Tesla Model S
  • Tesla Model S
  • Tesla Model S

  • tesla model s
  • tesla model s

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
Alongside the positive news in the recent shareholder call that Tesla Motors held recently, there is this bit of news that will help us understand the company's financial picture: the company confirmed that the first Advanced Technology Vehicle Manufacturing program loan payment is due in December and hinted the first payment might come early. The company previously announced the December due date in May.

Over on the Tesla Motors Club forum, one member noted that, "The DOE loan agreement was amended to require Tesla to set up a restricted cash account for the first three repayment installments. Those amounts are shown on the balance sheet. During the conference call, Elon intimated that he might make the first installment that is due in December early." Tesla would not give out an official statement on the matter, but you can listen to Tesla CEO Elon Musk and CFO Deepak Ahuja discuss timing and loan repayments here and see the balance sheet here.

Back in 2009, the U.S. Department of Energy approved a $465-million loan to Tesla to build the Model S and work on its all-electric powertrain. As of the end of the second quarter of 2012, Tesla says, it has an "additional $33 million left to draw on our loan facility with the DoE. We drew down $71 million from our DoE loan facility in Q2. Our relationship with the DoE remains strong and we remain on track to draw all remaining funds in the next few months."

Now that the DOE money is coming to an end, Reuters reports, Tesla might try to raise "a small amount of money" to cover things like development of new vehicles, including the Model X and "a smaller sedan code-named Gen III in 2015," the fabled Blue Star.


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    • 1 Second Ago
  • 47 Comments
      Nick
      • 2 Years Ago
      Will that shut up the anti-EV Beck-suckers?
        paulwesterberg
        • 2 Years Ago
        @Nick
        No fox news and friends are funded by oil companies. No amount of success will dampen their contempt for EVs.
          Marcopolo
          • 2 Years Ago
          @paulwesterberg
          @ paulwesterberg, Did you know that the Mitsubishi group (who produce the iMev ) includes an Oil company as a member of the group? ,
          2 Wheeled Menace
          • 2 Years Ago
          @paulwesterberg
          ^-- yep
        methos1999
        • 2 Years Ago
        @Nick
        Many of them are completely irrational and willfully ignorant of facts. Short answer: NO
        Giza Plateau
        • 2 Years Ago
        @Nick
        Anti EV people aren't that important. What's more concerning is whether Tesla will actually be able to begin to pay back the loan.
        Ashton
        • 2 Years Ago
        @Nick
        I'm going to assume your referring to Glenn Beck... I like & listen to Glenn Beck, and I love EV's.....I think I just shattered your bubble.
          PR
          • 2 Years Ago
          @Ashton
          Ashton, That would make you a pro-EV Beck-sucker, not an anti-EV Beck-sucker. You are the exception that proves the rule. The bubble remains intact.
          EVnerdGene
          • 2 Years Ago
          @Ashton
          your bigoted responses (in general and about any and every subject) make you an a-hole extraordinaire
      oktrader
      • 2 Years Ago
      Since I trade in TSLA, I watch for any news related to the finacial health of the enterprise. Your article caught my eye. I think you need to clarify a couple of things, particularly because people reading this column might think there was some sort of payment "upside" being hinted by Tesla. There really wasn't. Here was the analyst's question and the responses from Musk and Ahuja: Amir Rozwadowski (Barclays): And then if we’re thinking about the demands on your cash for the near term. I was wondering when do you expect to start paying back the DOE loan? Deepak Ahuja: We start paying that back in December of this year. Elon Musk: We’re required to pay it back in December. We’ll start paying it back no later than December. Deepak Ahuja: And then there’s quarterly payments thereafter. That's it. The whole discussion. I didn't see Musk "intimating" anything. It is in his already optimistic nature to project "possibilities", so be careful not to create something that isn't there. I searched Autoblog's archive of Tesla articles and came across this one "Tesla talking billion dollar deal with Toyota?" that you published almost exactly one year ago. You weren't the only ones. So did some financial news services who should've known better. All this was based on an obtuse Musk reference to the $100M RAV4EV deal in which he hinted about something "an order of magnitude bigger". Notice it's been a year and nothing has been mentioned since. If you are projecting something about early payment from his answer to Rozwadowski's question, then you are implying more than you should. Plucking your source from an enthusiast forum is probably not a good idea, either. In any case, the arrangement they have today for the debt service reserve account is better than the original DOE agreement, which had coverage ratios that would otherwise have been implemented very soon. Setting aside reserves for the first three debt service installments were a more favorable for Tesla than the coverage ratios for the remainder of the loan's terms. BTW, Tesla IS very cash-challenged for Q3 by any rational measure. I know that Roadster and S Model enthusiasts are frustrated to hear this, but all you need to do is look at the Q1 and Q2 Balance Sheets to be concerned. Add in the so-called "ramp-up" of S Models and you can see the necessary near-term expenditures will create significant challenge. History shows some ultimately successful companies who have prevailed through such peril, but most do not. It will be tough. I don't care what turns the wheels, mind you. I just want to make money, and I advise readers who wish to do the same to act prudently when evaluating any news source.
