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maoing that's a piece written by Anton Wahlman... yup, the very guy whose called about 6 different cars individually "Tesla Killers" (from the i3 to the Dodge Charger). Anton's short the stock, and that's his business, but his writing is nothing but an advertisement for his short position.
The article starts with a sentence that makes his calling the i3 a "Tesla Killer" sound tame. For laughs, here's how Anton begins his piece:
"There is no more urgent situation requiring the spin that only a high-powered centrifuge could provide thanTesla's (TSLA - Get Report)need to raise additional capital."
It's not at all clear that Tesla even needs a capital raise, so it's rather likely a 2015 cap raise is not even going to be a situation, let alone a situation more urgent than any other. One great thing about Anton, he makes his partisanship so obvious with his miles over-the-top language, his writing would likely raise a red flag for even someone who literally has never heard of Tesla before.
EarlyAdopter
Active Member
Yes, absolutely. Capital issuances through big investment banks like Goldman can be structured in a day and sold through the next.
Very True! With many global Fed equivalents in easing mode, but Greece up in the air and Our Fed contemplating raising rates, why wait for 3 or 6 months? Does not make sense to me to time it so tight, if cash burn this coming quarter will also be ovet $ 400 Million.
Raise the capital now, shore up the cash position on the balance sheet, particularly given Gigafactory for batteries may need more capacity.
Stock price may go down for a few days, but bounce back quickly and may even trigger a short squeeze.
IMO, the wise thing to do! One never knows what world events or weather or earthquake or whatever could happen ( low probability, yes for sure), but just get it out of the way and focus solely on production ramp for X and battery production start up!
This is just not worth risking for 3-6 months and maybe another $10-$20 rise in price, from here.
Wisdom, my friends!
It would be wise for Tesla to do a capital raise, through stock issuance, at a time when the stock is high, in order to finance further expansion even faster. I don't have any real idea whether they will, but given the enormous capital investment rate, and the relatively high interest rates Tesla has to pay on bonds, it would make a lot of sense.
Thanks for this, interesting. So I'm guessing they could "suddenly" choose to raise capital if the stars align.
I think Tesla's plan is to get to free cash flow positive before doing a cash raise. I've been meaning to write this and it isn't in response to anyone in particular... here goes:
The 2014 annual report Form 10-K says this:
Their cash at time of that statement was $1.9 billion. I'm puzzled why people are freaking out now that they intend on spending $1.5 billion in capex this year as if it was something new.
It goes back to a predominate misconception that Tesla is spent about $500 million in capex last quarter to support selling about 10k vehicles. Hence the whole "selling cars at a loss" meme. That capex was spent in chunks to support selling 20-25k vehicles a quarter (Model X production line, sales/service/supercharger expansion) and 50k a quarter (Model 3 initial launch via Gigafactory/paint shop) and 125k a quarter (paint shop to handle 500k annual cars). This spend is in advance of huge revenue growth.
Tesla doesn't have to do this high capex expansion... they could be less aggressive, which would make their balance sheet look better and the rest of the car industry and the stationary storage industry could breathe a sigh of relief. But no... that's not how Elon Musk or Tesla rolls.
During the Q1 ER conference call, Mr. Ahuja casually mentions:
Ah, on an operations basis, in Q1, they were a little better than break even.
As for capex spend, the big spending this year drops to a trickle at some point. The Model X production line has an end cost. The paint shop upgrade has an end cost. These costs taper off dramatically in Q3.
Later, Mr. Ahuja gave this answer when Mr. Brinkman of JP Morgan asked about free cash flow:
The plan is to achieve production of the Model X without a capital raise.
To get there, there are a number of moving parts that might cause them issues including any further delay in the Model X, a slower ramp up on the Model X, or a external financial market meltdown. Therefore, the plan might have to change and they might need some short term bridge financing. Possible actions include:
1) Take out loans against assets, and it appears that the CFO already has plans to do this. At the end of Q1, they had $370 million in raw materials, $492 million in finished goods, and $2.5 billion in property, plants, and equipment. They might end up paying dearly for such short term financing on a relative basis, but it would be worth it if they had to do it.
2) back off of capex spending. They can't back off any Model X capex spending, as that is necessary to reach the doubling of revenues. So, they can back off some of the 5% of the capex which is Supercharger expansion ($75 million per year) and the $300 million this year for Gigafactory #1 phase 1. Gigafactory capital spend might be front loaded this year, as they expect cells in early 2016. Which means the shell for phase 1 is done significantly earlier than the end of this year and Panasonic's spend goes up as they install manufacturing equipment. Model S battery pack assembly equipment might get delayed, as could stationary storage assembly into 2016. They could also back off service center and gallery expansion.
3) Do a capital raise.
Now, if the financials warrant it or the external market conditions warrant it, they could do raise before this whole scenario in order to grow even more aggressively - basically, Gigafactory #2 and Tilburg factory expansion makes sense as the next big things to do. They can add a Model S battery pack assembly plant somewhere in Asia - possibly very close to the Panasonic plants in Osaka that churn out Model S cells. Remember, Panasonic's Osaka plants are expected to at least churn out a cell output level equivalent to Gigafactory #1 phase 1, so in essence, the Panasonic factories are Gigafactory #0, phase 1 without the battery pack assembly part. Then battery packs for Europe and Asia never need to transit through the U.S. at all. They could also do far more assembly in Tilburg where they have already leased a new, much larger building.
The 2014 annual report Form 10-K says this:
Their cash at time of that statement was $1.9 billion. I'm puzzled why people are freaking out now that they intend on spending $1.5 billion in capex this year as if it was something new.
