17 ms·

Tesla to raise $1B

498 points by loourr 10y ago

defenestration 10y ago
Link to press release: http://ir.tesla.com/releasedetail.cfm?ReleaseID=1017594 http://ir.tesla.com/releasedetail.cfm?ReleaseID=1017594
- sundvor 10y ago
  As an ex-Allaire stack dev, couldn't help but have a chuckle at the cfm. :)
  - sundvor 10y ago
    (Tesla - powered by ColdFusion)
slagfart 10y ago
Does anyone know the % interest rate on these? It seems to be blanked out. How can financial markets function efficiently when such basic information is suppressed?
- defenestration 10y ago
  The interest rate, conversion price and other terms of the notes are to be determined, according to the press release.
- nemanja-mit 10y ago
  Key terms are interest rate (coupon) and conversion premium. These are not printed on preliminary prospectus and will be printed on the final once the pricing is determined. They way this works is that underwriters (big banks listed on the first page) go to the market (long only and hedge fund investors) with a range for coupon and conversion premium. Investors will express interest somewhere in the range and the instrument will be priced tomorrow at close to get the right investors and best pricing for Tesla. We'll see the final terms once the convert is priced tomorrow after close, but qualified investors already have offering ranges. Generally, converts have much lower interest than straight debt because they offer equity upside to investors once the stock goes above the conversion price. Tesla is high volatility stock, so the convert pricing will be attractive for the company (low coupon / high conversion premium) because that embedded option is valuable to convert investors.
marricks 10y ago
That went quickly from denying a capital raise to reality.
- TaylorAlexander 10y ago
  Elon said in a recent earnings call that, while they would probably be fine without a raise, they expected it would make investors more comfortable if they did a raise and thus might do one.
  - refulgentis 10y ago
    "Elon said..." has started enough apologies for Tesla's poor judgement that I've become numb to it. They're all of the form "while it may look like we're weak, actually...(poorly reasoned explanation for the weakness)", and it has been going on for years. I hope they figure out car production by 2019.
    - TaylorAlexander 10y ago
      I am refuting the suggestion that Tesla wasn't planning a raise. Elon told investors in an investor call that they would likely do a raise.
    - throwaway91111 10y ago
      Regardless of what you think of their judgement, they didn't deny raising capital, which is what your parent comment was saying.
salimmadjd 10y ago
Tesla is basically taking on a loan in form of a convertible notes. probably much smarter to distribute their lender among multiple entities than one giant bank that would have leverage on them. Also, it looks like Tesla would use a portion of the money to inflate their share prices via a small buyback. The after market trading so far make this strategy look successful. So at the end of a day: Tesla is raising capital without diluting their shareholders and reducing their share values and giving up much control. Also the maturity date of 5 years is rather interesting. I wonder if it correlates with their internal projections and their ability to pay that money back by then.
- jeffwass 10y ago
  You've contradicted yourself in the two quotes below. "Tesla is basically taking on a loan in form of a convertible notes." "So at the end of a day: Tesla is raising capital without diluting their shareholders and reducing their share values" Convertible debt is in fact dilutive. It's even specifically accounted for when calculating Diluted Earnings per Share : http://www.investopedia.com/terms/d/dilutedeps.asp http://www.investopedia.com/terms/d/dilutedeps.asp
  - salimmadjd 10y ago
    But you're not flooding the market with $750M new common stock of TSLA in the market. If TSLA price crashes it could impact consumer confidence in buying the T3 which Tesla is banking on. If TSLA drops and T3 are delayed, many consumers might panic and not oder their car creating a vicious circle.
    - jonknee 10y ago
      ... They are also issuing new shares: > Concurrently with this offering of notes, we are offering 968,993 shares of our common stock (or up to 1,114,341 shares of our common stock if the underwriters of that offering exercise their option to purchase additional shares in full), in an underwritten offering pursuant to a separate prospectus supplement. The closing of this offering of notes is not contingent upon the closing of the concurrent offering of common stock, and the closing of the concurrent offering of common stock is not contingent upon the closing of this offering.
Cookingboy 10y ago
As an investor of Tesla who bought into Elon's vision I've been getting more and more nervous about how the company is actually run at this point. A modern car company is as much of a production and supply chain company as it's a product and tech company. I get the feeling that due to Tesla being cutting edge in the tech department it led to all the supply chain/production problems being treated as if they are speed bumps on the way, when in reality they are fundamental core competitive areas for an automotive company. Toyota is not the world's premier automaker because they have cutting edge tech, they are what they are because they build unbelievably number of reliable cars at an unbelievable scale. The bleeding of cash after so many promises of "not going to raise money again" just shows that their vision is way ahead of their execution ability. Decisions like the terribly executed Falcon Wing Doors on a SUV that delayed production and increased cost and hurt reliability just further gave fuel to all the doubters. I also have a strong suspicion that Tesla has not been honest with their Auto Pilot 2 and full self driving tech's progress. The current AP2 is an unsafe joke and I