Elon Musk’s growth story is looking more like a fable as Tesla Inc. enters survival mode.

Just over two weeks ago, Musk boasted to stock analysts and big investors that the company was on course to reach half a trillion dollars in market value. Since then, Tesla’s stock price has dropped 19.5 per cent, vaporizing $8.8 billion in market value. The remaining $36-billion market capitalization is 7 per cent of what Musk is telling the world Tesla will be worth.

On Friday, Tesla’s stock price dropped below $200 a share for the first time since December 2016. On Monday it fell as much as 7 per cent before finishing at $205.36. The spark was provided by Dan Ives, an analyst at Wedbush Securities, who was once an enthusiastic Tesla supporter. On Sunday he cut his price target for the stock to $230 from $275 and issued a note to investors that said Musk faces a “code red” situation on his finances and a “Kilimanjaro-like uphill climb” to hit profitability goals in the second half of the year.

“There are dark clouds forming over Fremont,” Ives said in an interview, referring to the site of Tesla’s car factory in California.

A storm was already brewing in January, when Musk announced that 2,500 workers, 7 per cent of the workforce, would be laid off. That came after 9 per cent were laid off the previous June, with Musk saying, “We are making this hard decision now so we never have to do this again.” After two profitable quarters in late 2018, it seemed the time had come for Musk to buckle down and make good on his promise to deliver a mass-market car efficiently and profitably. Then came the first quarter from hell.

Tesla’s financial condition has only deteriorated since then. Musk has responded on two tracks: He’s watching every penny of expense, while talking up a series of projects with varying degrees of likely completion —from a new Model Y crossover to a robo-taxi service he employed to pitch the recent stock and bond sale. In the past such products, like the Tesla semi, while derided by critics as vehicular vaporware, have managed to boost the stock price. No more.

Although Ives said he does not believe Tesla is on the brink of bankruptcy, he said the company is headed toward a cash crisis without another capital raise, even after the $2 billion it raised from stock and convertible bonds sold earlier this month.

“Demand has been extremely disappointing this year,” Ives said. The Tesla story has shifted from “glass half full to glass half empty.” Patience, he said, “is wearing thin.”

The grim situation was laid bare in March, when Tesla turned in a disastrous first quarter. At a time when the company should have been ramping toward the “exponential growth” long promised by Musk, automobile revenue was down 41 per cent, leading to a $702-million net loss and $640-million negative operating cash flow.

While cash on hand fell to $2.2 billion at the end of the quarter, what many analysts saw as a dangerously low level, Musk raised some more. On the May 3 call about that stock-and-bond deal, Musk told investors, “We don’t expect to spend this capital. We expect to fund our activity out of our growing cash flow” as a “buffer” to a possible recession or automobile industry downturn.

But he revealed a different use for that cash —day-to-day expenses —in a cost-cutting memo to employees on Thursday that prompted the stock-price smackdown. Musk wrote that the money “actually only gives us approximately 10 months at the first-quarter burn rate to achieve break even.”

Hence, his edict to “examine every expenditure at Tesla no matter how small, and be sure it is critical.” Tesla’s chief financial officer will sign every page of outgoing expenses, Musk said, and “I will personally review and sign every 10th page,” adding: “This is hardcore.”

Meanwhile, the market appears to be taking a more skeptical view of what Ives calls Tesla’s “sci-fi projects.” The robo-taxi idea took a big hit last week when federal safety regulators said Tesla’s Autopilot driver-assist system was turned on 10 seconds before a Tesla in Daytona Beach, Fla., drove underneath a semi-trailer in March, slicing off the roof of the car and decapitating the driver. That’s the second time that’s happened with Autopilot engaged.

T. Rowe Price, once one of Tesla’s largest investors, announced in government filings last week that it had cut its Tesla stake by 81 per cent in the first quarter, further pressuring Tesla’s stock premium.

To remain an ongoing concern, Tesla must sell enough cars with a high enough profit margin to keep the lights on, never mind expanding into other product categories. Either that or raise yet more capital.

As it is, Tesla is paying a rising price for capital. Bonds due in 2025 that carry a 5.3 per cent coupon reached more than 9 per cent yield last week, which according to Bloomberg is well above the average yield for a company with the same rating. And as time goes on, capital may become even more expensive for Tesla.

That puts heavy pressure on boosting sales while further cutting costs. In the first quarter, Tesla delivered 63,000 cars. Musk forecasts 90,000 for the second quarter. Most analysts predict more than 63,000 but less than 90,000, but with lower average selling prices as the lesser-priced Model 3 replaces sales of older models. On the cost-cutting front, Tesla has already pushed research and development and capital spending toward historical lows.

Few are predicting cash will flow at the volume Tesla needs. The only hope is that sales pick up dramatically in the second half of the year. While Ives has switched from optimism to pessimism, joining a growing roster of Tesla critics and short sellers, some company champions are hanging in. Ross Gerber, a longtime Tesla bull and founder of the Santa Monica investment firm Gerber Kawasaki, has tempered his enthusiasm, but he said he still believes Tesla can prevail if Musk makes changes such as bringing in a chief operating officer.

“The issue is it’s never going to be a smooth ride with Elon,” Gerber said. “But I have confidence over time it will work out.... We don’t see the existential risk of bankruptcy as an issue for them.”