        Rotation
        • 2 Years Ago
        @oktrader
        I agree. When the sources listed included Tesla links, I clicked them to find the info that Tesla said they would repay early, only to find just links to financial statements. The info that says Tesla will pay back earlier comes from Tesla fan forums. This just isn't a good place to find good info, especially good financial info. I'm not saying Tesla won't make it through this period. I'm not saying Tesla will even just "squeak by". I'm just saying that Tesla will be low enough on cash at a critical time in a cash-intensive business that giving up cash doesn't make sense. The money saved by paying early isn't enough to increase the chances of having to resort to having to find semi-predatory completion financing to get through to the (financially) good side of the Model S product cycle.
        Giza Plateau
        • 2 Years Ago
        @oktrader
        oktrader, so are you shorting?
          EVnerdGene
          • 2 Years Ago
          @Giza Plateau
          oktrader: great perspectives also great to hear from an adult on this site
          oktrader
          • 2 Years Ago
          @Giza Plateau
          Giza: I don't mean to overcomplicate an answer that should be simple. TSLA is a very volatile stock that does not trade on any fundamentals. A prudent risk-taker can make money by a couple of things: (1) Closely watching for "events". TSLA is driven by announcements, news, and "ceremony", if you will. It works both ways, with strong upside leading up to the 22 June handover of Founders' models, and selloffs from surprising downgrades. In the immediate aftermath of these little tremors, option prices usually react very strongly and give you some good openings. (2) Following the charts. I am not a Wave Theorist by any means, but once again the lack of fundamental trading metrics makes charts measurably more useful. In observing these things I will structure trades (with reasonable protection), and they might be staked on either a long or a short position. I just covered August puts this morning at opening (clearly too early!!). In the long haul, I do not see Tesla getting to 2013 outside the teens. In my mind, the best case for the company has them making a significant offering at some discount, dragging the shares down about 20% below where they are now. That, combined with a general market weakening, will take them under 20. There may be spurts back to the 30's between now and then. Just to clear the air, I do have a fairly significant (to me) short position in the high 30s, expiring Jan 13. Please understand that TSLA short interest exceeds 25 Million shares and I am a very much immaterial fraction of that total. The big money players are out doing their thing, long or short, with no regard to what we type into these comments. I have no illusion that I am "talking down" the price, and you shouldn't, either. Finally, I'll say again that the chemical energy source used in the Model S -- whether a reversible reaction from which you capture electrons, or the rapid oxidation of hydrocarbons -- does not matter to me. I am simply trading on a very highly valued equity with substantial price action.
      Rotation
      • 2 Years Ago
      That doesn't make any sense. They have a cash crunch coming in the next 6 months, they need to make sure they get through that. Interest rates are very low, paying back federal loans early doesn't make a lot of sense. Ask Ford.