have no idea how people are ok with paying $5-10k for a significant downgrade when compared to AP1 because of a non-binding promise that it "might" get upgraded before their lease term is out. Any other automakers would be laughed out of the room for suggesting this kind of sales tactics. I still believe in Tesla/Elon's end game vision, and I think what they accomplished is nothing short of brilliant, but I think it's a very risky investment at this point and the road ahead is bumpier than many like to admit. The upcoming Model 3 will be the acid test for Tesla. It will no doubt be a good car, but at this point people should focus less on what the car can do and on how the car will be rolled out, sold and supported afterwards. A wealthy Model S customer may be ok with having the car in the shop after a minor accident for 5 months due to lack of replacement parts, but for an average Joe paying $500/month leasing a Model 3 that would just be the birth of a new BMW customer.
- amluto 10y ago
  I test-drove an AP2 car. After a disastrous ride in which it tried to hit two parked cars and a trashcan and wanted to drive off the road entirely, the sales person said, with a straight face, that it was great for stop and go traffic on 101. I'm a bit amazed they can currently sell cars.
grandalf 10y ago
This is the sort of thing that ought to terrify the makers of legacy automotive technology, both for how Tesla might scale production, but also how Tesla might become a lot more aggressive with its intellectual property strategy.
- dangrossman 10y ago
  Their ambitions for scaling production are meager: to start making Model 3's at a rate of 5000/week by 2018, which wouldn't even match the rate at which cars rolled out of that very same factory when GM/Toyota owned it. If they kept up that rate for a whole year, that'd represent around 0.7% of US car sales. Terrifying, or just one of many small car brands on the market? By 2019 they want to double that rate to 10K/week... but that assumes there are 10,000 people a week that want to buy an EV at (according to Mr. Musk) an average price of $42,000 or more -- significantly higher than the average new vehicle selling price. Right now, less than 2500 people a week buy any type of electric or plug-in hybrid car of any make or model in the entire country. So Tesla needs to quadruple demand for electric vehicles and then capture all of it within ~21 months to meet their targets. By 2019 they'll also be up against a bevy of EVs from those other auto makers, likely at lower price points. The 2018 Nissan Leaf, with 200+ miles of range and ProPilot (limited) self-driving capabilities might even beat the Model 3 to market, and will almost surely be cheaper. What valuable IP does Tesla have to license out that would terrify auto makers? There are plenty of other suppliers of EV motors, chargers, inverters, control systems, battery cells, battery packs and battery management systems. LG Chem's nearly reached price parity with Tesla/Panasonic (and has several gigawatt-hour-per-year scale factories of its own, with more in construction). BYD, Foxconn, Boston Power, Samsung SDI, SK Innovation, etc are bringing in 150+ GWh per year of EV battery production capacity by 2020. Their "Autopilot" software is built on Intel Mobileye (V1) and Nvidia's DRIVE PX2 (V2) platforms, which any other car company can license. The Supercharger network doesn't seem to offer anything technology wise that isn't matched by the Combined Charging System (CCS), which is rolling out 350 kW chargers throughout 2017, with the US government's backing. So what do they have that their competitors would value enough to license from them, knowing they're funding the competition?
  - 10y ago
CptJamesCook 10y ago
I just picked up my Model X after a week in the shop. They weren't able to finish all of the work, because "we are busy this time of year." They told me to bring it back in April. In about a year of ownership, this is the 3rd time I've lost the car for about a week. I probably should have brought it to the shop 3-4 other times, but I let the issues build up. They've had to replace all sorts of parts on my car, including the entire driver's seat. Even basic stuff like my phone playing audio doesn't work half the time. The driver's side wing mirror quit opening. I've had to reboot the car 10+ times in order for the dashboard display to work. The gull wing door opened into a ceiling and left a scratch. The hood opened into a ceiling and left a scratch. My windows have quit going up three times. Most of the trim / sealing / etc is coming off, misaligned, etc. I probably sit here and think of 10 more problems. Anyway, I knew I was buying a v 0.1 car and I’m generally happy with it, despite the problems. Their service has actually been amazing, but that's kind of the point of my post: If the Model 3 has anywhere near the same level of problems as my X, at 10x the scale, Tesla is doomed. How could this possibly be even remotely cost effective on a lower-margin Model 3?
- c0nfused 10y ago
  If it makes you feel any better, This seems to actually be fairly common in the automobile market for new model cars to have teething issues like this. I bought a new model mini cooper a few years back right after f56 came out and ran into issues like: USB port would not charge a Verizon smartphone, Car would occasionally stall and would need to be put in park to start again, Replaced rear seat, air bags. It sucks, but it seems like the sort of last minute post release bug fixing that happens all over in software.
- ricardobeat 10y ago
  > The hood opened into a ceiling Is that a Model X issue? What would you expect to happen in another car?
  - CptJamesCook 10y ago
    Sorry, I meant the tailgate. What happens is, you lift the tailgate a little bit and then the car takes over and opens the tailgate the rest of the way -- far higher than a person would do in a room with low ceilings. I let go of the tailgate and had no real way to stop it from opening itself the rest of the way into the ceiling.
