Way back in 1988, Alan Shapiro and I published a paper called “Corporate Stakeholders and Corporate Finance.”
The point of the paper was to highlight a manner in which corporate finance policy could have a major effect on corporate value - in contradiction to the famous Miller-Modigliani theorem. The paper proposed that corporate finance affected value through its impact on corporate stakeholders, particularly customers. Our point was that customers would shy away from a company in financial distress because they feared the products would be terminated, support and repairs would be withdrawn, and second hand prices would plummet, if the financial distress worsened. This leads to a downward spiral. If customers stay away, revenues drop and the financial crisis becomes more acute, leading to further loss of customers. The implication is that companies that want to keep their customers need to be sure to have plenty of financial slack so that customers do not have to worry about the company's future.
That leads to Tesla. With cash dwindling and debt ratings falling Tesla is headed for possible financial distress. For the first time, potential customers are lighting up the internet with concerns about buying cars from a company that might not be able to support them. It is not yet a Cornell-Shapiro downward spiral yet, but it is something to worry about.