        PR
        • 2 Years Ago
        @Rotation
        Rotation -- hysteria of a supposed cash crunch at Tesla are highly exaggerated by Tesla haters. This is proof that the Tesla haters don't know what they are talking about. I'm standing by my prediction that Tesla will exit Q3 and Q4 of this year with an excess of 150 million of cash on hand, even if they slip their production goals a few months into next year. Tesla starting their loan repayment schedule early isn't about paying off the loan sooner. It is about boosting investor confidence. It is a smart business move.
          oktrader
          • 2 Years Ago
          @PR
          PR, I probably didn't compose a very good explanation about the deposit. My apologies. First of all, you are CORRECT in your reading of the accounting treatment of the deposit. Tesla does NOT book revenue until the actual completion of the sale (i.e., delivery of the automobile and transfer of title). My point is that the deposit was already on the books as cash. Moreover, Tesla has already been applying cash from deposits to fund operations. (PLEASE do not think I am saying this is an inappropriate accounting habit. I personally think it is risky and were I a customer i would be concerned. ut by and large Tesla rez holders understand taht their money is being used to run the company and they do not object). So even though Tesla will recognize all ~$90-100,000 as revenue upon delivery, the actual cash received will be only $50-60,000. I don't at all mean to say that their ability to demand a large early payment was bad. Far from it: clearly, that's quite a coup. But the cash actually RECEIVED in Q3 will be roughly 60-odd % of the gross Model S revenue forecast. If there are 500 cars delivered at $100,000 each, the cash inflow will be about $60M. The expenditures from all the things I mentioned in my post will significantly exceed $60M. Roadster won't make up for it. There are only about 120 remaining gliders, and even if all 120 sold, the Gross Margin generated would be ~$4.5M at the most. This quarter can't pass without a raise of some kind. My understanding is that FedEx had a similar situation in their first year of business, basically running down to what was in petty cash. But there are lots of heartbreaking failures that have happened, too, most of them never even making a case study in B school. In the end this will take the very best execution, some financing help, and very faithful customers.
          oktrader
          • 2 Years Ago
          @PR
          PR, one needn't "hate" a company to be cautious and realistic about its cash position. Currently Tesla's consumers of cash are growing faster than the sources of inflow. The "ramp-up" will produce product at a rate far below optimum throughout Q3, carrying the burden of a reported 800 factory workers and plant overhead costs. Moreover, the liquidation of early model deposits leaves only ~65% remaining revenue upon delivery -- all this against cars which are being produced at 150-200% of optimum cost. SG&A and R&D continue to grow. Finally the factory inventory build up needed to make the Q3 - to - Q4 leap (10-15 cars per day to 60-80) will be in the tens of $M. There are more hurdles, but these are sufficient to give pause. I am not insulting Tesla by pointing these things out. Other than the greatly extended "ramp-up", these are challenges faced by any automaker in transition to rate production. But other established makers have resources on a very large scale to absorb the challenge. Little Tesla does not. This will be a difficult trek, and without a funding infusion from a new public offering, a private placement, or perhaps Musk's own pocket, Q3 is quite an abyss to cross.
          PR
          • 2 Years Ago
          @PR
          oktrader - It is true that rational analysis is not the same as "hate". But having some folks applying rational analysis on one hand is not mutually exclusive to other folks just spreading pure hate on the other hand. We get all kinds of politically motivated wacko's around here who hate entire companies just because they participated in this DOE loan program. Those are the folks I was referring to, not folks applying rational analysis. One even demanded that Chu himself come to AutoBlogGreen to stand on the carpet to answer for DOE loan decisions.... But I digress. From my reading of the SEC papers, I was under the impression that the deposits were not booked as a sale, and accounted for in their cash holdings until after delivery. From the SEC papers: "Upon delivery of the vehicle, the related reservation payments are applied against the customer’s total purchase price for the vehicle and recognized in automotive sales as part of the respective vehicle sale. " Is my reading incorrect about the reservation deposits not being booked as automotive sales until the point of delivery? If so, that would throw off my numbers by about $20m for the first 500 Signature series cars, and 5M million for every 1000 units after that. That would mean I would have to revise my projection down to closer to 110-120M by end of Q4. That certainly would make Q3 much tougher as you say, since the Signature Series deposits are 8 times larger than the standard deposits. But once the initial 500 Signature Series cars are all built, this would have less and less impact in Q4 and forward.
          oktrader
          • 2 Years Ago
          @PR
          Rotation: Early loan repayment would not reduce available cash. The funds are in a dedicated account that cannot be used for anything else anyway, as discussed here in the 1Q12 10Q: "Under the DOE Loan Facility, we have agreed to fund a dedicated debt service reserve account. In February 2012, we funded $15.0 million into this account, an amount equal to all principal and interest that will come due on December 15, 2012, and on or before October 15, 2012, we have agreed to fund an amount equal to all principal and interest that will come due on March 15, 2013 and June 15, 2013. Once we have deposited such amounts, we will not be required to further fund such debt service reserve account. We have classified this cash as current restricted cash on the condensed consolidated balance sheet." There are many casual investors out there who might find the "early repayment" encouraging even though it is not really meaningful.