unstatusthequo 10y ago
$750M, not billion
- powera 10y ago
  The $750M is the amount of convertible debt; there's a separate $250M of new common stock being issued.
antoniuschan99 10y ago
Why does Tesla need this? What is the money going to be used for? Is this like Solar Bonds that SCTY used?
hackuser 10y ago
How much of Tesla's prospects are due not to free market competition, but Elon Musk lending his credibility to Trump? What happens to his competition, who do compete in the market and take a principled stand against Trump? Is Musk still supporting Trump? I just spent some time doing a little research (below) and as far as I can tell, the answer to the questions seem unsettling, though I couldn't find many great, current sources in a short time. I'd be interested in serious discussion and information; let's skip the partisan hackery - there's so much out there that more won't provide any marginal revenue! . ---- . Musk's support for Trump: * Billboard near Elon Musk's Tesla factory asks him to 'dump Trump' http://abcnews.go.com/Politics/billboard-elon-musks-tesla-factory-asks-dump-trump/story?id=46033908 http://abcnews.go.com/Politics/billboard-elon-musks-tesla-fa... * Elon Musk, other business leaders to talk infrastructure with Trump Wednesday http://money.cnn.com/2017/03/08/news/companies/elon-musk-donald-trump/ http://money.cnn.com/2017/03/08/news/companies/elon-musk-don... Musk, who is a member of both Trump's economic advisory council and manufacturing council * Elon Musk: Rex Tillerson could be an 'excellent' secretary of state [from January] http://www.businessinsider.com/elon-musk-says-rex-tillerson-excellent-secretary-of-state-2017-1 http://www.businessinsider.com/elon-musk-says-rex-tillerson-... Note that Tillerson was previously CEO of Exxon-Mobil, a captain of the carbon industry. . ---- . How his businesses benefit from the relationship with Trump: Don't forget the strong appearance that Trump is selling access. What will happen to the space exploration goals of Jeff Bezos, owner of the Washington Post, for example, or other Musk competitors? Note that Musk's actions puts pressure on them, too, to support Trump or risk serious damage to their businesses. And also it seriously disrupts the free market to have it depend on personal relationships with the President rather than merit of the companies. * Musk’s Surprise Rapport With Trump Means 40% Rally for Tesla [from January] https://www.bloomberg.com/news/articles/2017-01-26/musk-s-surprising-rapport-with-trump-yields-40-rally-for-tesla https://www.bloomberg.com/news/articles/2017-01-26/musk-s-su... * Elon Musk’s Trump Alliance Indicates Great Things for Tesla Stock http://www.profitconfidential.com/stock/elon-musk-trump-alliance-great-things-tesla-stock/ http://www.profitconfidential.com/stock/elon-musk-trump-alli... * UBS analyst says he can't understand why Tesla shares are up so much this year, sell the stock https://www.cnbc.com/2017/02/16/ubs-analyst-says-he-cant-understand-why-tesla-shares-are-up-so-much.html https://www.cnbc.com/2017/02/16/ubs-analyst-says-he-cant-und... "We struggle to understand the run-up, particular as Q4 deliveries missed, though positive spin on the Musk-Trump relationship, reconfirmed Model 3 launch timing, and expectations of new reveals (including more autonomous features) are likely factors," analyst Colin Langan wrote in a note to clients Wednesday. * UBS (Basically): Tesla’s Path To Profitability Now Dependent On Musk-Trump Bromance [a one-sided editorial] http://dealbreaker.com/2017/03/teslas-profitability-musk-trump-bromance/ http://dealbreaker.com/2017/03/teslas-profitability-musk-tru... UBS notes, “there has been discussion that Trump’s infrastructure project may involve federal subsidies for a nationwide EV charging corridor, which could reduce the cost burden.” * Elon Musk's surprising secret weapon: Trump? [From January] * Elon Musk Has Trump’s Ear, and Wall Street Takes Note http://money.cnn.com/2017/01/20/technology/elon-musk-trump/ http://money.cnn.com/2017/01/20/technology/elon-musk-trump/ https://www.nytimes.com/2017/01/26/business/elon-musk-donald-trump-wall-street.html https://www.nytimes.com/2017/01/26/business/elon-musk-donald... [Both re: Morgan Stanley investor advice:] "Elon Musk has an important line of communication to Donald Trump through his role as a strategic advisor to the President-elect," Adam Jonas, an analyst with Morgan Stanley, wrote in an investor note Thursday. / "We believe this level of coordination with the new administration could actually evolve into greater strategic value than with the prior administration," Jonas added. Mr. Jonas said that the "strategic relationship between Tesla leadership and the new administration is an important development" in his decision to upgrade Tesla stock. . ---- . And some background: * Elon Musk Is Betting Big on Donald Trump https://www.theatlantic.com/technology/archive/2017/02/elon-musk-is-all-in-on-donald-trump/515562/ https://www.theatlantic.com/technology/archive/2017/02/elon-...
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exabrial 10y ago
My big question is, why? It seems they are selling vehicles. Are they in trouble or is this just to expand business?
- marricks 10y ago
  Well, they plan to sell 500k vehicles a year soon which takes a huge ramp up form current production. Sure, they could increase production with current profits form sales but it would slow them down.
  - mikeash 10y ago
    Just to quantify this a bit more: they plan to hit a rate of 500,000/year by the end of 2018, and so far the company has sold something like 200,000 cars total, ever, since it started. (I don't know how likely they are to hit that goal by the end of 2018, but they're trying.)
    - exabrial 10y ago
      That's a very lofty goal indeed. They will definitely have to come down in price
      - mikeash 10y ago
