Elon Musk is talking about maybe forming a holding that would own stock in both of the companies he's incredibly busy with these days – Tesla Motors Inc. and Space Exploration Technologies Corp. (SpaceX) – basically to simplify his life. "No actual plans under way," he said. "[It] gets unwieldy to have lots of companies with me as the only connection." The holding company may own public shares of both California-based companies. Tesla Motors went public in 2010, and Musk is looking at launching an initial public offering of SpaceX next year.

SpaceX has been doing pretty well lately. In May, it became the first private company to send a spacecraft to supply the International Space Station. In August, SpaceX landed a $440 million U.S. government contract to develop spacecraft for future cargo missions.

Tesla Motors is looking forward to becoming profitable, and that may happen in 2013 through sales of its Model S battery-powered sedan. Next year will see the launch of its all-electric Model X crossover sport-utility vehicle.

Musk also mentioned on a Web chat on Jalopnik that Tesla is thinking about rolling out an electric "supercar." This would cost more than the Tesla Roadster – supercars from brands such as Ferrari and Lamborghini can cost more than $200,000.

This will need to wait about four-to-five years, he said. It was going to happen right after the Model X, but it might be a good idea to make a less expensive electric car, since it is "more important to the world that we do a more affordable electric car."

As automakers are learning, offering more affordable electric cars is a good idea. A $7,500 federal tax credit is usually available, but on cars like Model S, it probably doesn't make much of a difference. The Model S, which began production in June, has a starting price of $57,400 and can cost more than $100,000, depending on battery pack size and other options. If you're thinking about buying one of these or a $200,000-plus Tesla supercar, a $7,500 tax credit is, proportionally, peanuts.


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  • 24 Comments
      oktrader
      • 2 Years Ago
      The idea of combined aerospace and automotive enterprises under a single corporate entity is not new. It is also not particluarly auspicious. From Ford's divestiture of their Aero house to the GM acquisition (and sale not many years later) of Hughes Aircraft Company to the breakup of Saab's aero and auto businesses to Rolls Royce aircraft engines and automobiles... none of them are particularly uplifting (no pun intended). That Musk sees a management advantage, from his own very busy perspective, is not unreasonable. But it's not a slam dunk. Having some sort of controlling interest in TSLA while maintaining the "holding company" and SpaceX private is difficult to imagine. Since Musk has spoken of a SpaceX IPO, then perhaps the exercise becomes easier. Still, other than simplifying the oversight function for Musk, what would be the value? The synergies are quite minimal, with Procurement, Engineering, Operations, and most line functions very diverse. I can understand his desire to take what is an ostensibly profitable enterprise (SpaceX), and by combining it with TSLA have a way to use the significant auto losses to minimize effective tax rates. But when he crosses the accounting lines between these two companies he takes some risk with government contracting standards. The NASA contracts with SpaceX thus far have not been pure commercial OTS procurements. Until they are, accounting requirements such as certifying costs and pricing in a combined automotive/aero business environment will get very tricky. Please understand: I recognize maximizing loss credits for tax purposes can be no big deal if the two are completely separate operating units under the corporate umbrella. In that case, of course, there are basically zero synergies between the enterprises. The other key reason, and one that might make much more sense, is that the value of TSLA can be "rejiggered", to use a Midwestern word, in the creation of a new issue comprosed partially of TSLA shares. This could be very helpful to current TSLA holders.
        Giza Plateau
        • 2 Years Ago
        @oktrader
        Only around 70 delivered cars so far. A long way to 500 let alone 5000.
          Grendal
          • 2 Years Ago
          @Giza Plateau
          A long way = 3 to 4 weeks to 500 and 3 to 4 months to 5000.
      PR
      • 2 Years Ago
      Profitable in 2013 is very good news for long term TSLA stock holders/buyers! Many will take the next few months as a buying opportunity if short-term sellers get spooked away by high one-time costs in Q3-Q4. There will be a tug-of-war on TSLA stock prices between long-term investors who want in on TSLA stocks before the 2013 profits start showing up on end of quarter press releases, and short-term investors who are narrowly focused just on the latest quarter's figures. What happens to TSLA stocks in the short term will depend greatly upon how much this forecast for profits in 2013 gets priced into TSLA share prices long before Tesla actually releases quarterly figures that show profits. The sooner the prospect of future profits gets priced into TSLA shares, the less one-time short-term bad news will be able to drive down short term TSLA prices. In fact, much of the TSLA price drop due to the potential cash crunch in Q3-Q4 may have already been priced into TSLA shares going back to late July as smart money anticipated higher cash burn in the August quarterly report signaling a short term cash crunch. (I am NOT "smart money", but 20/20 hindsight makes betting on the past much more lucrative for any a-hole on any blog... *grin* ) At this point, all the smart money has already priced that news into the price of TSLA. Now it is just down to how confident long-term investors are that Musk will make it through the potential cash crunch successfully, and turn profits in 2013. Those who are confident will accumulate on share price dips, and keep share prices stable. Those who lose confidence and believe Musk would even consider shutting the doors of Tesla just because of a short-term cash crunch will not. It is a classic brawl between long-term bulls and short-term bears to see who can price what news into TSLA shares before it happens. Tough time to be betting on shorting TSLA stocks....
