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Tesla To Raise Over $1.15 Billion To Help Offset Risk For Model 3 Production (techcrunch.com)
Tesla is looking to raise a total of around $1.15 billion from stock and convertible senior notes as a way to help "further reduce any risks" that it'll incur as it scales its business to handle its aggressive Model 3 production schedule, the company said. From a report: Tesla's decision to pad out its balance sheet with more capital was anticipated by many analysts, and a fair number of Wall Street watchers actually thought Tesla would seek more to help it grow based on recent comments made by Tesla CEO Elon Musk. The Model 3 is set to begin full production this year, with pre-production begun in February with a temporary production line pause to help get processes at its Fremont factory ready for the new vehicle. The split of the new funding efforts will see Tesla pursue $250 million in common stock offering, with $750 million raised via convertible notes due in 2022. Elon Musk himself will personally contribute by buying $25 million in Tesla stock.
Elon Musk is truly the Iron Man of our time.
Last fall, Tesla reported a Q3 quarterly profit just before the vote to buy up failed solar city (bailing out Elon Musk who was over levered with their worthless stock and debt). At the time, I pointed out that they were playing a lot of financial tricks to get that profit to lube up shareholders prior to the vote. Some people insisted they were now profitable. Well, they're not. They reported more losses in Q4 and now they need another billion. The model 3 will be delayed, it will be more expensive than announced, and it will be plagued with quality problems. I like Tesla, but Christ, they've been sniffing their own farts for too long.
Enjoy it Musk fanbois.
will be gleefully happy.
When Apple issues corporate bonds despite having $200 Billion in the bank, nobody bats an eyelid. When a business that is in a relatively early state of growth and wants to fund expansion decides to borrow money (Tesla), suddenly we have people accusing Musk of being a freeloader and a charlatan, whose businesses must be on the verge of collapse.
Almost all companies who intend to grow quickly borrow money to do so, especially with interest rates being historically low. It would be bad business not to borrow the money.
Tesla trades on emotion; not on fundamentals. The folks who buy are incredibly irrational. It's been in business since 2003 and has only made a profit when it pulls accounting tricks. Anyone putting money into Tesla now - especially at its obscene price - is an idiot. They do not understand risk/return, the time value of money, or anything else about investing - they are all gambling on Musk - and they will lose.
With the QEs and cheap money, there's a lot of stupid money out there.
This because there are so many of you fools out there waving dollas at your hero. Eventually he will run out of other peoples money. I read that musk is putting up $13.5 million himself. LOL! He's is worth $13 _billion_ on paper.
I find it surprising that the stock is trading nearly 3% higher on this news. Normally a stock would lose value because the shares will be diluted. (There should be some correlation between the assets of the company and the value of all the outstanding shares) I think investors are pleased that Tesla will have enough cash on hand to achieve it's goals.
One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
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It's funny watching all the nerds logging onto Musk stories and pretending that they play the stockmarket. "Oh yes, I have sold this stock short massively blah blah blah". Still, I don't want to interrupt your fantasy, dude.
Every nerd I know does at least dabbeling in stocks past the standard 401k.
It's not fair to compare Tesla with Theranos. Tesla has real product that is shipping now and works. The real issue is if Tesla has a viable business model and if its current valuation can be justified. Many Tesla naysayers, and I am one, believe the answer is "No."
Normalize interest rates and Tesla will start have to start earning serious operating capital or be in the dot-com model of "we'll make it up on volume."
A Theranos comparison? Really?
Tesla is producing real products (unlike Theranos) and is delivering slightly more cars per year than that little Stuttgart automaker Porsche.
However, unlike Porsche, Tesla is investing in one of the largest and most cost-effective battery factories in the world. It is possible that when Gigafactory is running at full-scale, most of the electric auto manufacturers and power companies will be buying batteries and energy storage systems from Tesla.
Tesla isn't anything like Theranos. I predict MBA's will be reading about Elon Musk - but not in the context you describe.
The real issue is if Tesla has a viable business model and if its current valuation can be justified. Many Tesla naysayers, and I am one, believe the answer is "No."
Normalize interest rates and Tesla will start have to start earning serious operating capital or be in the dot-com model of "we'll make it up on volume."
As with most naysayers, you're obviously completely clueless about anything and everything to do with finances. If you did, you'd have read Tesla's financial statements and know they make a profit on every single vehicle sold. As in "sale price - (cost of materials + cost of labor) = a positive number." They most definitely can "make it up on volume" eventually. That's the whole point of this funding round—ramping up their production capacity so they can produce higher volumes. Higher volumes of a profitable product x the amount of product sold = higher profit. Tesla doesn't post a profit because they're busy sinking those earnings into building out not one but two factories. But a super genius like you already knew that.
You obviously have no clue what a convertible note is, either. The interest rate on convertible notes is often not tied to the prime rate or to any other published rate. Tesla's coupon rate on their convertible notes is habitually a fixed 1.5%. Normalize the interest rates or further denormalize them, it doesn't matter. Tesla knows how much they will be paying on their debt, and it's totally unaffected by the prime rate. Further, when those convertible notes come due, they will pay in equity, not cash. That's what a convertible note is. But a super genius like you knew that too.
Oh wait. You obviously didn't know those things. Maybe when you learn the most basic things about corporate finance and about Tesla's specific financing, you'll be a super genius. Until then, you're just an idiot.
Energy credits are a government subsidy to support electric car producers, but it's hardly a unique situation. The government subsidizes everything from corn production to aeronautics. If you are arguing that the solar power industry would not be profitable without government subsidies, than you'd have to ask yourself if the same would be true without all the government spending on stabilizing world oil supplies.
they make a profit on every single vehicle sold. As in "sale price - (cost of materials + cost of labor) = a positive number."
Pretty much all companies except for basket cases on the verge of bankruptcy make a gross profit.
It's the net profit you need to look at.
To have a right to do a thing is not at all the same as to be right in doing it