        The Model 3 is supposed to start at $35,000. Demand doesn't seem to be a problem, as they have hundreds of thousands of reservations and pretty much stopped trying to solicit more while they work through the backlog. The major challenge for now is actually getting production up to capacity.
- throwaway91111 10y ago
  According to Elon it's to qualm investor fears, not because they have anticipated needing the capital.
- tomatoman 10y ago
  Maybe to grow faster?
patrickg_zill 10y ago
If I were to make a computer analogy, I would probably say that Tesla in having to deliver the Model 3, is right at the point IBM was when they were finishing up the IBM 360 series: it will be a make or break product release for them. http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/system360/words/ http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/system3... quote from Thomas J Watson Jr.: “The expense of the project was indeed staggering. We spent three quarters of a billion dollars just on engineering. Then we invested another $4.5 billion on factories, equipment and the rental machines themselves. It was the biggest privately financed commercial project ever undertaken.”" (note $5 Billion number was in 1964, inflation-adjusted, that is many billions more)
- tarlinian 10y ago
  Reading about the S/360 is insane...no one makes investments like that anymore. This would be the equivalent of Intel or someone spending $40 billion dollars on engineering the and the infrastructure needed to build a quantum computer today. (What's interesting is that they would survive even if the expense didn't pan out, but no large successful company would ever do this today.)
  - adventured 10y ago
    Sure they do. That's an immense spend by IBM, however lots of big companies spend in the 11 figures on projects. Exxon is spending $20 billion in the next five years to expand its oil refining and chemical operations along the gulf coast. Las Vegas Sands is planning to spend at least $10 billion just to build its Japanese operation. Verizon spent $25 billion or so over 12 years trying to build out FiOS. Wanda Group in China is spending $15 billion to build a Disney park competitor. Apple's total cost every time it builds a new iPhone is in the tens of billions including its ahead-of-time purchasing commitments.
    - tarlinian 10y ago
      All of these aren't in defining a new product. There was no guarantee of a customer base for the S/360. There was already an established market for each of these listed items. Maybe if Apple had spent that kind of money on making the first iPhone you could make a similar comparison.
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bischofs 10y ago
Tesla looks like they will lose that cool new thing vibe soon, the novelty of an electric car will wear off - especially when porsche or benz come out with an electric sedan or coupe. These companies will offer a much more compelling product with the ownership value that people expect from a luxury car company. I have shopped a model S and besides the electric drivetrain it is not really that nice of a car compared to an E class or a porsche panamera - The interior is weak as far as fit and finish. As soon as the the germans offer a similar product on the high end ( and with GM already offering a full electric on the low end ) tesla is done.
- radiorental 10y ago
  Curious, where is everyone going to get their batteries?
  - bischofs 10y ago
    Tesla doesnt make batteries they just package the cells, anyone can do this if the market demands it. Automotive companies are quite good at supply chains.
    - deleted 10y ago
      [deleted]
    - onmobiletemp 10y ago
      You dont know what youre talking about. They do make batteries. 2170s are rolling off the gig assembly line as we speak. They are already in their products. Please think before you speak.
      - bischofs 10y ago
        you are correct, my bad. I did think before I spoke though so that was not necessary. It is interesting how angry people get when you say anything negative about tesla. And my point stands that anyone has access to battery technology - Samsung sdi and LG chem can scale up with any partner just as tesla and panasonic could
eternalban 10y ago
Fuel cells are the future, not batteries.
- onmobiletemp 10y ago
  No, they arent
  - eternalban 10y ago
    We'll see.
    - onmobiletemp 10y ago
      The one thing we can agree on! Im sure that all fuels will have some limited role for as long as there are vehicles operating in adverse or unusual conditions. Hydrogen systems depend and will always depend on being adjacent to substantial batteries in the cars powertrain. This is because fuel cells can contain lots of energy but are much more limited in the rate at which they can offer that energy. In the mirai, the fuel cell keeps a battery topped off. When the car needs to accelerate quickly it draws charge from the battery.
- unknown_apostle 10y ago
  How's that (honestly interested in your opinion).
csours 10y ago
Disclaimer up front: I work for a Tesla competitor. If I were a Tesla investor I'd want to hear more about how Design for Automation is going. If you plan to automate vehicle assembly in a cost effective manner (as Musk has indicated), your components and your assembly operations must be designed for that automation. Tesla has had notable problems getting suppliers to understand and implement their plans (BorgWarner? - original transmission for the Roadster; Mobile Eye - self driving components; Falcon wing door component supplier). Tesla regularly asks suppliers to do things that no other car company has asked them to do (see list above). Design for Automation is a new requirement for many components, so this may be a challenge for suppliers, and thus Tesla. Tesla may win this gamble, or they may not. It will be interesting and educational either way.
- bflesch 10y ago
  Their agility in comparison to GM is communicated very well. At least they tackle innovative moonshot projects, it motivates people to give their best. In other companies the ones innovating are the minority and people dwell on past successes. I'd rather work at an innovative company than for GM.