          PR
          • 2 Years Ago
          @PR
          oktrader -- Thank you for your post. I now know where I went wrong with my math. The key is in your statement "My point is that the deposit was already on the books as cash." I wrongly conflated booking the sale with booking the cash. I had assumed incorrectly that Tesla had walled off deposits from their cash on hand via escrows or similar. I agree that there is not anything wrong with that as long as everyone agrees to it, it's just not what I had expected. It certainly does put the pressure on Tesla to actually deliver! That does make cash holdings in Q3 drop below 100M until they can get through the first 500, and get into the rest of their year's production where they will be selling 265 mile Model S's with 70K-90K price tags with the 5K deposits that will book more cash/less loss (Tesla isn't building any of the short range models until next year). Getting past that first 500 will be a critical milestone. Thanks again for the information.
          Rotation
          • 2 Years Ago
          @PR
          I'm not talking about hysteria or hating. Tesla will only sell a few thousand cars the rest of the year while ramping up to produce at a might higher rate. This takes cash. It makes no sense to reduce your cash on hand during this process. I wouldn't be surprised if Tesla did have exit Q3 and Q4 with $150M of cash on hand. That's just not much for a company in such a capital intensive business. And $120M is a lot less. "Boosting investor confidence". Yes, I'm not a big fan of pumping stock. Yes, every company does it, but in my opinion, CEOs long ago forgot the goal is to grow a company, not grow the stock price.
          PR
          • 2 Years Ago
          @PR
          It is important for Tesla to have cash on hand to build the Model S. But Tesla has more pokers in the fire than just the Model S. Tesla is going to have to raise much more funds than they have right now to launch the Model X, Gen2 Roadster, and Blue Star variants. To do that they have to make investors very comfortable, and to build stock prices so they can get the best VC funding deals. This is already in Tesla's forward-looking SEC statements, so we know this is going to happen. So while I completely agree with you that it would be nice for Tesla to just put their heads down and just concentrate on the Model S and forget about short term stock prices, that just isn't reality.
          Rotation
          • 2 Years Ago
          @PR
          Best VC funding deals? They're a public company already! While it's possible to raise private equity as a public company, it's not really great to be in a position to need to do so. So Tesla shouldn't give their money away and move toward that position. oktrader: The DoE loan rules are bizarre to me. They make it impossible to spend the money, all they basically do is serve as a loan guarantee so they can get other loans by telling potential creditors that if all else goes wrong, they'll just give the DoE money to the creditors as they close up shop. The money can't really be used as working capital. However, they surely have other loans which are keys to their cash on hand as mentioned above. Paying back DoE loans will reduce their cash on hand and may trigger issues in their other loans. That the very least it will lower their credit rating. No one ever went out of business by having too much cash on hand. And I know the loans aren't free, but given how cheap it would be to keep the money 6 months longer during this cash-intensive period it doesn't make sense to pay them back early at this time.
      motorhead
      • 2 Years Ago
      Brain-dead youth. They've never listened to Fox News but they just hate it. They've never listened to Glenn Beck, but they just hate him. Sounds like Hitler youths: "I've never met a Jew, but I hate them."
      Peter
      • 2 Years Ago
      All they have to do is produce cars in quantity and money will not be an issue anymore. Personally I find the idea that Elon Musk is on the shop floor far more encouraging than theatrics about a quarterly interest payment meant to boost stock price.
        Marcopolo
        • 2 Years Ago
        @Peter
        Peter, Your faith and sentiments are to be applauded ! But, will you invest in Tesla ?
          PR
          • 2 Years Ago
          @Marcopolo
          Marco, Only "Twenty-two percent of Americans own individual stocks" and only "14 percent have a 'great deal' of confidence" in the US stock market. Given those numbers, there is no magical insight to be gained from either a yes or a no response to your question. http://abcnews.go.com/Business/story?id=86452&page=1
          Marcopolo
          • 2 Years Ago
          @Marcopolo
          @ Peter, Are you 'Peter'? Is Peter your 'alter ego' so you know what he's thinking and can answer for him ? If not , what business is it of yours ?
