first quarter capital burn rate.

That contradicted what Musk said on the investor call. There he said that Tesla didn't “expect to spend this capital. We expect to fund our activity out of our growing cash flow, but we think it's probably wise to have at least some buffer here, some cash buffer between now and say summer next year (h/t @Paul_M_Huettner).”

To short sellers, this kind of behavior reeks of desperation, and they think the stench will only become more odorous after Tesla reports its second-quarter numbers in August.

“Tesla is grabbing as much cash as they possibly can before the stock tanks,” said Gabe Hoffman of Accipiter Capital, an outspoken short. “They're still projecting 90,000-100,000 deliveries in Q2 and they'll be lucky to get closer to 70,000. Then there's a cliff in Q2 because of the tax credit phasing out and cash will be burned in Q2, Q3, and Q4. This company was almost functionally bankrupt on March 31st and this raise will barely get them through the year.”

If that's the way you look at it, the headwinds are coming for Tesla. And there doesn't seem to be a tailwind in sight.