  - bischofs 10y ago
    The bolt and the volt are well engineered products at a very reasonable price point. I think GM is innovative with these platforms
    - csours 10y ago
      To bflesch's point, GM is making a different gamble: that the vast majority of consumers will continue to prefer fossil fuel engines for the next few engineering cycles (10-15 years). GM has a side bet on electric cars in the form of a joint venture to build electric cars with LG, and another side bet in the form of a joint venture to build hydrogen fuel cells with Honda. Tesla is making a VERY big bet that a vertically integrated, highly automated, battery electric carmaker will be able to take an increasing amount of market share. To be clear, I'm extremely impressed with what Tesla has accomplished so far - if Musk accomplishes what he plans, manufacturing will never be the same. Like I said above, it will be educational to see what happens.
4SomeReason 10y ago
Dude's user name is 'losers'. Lol
JumpCrisscross 10y ago
Ah, convertible bonds. On the trading floor, a converts-trading colleague had a Post-It note on his monitor: "Interest rates up: converts down Interest rates down: converts down Volatility up: converts down Volatility down: converts down Apple strudels up: converts down et cetera" Converts are complicated. For one, nobody is fighting for you post-issuance. You don't (yet) hold stock, so the Board doesn't think you're pretty. Yet your bonds will be subordinated, making them swim like equity. This leads to all kinds of fun [2] when markets fail to maintain monotonicity. Monotonicity means if a line is going up it keeps going up; never down (and vice versa) [3]. A graph for the Empire State Building with the floor number on the X axis and the height of said floor on the Y axis would be monotonically increasing. If I bent the building into a U shape, that graph would not be. If you graph pay-offs for people in your company as a function of the stock price, you want it to be monotonic. That means interest are aligned. If your CFO makes a million dollars when the stock tanks, he's going to want the stock to tank. Let's consider HappyCo. HappyCo has issued 10,000 shares of Common Stock. They trade at $100 per share (a $1MM market capitalization [4]). HappyCo issues 1,000 convertible bonds that can be turned into one share of Common Stock in exchange for $120 per share. To keep this easy for now, let's say HappyCo issue these converts secretly, i.e. the market can't price them in before exercise. If the stock price is way above 130 everyone wins. If the stock price is below 130, converts lose. (Stockholders also lose.) But what if the price is exactly 130? The market, thinking there are 10,000 shares outstanding, weighs the company in at a $1.31MM market cap. But then--dun dun dun--everyone converts. Holy shit, 1,000 new shares! At what price does this new share count (11,000) yield a $1.31MM market cap? 119.09 per share. At 129 pre-conversion, the $1.29MM company trades at 129 per share after accounting for the converts (nobody converts). At 130 pre-conversion it trades at 118.18 post-conversion. It takes us until 141.90 pre-conversion to get back to 129 post-conversion. The price goes monotonically up, but the stockholders do okay, then worse, then better again. Monotonicity was broken. An evil shareholder learning of the converts might prefer a pre-conversion price of 129 over 140. This may seem silly. Nobody secretly issues stock [5]. The market would start pricing the converts in as the stock price approached the conversion price. How does it do that? Options! A convert is a bond married to an option. (People once made a lot of money arbitraging converts against the issuer's stock, bond and options markets [6]). You get all the legal complexity of bonds [7] entangled with the mathematical complexity of options [8]. As I said, fun [2]. But bankers would just price things properly at the outset to ensure they maintain monotonicity, right? Well, they try to. But look at the variables in a common option valuation equation [9]. Rates, volatility, dividends, et cetera. Each of these changes the balance for converts holders. (For example, if dividends go up one might want to convert sooner, i.e. at a lower price. What if taxes go up at the same time? Who knows! Fun [2]!) In a perfect world, each variable would iterate, one by one, like an Excel spreadsheet that isn't complaining about circularity. Investors would, one by one, plug new numbers into their models to get a clean answer. Unfortunately, we inhabit a reality where more than two aspects of it can change simultaneously. Upshot: converts commonly ram through their boundaries all the time. When this happens, everyone converts. Actually, not everyone since each investor has a different break-even conversion price. An insurance company, with lower borrowing costs, will convert differently than an individual investor on margin. Similarly, an invest trading out of a tax-deferred IRA will convert differently than one trading straight. Fun [2]! TL; DR Converts a lots of fun [2] for financial theoreticians, fun for market makers and hedge funds, a little less fun for bankers and an affordable source of entertainment for all. [2] http://dwarffortresswiki.org/index.php/DF2012:Losing http://dwarffortresswiki.org/index.php/DF2012:Losing [3] https://en.wikipedia.org/wiki/Monotonic_function https://en.wikipedia.org/wiki/Monotonic_function [4] http://www.investopedia.com/terms/m/marketcapitalization.asp http://www.investopedia.com/terms/m/marketcapitalization.asp [5] http://sharesleuth.com/investigations/2012/12/small-companies-big-questions-who-secretly-got-millions-of-shares-of-stock-in-chinese-reverse-merger-companies http://sharesleuth.com/investigations/2012/12/small-companie... [6] http://www.institutionalinvestor.com/article/1027772/boy-wonder.html http://www.institutionalinvestor.com/article/1027772/boy-won... [7] http://www.treasurer.ca.gov/cdiac/debtpubs/handbook.pdf http://www.treasurer.ca.gov/cdiac/debtpubs/handbook.pdf [8] https://en.wikipedia.org/wiki/Black–Scholes_model https://en.wikipedia.org/wiki/Black–Scholes_model [9] https://en.wikipedia.org/wiki/Black–Scholes_model#Black.E2.80.93Scholes_equation https://en.wikipedia.org/wiki/Black–Scholes_model#Black.E2.8...