          PR
          • 2 Years Ago
          @Marcopolo
          Looks like somebody doesn't know the difference between a public forum where everyone posts on everyone else's posts, and private emails or private chats. If you want a private conversation with Peter, you will have to do it in a private email or a private chat, not on a public forum where everyone is free to comment whenever the feel like it. Sad that you have to be taught about even basic workings of the internet. *rolls eyes*
        Marcopolo
        • 2 Years Ago
        @Peter
        PR. My question was addressed to Peter, your interruption assumes you know his answer, and even worse, presumes to assume why I want know ! It looks like somebody doesn't know what the word 'busybody' means!
      me
      • 2 Years Ago
      wha wha whaaat tax pay'r money helping to kick start an American made car? providing jobs??! NOOOOO! NOOOO! Per the GOP that's what the commies do lol
      Marcopolo
      • 2 Years Ago
      oktrader, Thank you for your very interesting analysis. I haven't read the terms of deposits for reservations of advanced orders for Tesla S vehicles. However, it seems very unlikely that Tesla can use that money prior delivery as operating cash, without some kind of bond or realistic guarantee in the advent of a failure to deliver. Tesla Motors, has been an astonishing achievement and a testimony to the remarkable acumen of it's founder, Elon Musk. Tesla's business model is very unusual.In many aspect's Tesla more closely resembles an IT company than a traditional auto-manufacturer. This may turn out to be a good thing, and the way of the future, or a disaterous lack of appreciation of the fundamentals of the auto-business. Only time will tell. Tesla is to be commended for seeking additional sources of revenue from selling services to other auto-makers. The income from the efforts is substantial, but not as great as Tesla fans believe. Tesla funding outside of the DOE, is totally dependent upon the reputation of Elon Musk. Elon Musk is Tesla's greatest asset and strength, yet he's also Tesla's greatest weakness. (One heartbeat !) With the model S, released and the first few delivered, Elon Musk desrves to enjoy the accolades for his epic achievement. However, Tesla's financial fortunes are not so certain. To date, the market for short range EV's has proved very slow and unprofitable. Tesla boasts an order book of 10,000 reservations for the model S. Sales after that are unpredictable. Under normal conditions, Tesla would need to sell 10x that number to repay the development costs of the model. However, since this is Tesla's first production model, some of the development costs can be counted as establishment costs of the company and form part of the companies assets, purchased from equity. But the DOE loans must be repaid, and further expansion capital raised to cover the added expenses 10,000 sales will generate. The issue of whether Tesla's unique sales method is effective on a large scale is unknown, as are many other issues. It all comes down to Elon's personal magic and how patient investors will be with long delays of return on capital. Elon Muck may have sufficient idealistic following to provide future funding, or not. If the magic stops, and the investor support declines, Elon Musk will still have the opportunity to JVC or merge with a sympathetic OEM. An expansion into producing a lower priced, low profit, volume production model EV, would be a bridge too far. Although the promise of such a vehicle being produced may prove popular with some investors, others will see such an ambition as completely beyond Tesla's resources. But, Elon Musk is a remarkable man, and he just might find enough supporters, with sufficient capital to advance his dream.
        Marcopolo
        • 2 Years Ago
        @Marcopolo
        PR, I think you misunderstand the implications of using deposits as cash income.I am not referring to some kind of consumer liability. There is nothing inherently wrong or illegal about using deposit money as operating cash (except in some jurisdictions) as long as that condition forms part of the sales contract. Tesla's 'reservation' contract's are able to be cancelled, and can be deposits refundable. This must produce a counter-balancing unfunded liability in the companies balance sheet, during the time the deposit money is spent, and the delivery of the vehicle. That unfunded liability, must be addressed by some method. Elon Musk may have offered his own personal guarantee, or made provision by some other method. The questions of title over stock, and the valuation of assets, also gets murky, but Tesla's lawyers have been thorough, and no doubt you will have researched those provisions in your 'due diligence.' The unfunded liability created by treating deposits as cash flow, is difficult to assess while the company is still trading, since it's difficult to predict the cancellation/refund rate. Assessing these types of aspects of risk, is the difference between 'due diligence' performed by private investors and those who invest other peoples money.