        oktrader
        • 2 Years Ago
        @PR
        Well, PR, you had to bait me with that last sentence! Seriously, I understand your perspective. It certainly coincides with the analysts carrying a "buy". But from where I sit the best-case 2013 is already baked in. Do some quick math to estimate earnings Revenue and Gross Margin 20k S cars @ $80k each, 25% GM = $400M $20M of Daimler work 30% GM = $7M $35M of RAV4EV parts 30% GM = $11M $10M of spare/repair 50% GM = $5M Total Gross Profit: approx $425M Expenses R&D: reduce Q2 '12 rate by 25% = $225M SG&A: stay at Q2 '12 rate = $140M So income from Operations is $425M - ($225M + $140M) = $60M Other expenses: we'll just pick warranty and ignore others Reserve based on achieving 80% better than Roadster warr. costs of $0.40/mi, so $10M So earnings before interest, tax, depr. & amort. is $60M - $10M = $50M Interest expense: long-term debt 6/30 $400M, plus short-term financing costs = est. total $10M Depreciation: PPE on 6/30 was $433M, optimistically $10M depr. Total interest and depreciation $10M +$10M = $20M Net income before tax: $50M - $20M = $30M Assume income tax is zero and no new shares issued. Thus EPS is ($30M/105M shares) = $0.28/share. That is EPS for full year 2013@25% GM, 20,000 S Models shipped, everything running to beat case plan. So that means today's share price is trading at 100x an outrageously optimistic 2013 earnings picture, hitting every target projected by Tesla leadership and stretching credulity on I/D/A. I'm comfy w/ our Jan '13 puts in the high 30's.
          Domenick
          • 2 Years Ago
          @oktrader
          @MarcoPolo I'd like them to be a runaway success also but I try to not let my feelings about what they are doing color my judgement. Much. I expect there to be hitches, recalls and more missed deadlines – self-imposed or otherwise. Still, I think they have a relatively good chance for success over the next 4 or 5 years, at least. I wouldn't personally use the Nissan Leaf experience as an indicator of what to expect with Tesla. The value proposition is entirely different. Hopefully the updated Leaf will have some of the range and price improvements it so desperately needs, but I think the US market needs a rock solid 100-mile minimum range in the mid-20's to really get sales traction. Tesla has the range, performance, and more positive consumer experience in its favor to help make up for premium pricing.
          oktrader
          • 2 Years Ago
          @oktrader
          Marco: Very astute; I've observed it personally. The fall is generally tragic. My personal witness to this was Vern Raburn, a Microsoft multi-millionaire, and the Eclipse Jet. (Summary: Seattle software guy suddenly knows more than entire aviation industry and strikes out to to build an "air taxi" empire. It's worth a few minutes of your time to read and compare to Tesla.) But of course we've known this fault in human nature since we first became conscious of ourselves. Hence the special treatment given to Roman conquerors... Caesar's chariot, rolling at the rear of the victorious procession, had an extra "feature". To prevent pride from consuming him, the great leader had positioned a lowly servant at his side. That man's sole responsibility was to temper the boundless enthusiasm of adoring throngs with this simple warning, "Sic Transit Gloria Mundi". Indeed, Mr. Musk: thus passes the glory of the world.
          Marcopolo
          • 2 Years Ago
          @oktrader
          @ Domenick Well, I hope you are correct ! I would love to see Tesla as a runaway success ! But, that's an emotional position, and I don't see any evidence to support that position. Only a little while ago the Nissan Leaf was going to 'revolutionize' the car industry, with many furious fans claiming wildly optimistic results. But, I guess time will tell......