It goes back to a predominate misconception that Tesla is spent about $500 million in capex last quarter to support selling about 10k vehicles. Hence the whole "selling cars at a loss" meme. That capex was spent in chunks to support selling 20-25k vehicles a quarter (Model X production line, sales/service/supercharger expansion) and 50k a quarter (Model 3 initial launch via Gigafactory/paint shop) and 125k a quarter (paint shop to handle 500k annual cars). This spend is in advance of huge revenue growth.
Tesla doesn't have to do this high capex expansion... they could be less aggressive, which would make their balance sheet look better and the rest of the car industry and the stationary storage industry could breathe a sigh of relief. But no... that's not how Elon Musk or Tesla rolls.
During the Q1 ER conference call, Mr. Ahuja casually mentions:
Ah, on an operations basis, in Q1, they were a little better than break even.
As for capex spend, the big spending this year drops to a trickle at some point. The Model X production line has an end cost. The paint shop upgrade has an end cost. These costs taper off dramatically in Q3.
Later, Mr. Ahuja gave this answer when Mr. Brinkman of JP Morgan asked about free cash flow:
The plan is to achieve production of the Model X without a capital raise.
To get there, there are a number of moving parts that might cause them issues including any further delay in the Model X, a slower ramp up on the Model X, or a external financial market meltdown. Therefore, the plan might have to change and they might need some short term bridge financing. Possible actions include:
1) Take out loans against assets, and it appears that the CFO already has plans to do this. At the end of Q1, they had $370 million in raw materials, $492 million in finished goods, and $2.5 billion in property, plants, and equipment. They might end up paying dearly for such short term financing on a relative basis, but it would be worth it if they had to do it.
2) back off of capex spending. They can't back off any Model X capex spending, as that is necessary to reach the doubling of revenues. So, they can back off some of the 5% of the capex which is Supercharger expansion ($75 million per year) and the $300 million this year for Gigafactory #1 phase 1. Gigafactory capital spend might be front loaded this year, as they expect cells in early 2016. Which means the shell for phase 1 is done significantly earlier than the end of this year and Panasonic's spend goes up as they install manufacturing equipment. Model S battery pack assembly equipment might get delayed, as could stationary storage assembly into 2016. They could also back off service center and gallery expansion.
3) Do a capital raise.
Now, if the financials warrant it or the external market conditions warrant it, they could do raise before this whole scenario in order to grow even more aggressively - basically, Gigafactory #2 and Tilburg factory expansion makes sense as the next big things to do. They can add a Model S battery pack assembly plant somewhere in Asia - possibly very close to the Panasonic plants in Osaka that churn out Model S cells. Remember, Panasonic's Osaka plants are expected to at least churn out a cell output level equivalent to Gigafactory #1 phase 1, so in essence, the Panasonic factories are Gigafactory #0, phase 1 without the battery pack assembly part. Then battery packs for Europe and Asia never need to transit through the U.S. at all. They could also do far more assembly in Tilburg where they have already leased a new, much larger building.
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I agree completely techmaven. By the time step 3 comes around the stock price will be quite a bit higher.
Your thinking makes sense techmaven.
But the question for me becomes: if there is room for even more aggressive growth, then why not do it if the market is willing to inject more capital on terms favorable to Tesla?
I understand that some things are progressing as fast as possible: MX production start/ramp, Model 3 development, Gigafactory #1. These thing can't be accelerated further, no matter how much money is thrown at the problem.
But it does seem to me that the interest and addressable market for stationary storage may have been underestimated, even by Tesla. This makes for a huge opportunity for even more "reckless growth" (as they say in Québécois). It seems that would be less of an engineering/technology development problem but more the sort of thing that could actually be accelerated by injecting money: namely building Gigafactory 2 and 3 sooner than earlier planned.
But the question for me becomes: if there is room for even more aggressive growth, then why not do it if the market is willing to inject more capital on terms favorable to Tesla?
I understand that some things are progressing as fast as possible: MX production start/ramp, Model 3 development, Gigafactory #1. These thing can't be accelerated further, no matter how much money is thrown at the problem.
But it does seem to me that the interest and addressable market for stationary storage may have been underestimated, even by Tesla. This makes for a huge opportunity for even more "reckless growth" (as they say in Québécois). It seems that would be less of an engineering/technology development problem but more the sort of thing that could actually be accelerated by injecting money: namely building Gigafactory 2 and 3 sooner than earlier planned.
Is he Québécois? He studied in Paris and Madrid so I was assuming European and for that matter Spanish based on the last name. Also es.wikipedia.com is apparently the only wikipedia with him in it. But honestly I don't know where he is from and the wiki page doesn't say.
Jerome Guillen - Wikipedia, la enciclopedia libre
Yeah I think he's French. Studied in Paris and Spain l, then doctorate from U of Michigan. I just had this idea that he was spending a lit of time in Quebec nowadays but I'm not sure where I have it from.
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LargeHamCollider
Battery cells != scalable
I think it was mentioned elsewhere on TMC but deposits for Model 3 in March 2016 could constitute a significant raise. I'd guess 100,000-500,000 pre-orders in the first year which, at ~$3,500 each, would be .35B to 1.75B.
I don't think that the deposit for a Model 3 will be anywhere near $3500. People who are waiting for something comparable to a low end BMW 3 series or Merc C class are not used to putting down any deposit at all, or at most $1000 if they want it built to their exact specification.
Customer deposits are fully refundable. Invest all that money in Gigafactory 2, Fremont expansion or whatever else and then try to explain your balance sheet to the shareholders and the SEC...
Runarbt
Active Member
RobStark
Well-Known Member
Almost all US dealers across all brands require a $1K deposit when ordering a custom car and since all Tesla's are made to order, requiring a deposit isn't unusual. Having said that, I wonder if Tesla will try to increase sales volume by having some in stock models. Perhaps the CPO program and website is a precursor to have a similar system for store stocked cars.
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