          Marcopolo
          • 2 Years Ago
          @Marcopolo
          Ok trader and PR, Until Tesla reaches a point of insolvency, the position of unfunded liabilities is hypothetical. However, in the advent of insolvency, the issue of deposits could very well form the basis of an action against the directors. The argument of informed consent would have to be balanced against Elon Musk's many public endorsements " of standing behind Tesla" Such remarks could be construed as a personal guarantee. Basically, I am nervous about such imprecise arrangements, but as I say, the question is hypothetical, unless Tesla fails, which I sincerely hope it doesn't.
          oktrader
          • 2 Years Ago
          @Marcopolo
          Marco, I understand your perspective that Tesla should consider a reserve. Notwithstanding some state/local laws affecting a few US depositors (and non-US statutes of which I’m unaware), Tesla has no requirement to reserve against this potential liability. Depositors are unsecured creditors to the corporation, pure and simple. Musk has made no personal warranty nor has it been suggested. (I’m not sure whether most rez holders realize they haven’t even the most remote claim of a place in line ahead of ANYONE if things go all pear-shaped, but most understand they are in fact funding the business.) The entry for “Reservation Payments” is clearly segregated on the Balance Sheet under Liabilities/Stockholders’ Equity. It’s a very important part of the cash on hand to survive the transition to production. As for your statement… <> … you’re correct. Right now it’s hard to understand what the actual remaining cash on hand is in this aspiring company. Also, recall the 8-K you might be looking at right now is unaudited. So it’s difficult for investors and customers to really know what the prospects are for a successful Q3/Q4.
          PR
          • 2 Years Ago
          @Marcopolo
          Marco, here is how Tesla's unfunded liability is addressed in the latest SEC filing: Liabilities and Stockholders’ Equity: June 30 2012 ... Reservation payments $133 million That's it. Nothing special, just a line-item under liabilities on the balance sheet backed only by each individual reservation agreement. No other guarantee is offered. Reservation holders can get their reservation deposits back for as long as Tesla has cash on hand to return to them. The implication of Tesla using this deposit money as cash is very clear. Tesla is perfectly free to spend every single penny of the $133 million in reservations, even it that means Tesla doesn't have any cash left to return to folks who have put down reservations. If Tesla does not have cash available to refund reservations, then Reservation holders have to get in line with anyone else who also is owed money by Tesla and want to collect. They would be towards the back of the line if a judge has to decide what assets are liquidated to pay which liabilities.
          oktrader
          • 2 Years Ago
          @Marcopolo
          Marco. Well, somehow my quotation from your post evaporated. I meant to reference this: "The unfunded liability created by treating deposits as cash flow, is difficult to assess while the company is still trading, since it's difficult to predict the cancellation/refund rate."
        PR
        • 2 Years Ago
        @Marcopolo
        marco said "it seems very unlikely that Tesla can use that money prior delivery as operating cash, without some kind of bond or realistic guarantee in the advent of a failure to deliver. " That was my previous belief also. But oktrader is correct. Here is the key part of the Reservation Agreement that oktrader is referencing: "We will not hold your Reservation Payment separately or in an escrow or trust fund or pay any interest on Reservation Payments" Goto Tesla's reservation page, and you can read it for yourself if you have any doubts. Once he pointed this out, I went back and did due diligence before I responded to him. I also went through more of the numbers over multiple SEC docs and tracked the deposits indeed being booked against cash. oktrader's statements are accurate and backed by the primary source documents.
      Marcopolo
      • 2 Years Ago
      Tesla's stock currently trades in the vicinity of 19 times book value. This sort of valuation is very rare in industrial stocks, and reflects both the passion of investors, and Elon Musk's ability to turn ideas into viable business enterprises. Unlike other hopeful EV start-ups, Tesla has generated income from sales vehicles, technology to other OEM's, and sold environ-credits.This income has helped dilute the impression of losses and kept the share price confidant. The company appears well managed and capable of delivering it's products (and obligations) on schedule. However, what can't be overlooked is at March 31st, Tesla had $123 million of working capital and $154 million of equity. Tesla lost $89 million in the first quarter and burned $50 million of cash in operations. Although revenue from Model 'S' sales will start to generate income in the next year, will it be sufficient to provide a satisfactory return on invested capital ? Under normal conditions, I would join the naysayers and expect to see shareholder disillusionment increase, making any future fundraising very difficult without offering a 20+% discount from the market price. But,Tesla shareholders are a different breed. Whether it's faith in Tesla, Musk or just the passion to see Tesla succeed, many of Tesla investors are not motivated purely by maximum financial return on investment, and the value of that passion shouldn't be underestimated. So far their champion has delivered, and the investors will continue to support Tesla. Whether Tesla can sell 20-30,000 EV per year, is more difficult to assess.