          oktrader
          • 2 Years Ago
          @oktrader
          PR: re: your questrions about our position >> Were these [puts] from back in April? Yes, early April transaction. They were cheap and we're in the money in the current trading band. .>> Would you buy more puts right now? No; too expensive, and we're at our risk limit for TSLA To a broader question (that you didn't ask, but I can't sleep, so you get some reading material for bedtime!), we know that we are probably reaching the end of our glory days. Pretty much every hot-shot fund you see is preening themselves over a fantastic series of positions they've taken in the last few years, and they are on top of the world. Basically, they've hit a groove in a circumstance and business category that they were seemingly born to navigate. But before and after this brief burst, they were more or less middling, maybe better han the indices by a couple of points. We know we are at or just past our apogee. The timing of macroeconomic and technological shifts was such that our knowledge in key areas perfectly fit the time and the industries involved. Some of us had been in the first fuel cell and distributed generation bubble (see FCEL and CPST). One had been in the refining world in the brief period in the mid/late 00's when crack spreads were huge and coking seemed to be a never ending demand. We had experience in gov't- and privately-funded technology ventures. And all of us had lived in some part of the transportation industry during the last decade. While the script is never the same, sometimes it's mighty close, and when you've lived it, you know what line comes next. Our judgment (and the outcome) has been superb. (Mind you, this is a fund just under <$10M started by four of us, and joined over time by two more investors. It wouldn't show up on anyone's list.) What will follow then very soon is a rationalization of capacity, investment, etc., as well as inevitable corrections to the market's valuation errors, settling out in ways that don't present the opportunities that we've had in the last 30 months or so. TSLA is one of the last "big ones" on our risk/return map. It's tucked WAAAY up in the upper right corner. Plus we're all getting ready to move on, owing to age, recognition of what I pointed out above, and (thankfully) some great returns that will support our financial security for some time. As you point out, we have time with TSLA, a relatively safe position, and quite a bit of focus. We won't get killed, but of course we'll be disappointed if this doesn't help drive us over $10M before we hit our three year anniversary. So the moral for YOU is to "wear protection" when you play an issue like TSLA. If you don't know how to do this, you won't find it hard to learn, based on what I read from you here. It is a tricky issue that is driven by belief and possibility. The trips up can be fabulous, but the drops are killers. Good luck.
          PR
          • 2 Years Ago
          @oktrader
          You noticed the obvious bait, eh? *grin* There are definitely EPS estimates all over the place. Heck, Goldman put Tesla's 2013 EPS at $1.36/share just a couple of months ago. And $2.99/share for 2014. JPMorgan put their 2013 EPS estimate at $1.35 at the beginning of the year. Other numbers I've seen projected are $0.71 for 2013, and even a $3.45 for 2015! (I think that was stan-morgan, I'll have to find that one.) Of course there are others that call for negative EPS numbers through 2013, even into 2014. But who will actually be the most accurate at predicting the future isn't really central to my point. I appreciate the math you posted, but who is right about the actual EPS numbers will be old news long after the market prices get all these projected 2013 EPS estimates priced into them. The issue is that TSLA shares aren't being priced in the market as if it were an established company like GE or Ford that has a long history and relatively steady EPS numbers. I think you already completely agree with that statement. Future profitability is being baked in long ahead of actual profits. If Tesla makes it past their cash crunch, and succeeds in putting out anywhere around 5K units by the end of the year, then shares can really jump. Heck, TSLA IPO's back in June of 2010, three full years before anyone ever expected positive EPS numbers. That IPO was the long-term bulls pricing in future profits a full 3 years ahead of positive EPS numbers! I know you are shaking your head and in wonder about how insane that sounds to a number cruncher like yourself who prices stocks on the fundamentals. But that is the kind of investor that TSLA has been attracting for the last 2 years, and if Tesla can come anywhere near their projections, there will be more long-term bulls just like these investors. They don't have to be right about future EPS figures, they just have to be willing to place their bets. I'm glad your puts have strike prices in the high 30's. That gives you plenty of room for the potential for profits. You definitely have plenty of time to let it play out at the current price. Were these from back in April? Would you buy more puts right now?
