On Friday, close to $1 billion in debt comes due for Tesla, an obligation that will wipe out about a quarter of the company's cash.
According to regulatory filings, Tesla has $920 million in convertible senior notes set to expire on March 1, at a conversion price of $359.87 per share. Tesla's stock hasn't traded above $359 for weeks, and closed Tuesday at $297.86.
If the shares were valued at the conversion price, the bonds could convert into Tesla stock, and Tesla wouldn't need to pay the debt in cash. But in the absence of a major share rally this week, the electric vehicle maker will have to make the payment in cash.
In its 2018 annual report, Tesla said it had $3.69 billion in unrestricted cash and equivalents to end the year. Former hedge fund manager Darius Brawn said the debt payment could put Tesla in a cash crunch, unless the company sees exceptional Model 3 sales next month.
"If March doesn't go gangbusters for Tesla they are in real trouble, especially without raising," said Brawn, who worked as a portfolio manager for Citadel, SAC and Sharpe Point. Brawn added that he doesn't think the company can raise while CEO Elon Musk clashes with the Securities and Exchange Commission.
On Monday, the SEC asked a federal court to hold Musk in contempt for violating an agreement the parties struck last year over Musk's Twitter use.
A Tesla spokesperson pointed to comments from the fourth-quarter shareholder letter, when the company said it has "sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019." Tesla also said that its cash position improved by $1.45 billion in the second half of 2018, and that it expects positive net income and positive free cash flow "in every quarter beyond Q1 2019."