dilemma 10y ago
It's correct that if EVs take off, there is going to be a lot of new demand for batteries. It is also correct that as a car manufacturer, owning a battery producing company and selling to the rest of the industry, is a competitive advantage. It is not correct that building both of these companies from scratch, in parallel, is the way to do it. Focus on building cars an become the leader in that, then buy Panasonic or a flailing manufacturer. Or become the leader in battery technology, and buy a car company couldn't get on the EV train fast enough and turn it around. Tesla is spreading itself too thin, losing focus and eventually competitiveness and then, control
- pcurve 10y ago
  "It is also correct that as a car manufacturer, owning a battery producing company and selling to the rest of the industry, is a competitive advantage." You really don't get rich off of building commoditized foundational parts like battery. Any competitive edge you have is going to be short lived.
  - rwallace 10y ago
    You say that, but in recent decades, Intel was more profitable than the typical PC manufacturer that bought chips from them. Hard technology can be a very lucrative competitive advantage.
- chmaynard 10y ago
  I was really hoping that Tesla and Toyota would form a partnership to build and service the Model 3. From a purely business point of view, I think this would have been a huge win for both companies. Despite the success of the Prius, Toyota made a decision to focus exclusively on fuel cell technology and wasted 10 precious years. They lost that bet, and now they need access to Tesla's superior EV technology to catch up with the competition. Tesla has no experience with the formidable supply chain and production issues involved in building cars on a large scale. This is one of Toyota's great strengths. Unfortunately, there seems to be some bad blood between Toyota and Tesla management. I suspect this may have prevented consideration of such a partnership. (Disclaimer: I just decided to sell my modest investment in Tesla stock.)
Animats 10y ago
The notes: will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes, (in other words, they're not senior to anything no explicitly listed as junior, or any existing debt) will rank equally in right of payment with any of our unsecured indebtedness that is not so subordinated (including our Existing Convertible Notes), will be effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of our subsidiaries... That's a rather junior senior note. None of this matters unless they go bust, in which case it really matters.
kumarski 10y ago
Uber as a ponzi scheme of ambition 1/ Basic premise was they keep highlighting their entry into larger and larger markets and so investors keep ponying up $ for the ambition. 2/ First, it was taxis 3/ Then, it was taxis + logistics 4/ Then taxis, logistics, vehicle ownership 5/ Then taxis, logistics, vehicle ownership, autonomous 6/ Then taxis, logistics, vehicle ownership, autonomous, trucking 7 / Then taxis, logistics, vehicle ownership, autonomous, trucking, drones 8/ I might have the order wrong but each spins Uber into addressing an even larger Total Addressable Market 9/ While they never actually own even the first one (taxis) yet. But investors love the ambition and keep ponying up. 10/ Hence, the ponzi scheme of ambition https://twitter.com/asanwal/status/820365771834531841" https://twitter.com/asanwal/status/820365771834531841" It's hard to say whether Musk is doing something similar or not. Satellites, boring company, mars mission, electrified grid, etc....Obviously, Kalanick is much different than Musk, but I can't help but feel pattern recognition creeping up on me.
- taytus 10y ago
  At some point we should stop calling them investors and start calling them what they really are: idiots.
  - xarien 10y ago
    So I've personally made 6 figures on TSLA. If I'm an idiot, what does that make someone who thought they were smarter than someone who would invest in TSLA? Here's the thing about investment: whether you're playing the long or short game, the only way you make money is through stock volatility. And as far as volatility is concerned, TSLA has been fantastic to play over and over again.
    - taytus 10y ago
      The comment I replied to talked about Uber, not TSLA. I can't understand your need to brag about how much money you made, but yeah, it would be cool if you could read first.
      - 10y ago
ww520 10y ago
Why does the after hour market going up for the news?
- marvin 10y ago
  Market probably expected just a stock issue instead of convertible notes, and this delays dilution for a bit.
tmsldd 10y ago
Nothing wrong with Tesla raising money, after all they basically burn it to sustain the company.. The curios part is that it looks so few.. 1 B isn't a really much.
- elmar 10y ago
  I agree with you they will have to raise more, model 3 unit economics will probably be horrible and they will need much more cash.
thewhitetulip 10y ago
I think the time is ripe for TESLA to launch into India, a manufacturing plant. Modi govt is keen to ratify the Paris accord and raise the clean energy initiatives. On another side, it would help TESLA brand if they first launch a high end car in India and later market the mass market car as a better luxury car, they'll earn an awfully large income on this.
- deleted 10y ago
  [deleted]
cbhl 10y ago
I'm surprised that this bond issue specifically calls out launching the Model 3 (as opposed to being used for e.g. further SolarCity installs).