          Domenick
          • 2 Years Ago
          @oktrader
          @Oktrader Personally, I think your revenue estimates are low. I expect to see closer to 30,000 in S sales by the end of 2013, based on the increasing rate of reservations and the projected build rate. Also, I expect revenue from Mercedes to be much greater.(http://green.autoblog.com/2012/06/29/mercedes-b-class-e-cell-will-get-tesla-powertrain/). And, I believe there is a revenue stream from green car credits you haven't accounted for.(http://www.businessweek.com/articles/2012-06-07/green-car-credits-automakers-new-way-to-cash-in). In spite of this, I'm not confident of a high 30's stock price for Jan '13, but that's more of a gut feeling than actual calculation. Mid 30's, maybe. @Marcopolo " The frightening truth for Tesla, is there is every indication that the overwhelming majority of Tesla buyers are already known." The reservation rate has been on an upward trend overall since Q2 2010 (http://www.teslamotorsclub.com/showthread.php/5747-Model-S-Reservation-and-Delivery-Tally/page153?p=176941&viewfull=1#post176941) Reservations are currently estimated to be 13,143 as of 08/30/12 You can say that I'm an overly optimistic kool-aid drinking fanboy – and you may be right – but I think you're being, perhaps, just a little too pessimistic. Here, have a swig of this. http://www.teslamotorsclub.com/showthread.php/8886-Model-S-First-Drive-Reviews
          Marcopolo
          • 2 Years Ago
          @oktrader
          @ Ok trader, PR's comment, " Profitable in 2013 is very good news for long term TSLA stock holders/buyers " would be very good news indeed, if it had any basis in reality ! In fact, Tesla will finish the 2013 year, with a considerable loss. The frightening truth for Tesla, is there is every indication that the overwhelming majority of Tesla buyers are already known. If sales for the Model S taper off after the initial orders have been filled, the effect on the share price will be dramatic. Tesla's unique method of marketing may not be as effective as was first imagined. Failure of the sales model, would be seen as a major flaw in the companies business plan. The resulting investor stampede to dump Tesla stock, would prove to be a real test of Musk's character !
      RC
      • 2 Years Ago
      What's great about Tesla is that its cars meaningfully tell its story. The Roadster is a proposition to push forward. The Model S is how it's done. Their next car should continue to express Tesla's mission. There is plenty of room with the Roadster to step into supper car territory. Less is more, if you don't believe me just ask Apple.
      Letstakeawalk
      • 2 Years Ago
      "... supercars from brands such as Ferrari and Lamborghini can cost more than $200,000." If you include the sales tax, it's pretty much impossible to buy any new Ferrari or Lamborghini for *less than* $200K.
      Grendal
      • 2 Years Ago
      Personally I think a "supercar" would be a waste of time. I think that after the Gen III/Bluestar or more likely as Elon revealed in the same interview, the Model E, that Tesla should make a sportscar/roadster based on that platform. Something that rivals the 911 and beats it on every level. If they keep it in the $60-$110K range then they should sell a lot. A supercar at $200K means they are selling to a very select crowd. Too exclusive if you ask me. Selling 10K of a new roadster makes a lot more financial sense.
        Marcopolo
        • 2 Years Ago
        @Grendal
        @ Grendal The problem with producing cars which sell only low volumes, is such vehicles must be very expensive to justify the cost . The market for the original Tesla roadster petered out at under 3000 sales. The idea of beating the Porsche on every level is neither practical, nor profitable. It's a sort of dream by people who have never owned a new Porsche. Porsche buyers are not seeking transport. They're going to suddenly switch loyalties on a whim ! Most of these new models that Elon Musk speculates on, are just concepts and speculation. Such speculation adds to the mystique of Elon Musk, and Tesla, (which is no bad thing) and creates an image of Tesla as the car of the future. Tesla with have it's hands full building, delivering and selling the model S in sufficient numbers to justify expansion.
          Grendal
          • 2 Years Ago
          @Marcopolo
          "Tesla with have it's hands full building, delivering and selling the model S in sufficient numbers to justify expansion." Totally agree. New designs are great but make the design you have successful and profitable first. Once successful then move on to the next. As much as I want a Gen III Model E, I'm not going to get it unless they make the Model S and X a success. As far as I can tell Tesla is going to have their hands full for a long time with the Model S, X, E, and a likely E crossover, before they have the time to get to a new Roadster. All of that providing they reach production and profit on the Model S.
      purrpullberra
      • 2 Years Ago
      It doesn't make sense for Tesla to build $200k supercars unless they are going to make a TON of money off each one. I think there are enough people to buy the right car for this to happen. But it won't be at that price. Make it well over half million and then you could have a profit of 100k + per car sell a hundred over 2 years. Very few people are used to make this stuff so they can keep up the bread and butter modelS and X. Prestige means nothing now. Competing with ferrari means nothing. Surviving to make cars in 5 years is all that matters. Honestly, what I got from this is thaat Elon is trying to do something that will help him spend less time managing his portfolio than it does with anything else you guys have brought up here earlier. I don't see Elon being very engrossed in the minutia of corporate structuring to maximize potential tax benifits in all possible outcomes. Some people get off on that stuff but.... I know he's not ignoring real possibilities but he's got people to do that worrying for him. Anything else he's said about it is likely to be ramblings-on instead of true insight as to his motives. OK: It sounds like you've done a lot of homework :) so you must be aware of all of the unrealistic dreamers out in the world. There are a lot of them and many have a lot of money. I see Tesla fanboys coming largely from that group of people. How can you expect those types of "investors" to act rationally, as currently defined by wall street? I see the shareholders as zealots who are doing 'good work' supporting a company with aims such as tesla's. You must see that too. How are they ever going to behave like one expect a typical inverstor to behave? It seems if most hold on to shares to the bloody end that short sellers have little to work with until then. Maybe I'm wrong there. Do you agree that there is something unusual about lots of/most tesla investors? Why place any bets around people like that?
