Although this is a description of Morgan Stanley's absolute worst case scenario for Tesla and the firm's best case target still remains at $230 per share, it is indicative of the stock markets further lack of confidence in Elon Musk's electric vehicle manufacturer.
Tesla's (NASDAQ: TSLA) shares were down more than 2 percent in pre-market trade on Tuesday, after they hit on Monday the lowest since December 2016 at US$205, after Wedbush Securities cut their share price target to US$230 from US$275.
Musk told employees that expenses are being reviewed since the company went on a "Spartan diet" after losing $702.1 million in the first quarter. And the situation only grew worse when CEO Elon Musk last week ordered a "hardcore" belt-tightening covering "literally every payment that leaves our bank account".
Tesla's stock, which has nearly halved in value since last August, was down another 3% at $199.
But it was not all that long ago that Tesla and GM had almost the same market capitalization.
A week later, Tesla raised more than US$2.3 billion through offering common stock and convertible bonds in a move that analysts described as "net positive" and probably long overdue. Two years ago, a Bloomberg article came out that claimed the auto company was spending 8,000 Dollars per minute.
During that time, Tesla analysts lowered their earnings estimates for the next 12 months by 33%, with just three names seeing more severe cuts, according to a Monday report from the firm's quantitative analysts. Meanwhile, T.Rowe Price Associates has sold off 81% of its Tesla holdings so far this year.
"Tesla's stock price will have to get back over $300/share for shorts to be deeply in the red again and the threat of a short squeeze to be valid", wrote Ihor Dusaniwsky, S3 Partners' managing director of predictive analytics. "To the extent trade tensions between the United States and China are focused on industries and technologies with national security/IP sensitivity, we would expect Tesla's China story may continue to be heavily discounted by the market".
"We give Tesla credit for tapping into the world's largest EV market for a number of years" in China, Mr Jonas said.
Analyst Adam Jonas said Tesla's rising debt pile and geopolitical exposure, including the risk that Chinese demand for the company's cars could suffer, had driven him to slash his "bear-case" valuation to $10 from a previous $97.