498 points by loourr 10y ago

Link to press release: http://ir.tesla.com/releasedetail.cfm?ReleaseID=1017594 http://ir.tesla.com/releasedetail.cfm?ReleaseID=1017594

sundvor 10y ago
As an ex-Allaire stack dev, couldn't help but have a chuckle at the cfm. :)
- sundvor 10y ago
  (Tesla - powered by ColdFusion)

slagfart 10y ago

Does anyone know the % interest rate on these? It seems to be blanked out. How can financial markets function efficiently when such basic information is suppressed?

defenestration 10y ago
The interest rate, conversion price and other terms of the notes are to be determined, according to the press release.
nemanja-mit 10y ago
Key terms are interest rate (coupon) and conversion premium. These are not printed on preliminary prospectus and will be printed on the final once the pricing is determined. They way this works is that underwriters (big banks listed on the first page) go to the market (long only and hedge fund investors) with a range for coupon and conversion premium. Investors will express interest somewhere in the range and the instrument will be priced tomorrow at close to get the right investors and best pricing for Tesla. We'll see the final terms once the convert is priced tomorrow after close, but qualified investors already have offering ranges. Generally, converts have much lower interest than straight debt because they offer equity upside to investors once the stock goes above the conversion price. Tesla is high volatility stock, so the convert pricing will be attractive for the company (low coupon / high conversion premium) because that embedded option is valuable to convert investors.

marricks 10y ago

That went quickly from denying a capital raise to reality.

TaylorAlexander 10y ago
Elon said in a recent earnings call that, while they would probably be fine without a raise, they expected it would make investors more comfortable if they did a raise and thus might do one.
- refulgentis 10y ago
  "Elon said..." has started enough apologies for Tesla's poor judgement that I've become numb to it. They're all of the form "while it may look like we're weak, actually...(poorly reasoned explanation for the weakness)", and it has been going on for years. I hope they figure out car production by 2019.
  - TaylorAlexander 10y ago
    I am refuting the suggestion that Tesla wasn't planning a raise. Elon told investors in an investor call that they would likely do a raise.
  - throwaway91111 10y ago
    Regardless of what you think of their judgement, they didn't deny raising capital, which is what your parent comment was saying.

salimmadjd 10y ago

Tesla is basically taking on a loan in form of a convertible notes. probably much smarter to distribute their lender among multiple entities than one giant bank that would have leverage on them. Also, it looks like Tesla would use a portion of the money to inflate their share prices via a small buyback. The after market trading so far make this strategy look successful. So at the end of a day: Tesla is raising capital without diluting their shareholders and reducing their share values and giving up much control. Also the maturity date of 5 years is rather interesting. I wonder if it correlates with their internal projections and their ability to pay that money back by then.

jeffwass 10y ago
You've contradicted yourself in the two quotes below. "Tesla is basically taking on a loan in form of a convertible notes." "So at the end of a day: Tesla is raising capital without diluting their shareholders and reducing their share values" Convertible debt is in fact dilutive. It's even specifically accounted for when calculating Diluted Earnings per Share : http://www.investopedia.com/terms/d/dilutedeps.asp http://www.investopedia.com/terms/d/dilutedeps.asp
- salimmadjd 10y ago
  But you're not flooding the market with $750M new common stock of TSLA in the market. If TSLA price crashes it could impact consumer confidence in buying the T3 which Tesla is banking on. If TSLA drops and T3 are delayed, many consumers might panic and not oder their car creating a vicious circle.
  - jonknee 10y ago
    ... They are also issuing new shares: > Concurrently with this offering of notes, we are offering 968,993 shares of our common stock (or up to 1,114,341 shares of our common stock if the underwriters of that offering exercise their option to purchase additional shares in full), in an underwritten offering pursuant to a separate prospectus supplement. The closing of this offering of notes is not contingent upon the closing of the concurrent offering of common stock, and the closing of the concurrent offering of common stock is not contingent upon the closing of this offering.

Cookingboy 10y ago

As an investor of Tesla who bought into Elon's vision I've been getting more and more nervous about how the company is actually run at this point. A modern car company is as much of a production and supply chain company as it's a product and tech company. I get the feeling that due to Tesla being cutting edge in the tech department it led to all the supply chain/production problems being treated as if they are speed bumps on the way, when in reality they are fundamental core competitive areas for an automotive company. Toyota is not the world's premier automaker because they have cutting edge tech, they are what they are because they build unbelievably number of reliable cars at an unbelievable scale. The bleeding of cash after so many promises of "not going to raise money again" just shows that their vision is way ahead of their execution ability. Decisions like the terribly executed Falcon Wing Doors on a SUV that delayed production and increased cost and hurt reliability just further gave fuel to all the doubters. I also have a strong suspicion that Tesla has not been honest with their Auto Pilot 2 and full self driving tech's progress. The current AP2 is an unsafe joke and I have no idea how people are ok with paying $5-10k for a significant downgrade when compared to AP1 because of a non-binding promise that it "might" get upgraded before their lease term is out. Any other automakers would be laughed out of the room for suggesting this kind of sales tactics. I still believe in Tesla/Elon's end game vision, and I think what they accomplished is nothing short of brilliant, but I think it's a very risky investment at this point and the road ahead is bumpier than many like to admit. The upcoming Model 3 will be the acid test for Tesla. It will no doubt be a good car, but at this point people should focus less on what the car can do and on how the car will be rolled out, sold and supported afterwards. A wealthy Model S customer may be ok with having the car in the shop after a minor accident for 5 months due to lack of replacement parts, but for an average Joe paying $500/month leasing a Model 3 that would just be the birth of a new BMW customer.

amluto 10y ago
I test-drove an AP2 car. After a disastrous ride in which it tried to hit two parked cars and a trashcan and wanted to drive off the road entirely, the sales person said, with a straight face, that it was great for stop and go traffic on 101. I'm a bit amazed they can currently sell cars.