      Marcopolo
      • 2 Years Ago
      "As automakers are learning, offering more affordable electric cars is a good idea" Really ? Which automakers are learning this fact ? Certainly not Toyota, Renault/Nissan, GM, Ford, Mitsubishi or Peugeot/Citroen ! Jon LeSage's remark is guaranteed to strike a positive response from those hopeful EV enthusiasts who confuse future desires with reality. In reality, 'affordable' EV's are not well received in the marketplace. Tesla's model S orders have, so far, all been long distance, expensive models. 'Affordable' EV's, Leaf and iMev, are languishing far below sales forecasts, with increasingly less interest. EREV's outsell 'affordable' EV's because the drive-train is more practical, to more people. Until battery technology improves, this will always limit the appeal of pure EV's. Creating a publicly traded holding company to own stock in both of Elon Musk's enterprises, is a little ominous. Such a vehicle would allow Elon Musk to exit either entity without a loss to his personal investment, while at the same time raising new capital without overtly diluting the position of either companies shareholders. Jon LeSage's article reads like a press release for Tesla fans. It contains very little analysis, and makes very optimistic assumptions supported by little more that enthusiasm for Tesla, and all things Musk.
        oktrader
        • 2 Years Ago
        @Marcopolo
        Marco, I agree that the business press is not being appropriately inquisitive. Musk is an interesting guy who captivates our imaginations about the future. It turns out this is an excellent skill to keep bright lights off of current issues and prior promises. Giza points out a growing challenge to meet this year's deliveries and, in turn, clear customer and shareholder expectations. Musk manages to dodge tough questions about the present because most everyone (except Certified Financial Curmudgeons like me) would rather hear the guy project his sense of possibility: hyperloops, supersonic electric aircraft, etc. Plus there is never a journo with the guts to challenge the guy on missed promises long past. The "Supercharger" is a classic example, with Musk projecting the following on a Jun 2009 YouTube posting (that would be >3 years ago, by old guy math): "In fact we have a charging system that is capable of charging the car in 45 minutes, that we're gonna start deploying in trials maybe as soon as end of this year, or some time next year." Not to worry... During the Q3 conference call last year (Nov 2), he said it would be revealed in a few months. Alright, maybe I shouldn't be so picky, because in the Aug 30 Jalopnik interview he said: "The Tesla Supercharger, to be unveiled in a few months, will do a lot more than anyone expects."  Now, if Musk were to say in the Q3 call this fall that "we'll unveil it on Christmas Day", but in fact pulls away the curtain on Christmas EVE, the entire business press will say "Musk beats schedule for Supercharger!" Short memories and "fluffy" coverage -- you really can't blame Musk for constantly focusing on tomorrow, and largely ignoring what he said in the past. He's allowed to do it. Once you understand this about him, you don't worry about statements he's made like this one in Fast Company back in March: "All I can say is if you're shorting Tesla at the end of this year, it's going to sting. It's going to sting a lot." That's an irresponsible thing for a CEO of a publicly held company to say. I haven't heard anything like it since (pretty sure the lawyers had a chat w/him). But, in any case, I figure he'll be late on this promise, too. 
          Marcopolo
          • 2 Years Ago
          @oktrader
          @oktrader, Thank you for your usual accurate and insightful reply. My main concern about the press and Elon Musk fan club, is the effect a lack of constructive criticism and analysis is having on a personality like Elon Musk. While there's no denying his brilliance, or dedication, he's displayed some very worrying signs of not being able to easily accept criticism or respect the opinions of others to hold divergent viewpoints. The cult of personality has destroyed many brilliant ' men of destiny ' !
          Giza Plateau
          • 2 Years Ago
          @oktrader
          oktrader, delivery date notifications indicate that maybe 150 cars will have been delivered by end of Q3 http://www.teslamotorsclub.com/showthread.php/9489-Model-S-Delivery-Update Even the greatly reduced projection was 500 cars in Q3.
          PR
          • 2 Years Ago
          @oktrader
          Giza -- That link puts a number on Signature Series cars, but doesn't put a number on Founder's Series cars, or the number of demo/dealer cars. So it isn't going to be the same as the total number of cars built.
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