        oktrader
        • 2 Years Ago
        @Marcopolo
        Marco: I have stayed out of comments on this board until yesterday, and at this point probably seem to be a bit overbearing. My apologies. I feel compelled to “contribute” here because I think there is a lot of well-intentioned personal wealth at risk in TSLA holdings. I’ll go down the list and attempt uncharacteristic brevity. (1) On “generating income”. Just to be clear: TSLA has never “generated income”. In fact, among EV “startups” they have a greater cumulative loss (e.g., greater “negative retained earnings”) than any of their counterparts. Yes, they have shown positive Gross Margin, but have never made a dime. I’m not saying that they should have been expected to, or that they are bad guys because they haven’t. But it’s more accurate to state their commercial revenue streams have contributed to operations, or perhaps been absorptive. (2) “Delivering its products on schedule” Not true. Tesla has a long history of over-optimistic schedule promises, with initial Roadster production deliveries months late. As for the Model S… this comes from TM’s web site in a March ’09 press release: “Tesla expects to start Model S production in late 2011.” Right now, Signature Rez holders in the sub-300’s have been given November delivery dates. Musk reaches far and has achieved quite a bit, but schedule isn’t his strong suit. (3) Your belief that no fundraising leverage will be applied: Do you really believe that Musk has not floated the possibility of a raise with one of the many potential underwriters now currently recommending TSLA stock? I don’t know for sure any more than other non-insiders, but I can’t believe he has allowed Tesla this close to the precipice without assessing the possibility of another offering. I’ve been where he is (at about 3 orders of magnitude less value): there is no such thing as a benevolent savior. Period. As the cliché goes, “all we want is your lungs”. Musk is likely still maneuvering. As for a “Wonderful Life”-style bailout: The family of retail Tesla shareholders are not organized in a way to undertake such a funding instrument even if they wanted to, and key shareholders probably wouldn’t allow it. (4) Speaking of benevolent shareholders: Please. Mutual Funds and Institutions hold about half of the ~105M shares. Do you think fund Managers will just square their jaws, proclaim “I’m sticking with Elon”, and stand alongside him? Moreover, amongst those large holders, don’t you realize that many are loaning shares to be shorted? I don’t know how many, but it’s not an uncommon practice; with a 25M+ share short interest, quite a few are doing so. If Q3 goes as I expect, at best we will see the shares in the teens as many, many shares are unloaded. At worst the value destruction will be sobering indeed.
          Marcopolo
          • 2 Years Ago
          @oktrader
          @ oktrader, Well, you are a most welcome contributor ! Please keep posting ! As to your assessment above, you can't be faulted on fact, or well reasoned analysis. If I were asked to advise a client , my analysis and conclusion would be very similar to your own. However, if I were raising funds for Tesla, I would take a different approach. 1) Income: Unlike most start ups, Tesla hasn't just burned cash, but actively sought to develop subsidiary streams of revenue to increase profitable activity and reduce dependance on shareholder/Borrowed funds. The vehicles iTesla has produced have been very well received. 2) “Delivering its products on schedule” Of course again you are correct, Tesla has missed dates, and revised schedules, but hey, this is the Auto-industry ! Tesla is dealing with a radical new technology, and within that context, Tesla is a reliable performer, achieving targets once thought impossible, and in many ways, outperforming long established international corporations. 3) I would expect leverage to be applied ! In fact it will be a real test of Musk's ingenuity to maneuver his way though this phase of Tesla's progress. 4) Nope, you are correct, the Institutional investors will always behave in their own best interests ! Unlike, 2008, it will also be more difficult for Musk to find idealistic Silicon Valley money. (most have already been burned by other start-ups). However, I do believe that Musk still has sufficient influence and connections to find investors with access to sufficient funding and ideological motives. Another alternative would be a merger, or JVC, with a major OEM. Toyota, Daimler or even Ford would be able to handle the logistics, and at around $1billion acquisition cost Tesla would be a affordable. In turn, Tesla would gain access to the advantages of large corporate structure and established markets, and remove the pressure on a single model having to carry such a financial burden. It would also allow Elon Musk time for other projects. But all the above is hypothetical ! In reality, I agree, the vultures are circling, and selling 30,000 units over the next 18 months while trying to attract sufficient capital and keep the stock price at an unrealistic price, maybe an insurmountable task. But I still wish Elon and his team, the best of luck.
          Marcopolo
          • 2 Years Ago
          @oktrader
          SNP, Did you miss the bit where I said, "However, if I were raising funds for Tesla" ? Obviously, I had moved from an assessment based on known facts, to more wide ranging opinion reflecting a different interpretation of Tesla's possible future.
          SNP
          • 2 Years Ago
          @oktrader
          @Marco, your points are more like guesses than they are real assessments. "...tesla is dealing with a radical new tech and within that context....is a reliable performer..." "...would expect leverage to be applied..." "...i do believe Musk still has sufficient influence and connections to find investors..." "...another alternative would be a merger..." Kinda like if i said, the S&P will shoot up next month because i expect congress to pass a balanced budget... if the dollar drops because of anticipated money printing, Ford and GM will be able to increase their profits.... my car wont be recalled because it was made in the USA. lol,
      oktrader
      • 2 Years Ago
      To the financially curious: There is a bit of hidden Q3 guidance now in from Tesla in the form of their 10Q (released today). I'll just hit a couple of things. If you are interested in the company as a customer or investor -- or even as a writer, Mr. Blanco: seriously, if you're going to post articles about the company's finances, you need to find source data and not be dependent on enthusiast websites -- you should set aside 90 min or so to scan it. Tesla expects Q3 to show lower revenue and higher losses: "Given the limited number of vehicles we expect to deliver, we expect our automotive sales gross margin for the third quarter of 2012 to be slightly negative, as our cost of automotive sales will reflect the full burden of operating our Tesla Factory, including depreciation for our manufacturing facility and equipment" [p.24] Run the numbers for a breakeven GM and you'll see another ($1)/share quarterly loss, which is much greater than current analyst estimates (ranging from (0.42) to (0.94)). That negative ~$100M, plus significant additional capex and ~70% of S Model actual cash collection per car, is an indicator of how intense the cash burn will be. My own measure tells me Tesla only has sufficient cash remaining if they execute PERFECTLY and take some agressive cost reduction measures (e.g., table Model X and "Gen III" for 6 months, with attendant engineering headcount reduction). There is also a strong indication that a new offering is coming: "While we are confident in our ability to achieve our intended business plans with our current cash levels, we are evaluating alternatives to opportunistically pursue liquidity options to strengthen our balance sheet, accelerate our pace of product development and increase shareholder value" [p.22] From where I sit that equals dilution (though some of you may understandably disagree). I do not mean to tell anyone how to trade/invest this stock, or whether you should or should not place a deposit for their products. I certainly do not intend a judgment about car technologies with this set of posts. I do, however, hope that you can see you must do REAL research using REAL data vs. surfing forums where people think as you do. From there make choices that fit your actual tolerance for risk. Thank you for polite and rational discussion; I hope I didn't overwhelm your patience.
        Giza Plateau
        • 2 Years Ago
        @oktrader
        oktrader, Those are concerning statements. It further states that profitability wont be achieved before 2013 which basically means that even Q4 with 4500 cars, corresponding to an annual rate of 18000 cars, will not be profitable. This despite having claimed profitability at 8000 cars annually. The only save that seems possible, and it is a poor one, is that they know already that 4500 cars wont be produced in Q4.
          PR
          • 2 Years Ago
          @Giza Plateau
          Giza Q3 is heavy with Signature Series models being built, with $40K deposits that have already been booked as cash (see posts below) that have much lower bookable profits in Q3. Basically, the profits in terms of cash are already booked. Also, Tesla is still basically building cars like a small custom car builder at higher expense ratios per unit. That will drop as they go into true mass production. There are only 500 units with this $40K deposit, so it would not be accurate to automatically assume the Q3 numbers will extend forever.
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