grandalf 10y ago

This is the sort of thing that ought to terrify the makers of legacy automotive technology, both for how Tesla might scale production, but also how Tesla might become a lot more aggressive with its intellectual property strategy.

dangrossman 10y ago
Their ambitions for scaling production are meager: to start making Model 3's at a rate of 5000/week by 2018, which wouldn't even match the rate at which cars rolled out of that very same factory when GM/Toyota owned it. If they kept up that rate for a whole year, that'd represent around 0.7% of US car sales. Terrifying, or just one of many small car brands on the market? By 2019 they want to double that rate to 10K/week... but that assumes there are 10,000 people a week that want to buy an EV at (according to Mr. Musk) an average price of $42,000 or more -- significantly higher than the average new vehicle selling price. Right now, less than 2500 people a week buy any type of electric or plug-in hybrid car of any make or model in the entire country. So Tesla needs to quadruple demand for electric vehicles and then capture all of it within ~21 months to meet their targets. By 2019 they'll also be up against a bevy of EVs from those other auto makers, likely at lower price points. The 2018 Nissan Leaf, with 200+ miles of range and ProPilot (limited) self-driving capabilities might even beat the Model 3 to market, and will almost surely be cheaper. What valuable IP does Tesla have to license out that would terrify auto makers? There are plenty of other suppliers of EV motors, chargers, inverters, control systems, battery cells, battery packs and battery management systems. LG Chem's nearly reached price parity with Tesla/Panasonic (and has several gigawatt-hour-per-year scale factories of its own, with more in construction). BYD, Foxconn, Boston Power, Samsung SDI, SK Innovation, etc are bringing in 150+ GWh per year of EV battery production capacity by 2020. Their "Autopilot" software is built on Intel Mobileye (V1) and Nvidia's DRIVE PX2 (V2) platforms, which any other car company can license. The Supercharger network doesn't seem to offer anything technology wise that isn't matched by the Combined Charging System (CCS), which is rolling out 350 kW chargers throughout 2017, with the US government's backing. So what do they have that their competitors would value enough to license from them, knowing they're funding the competition?
- 10y ago

CptJamesCook 10y ago

I just picked up my Model X after a week in the shop. They weren't able to finish all of the work, because "we are busy this time of year." They told me to bring it back in April. In about a year of ownership, this is the 3rd time I've lost the car for about a week. I probably should have brought it to the shop 3-4 other times, but I let the issues build up. They've had to replace all sorts of parts on my car, including the entire driver's seat. Even basic stuff like my phone playing audio doesn't work half the time. The driver's side wing mirror quit opening. I've had to reboot the car 10+ times in order for the dashboard display to work. The gull wing door opened into a ceiling and left a scratch. The hood opened into a ceiling and left a scratch. My windows have quit going up three times. Most of the trim / sealing / etc is coming off, misaligned, etc. I probably sit here and think of 10 more problems. Anyway, I knew I was buying a v 0.1 car and I’m generally happy with it, despite the problems. Their service has actually been amazing, but that's kind of the point of my post: If the Model 3 has anywhere near the same level of problems as my X, at 10x the scale, Tesla is doomed. How could this possibly be even remotely cost effective on a lower-margin Model 3?

c0nfused 10y ago
If it makes you feel any better, This seems to actually be fairly common in the automobile market for new model cars to have teething issues like this. I bought a new model mini cooper a few years back right after f56 came out and ran into issues like: USB port would not charge a Verizon smartphone, Car would occasionally stall and would need to be put in park to start again, Replaced rear seat, air bags. It sucks, but it seems like the sort of last minute post release bug fixing that happens all over in software.
ricardobeat 10y ago
> The hood opened into a ceiling Is that a Model X issue? What would you expect to happen in another car?
- CptJamesCook 10y ago
  Sorry, I meant the tailgate. What happens is, you lift the tailgate a little bit and then the car takes over and opens the tailgate the rest of the way -- far higher than a person would do in a room with low ceilings. I let go of the tailgate and had no real way to stop it from opening itself the rest of the way into the ceiling.

unstatusthequo 10y ago

$750M, not billion

powera 10y ago
The $750M is the amount of convertible debt; there's a separate $250M of new common stock being issued.

antoniuschan99 10y ago

Why does Tesla need this? What is the money going to be used for? Is this like Solar Bonds that SCTY used?

hackuser 10y ago

How much of Tesla's prospects are due not to free market competition, but Elon Musk lending his credibility to Trump? What happens to his competition, who do compete in the market and take a principled stand against Trump? Is Musk still supporting Trump? I just spent some time doing a little research (below) and as far as I can tell, the answer to the questions seem unsettling, though I couldn't find many great, current sources in a short time. I'd be interested in serious discussion and information; let's skip the partisan hackery - there's so much out there that more won't provide any marginal revenue! . ---- . Musk's support for Trump: * Billboard near Elon Musk's Tesla factory asks him to 'dump Trump' http://abcnews.go.com/Politics/billboard-elon-musks-tesla-factory-asks-dump-trump/story?id=46033908 http://abcnews.go.com/Politics/billboard-elon-musks-tesla-fa... * Elon Musk, other business leaders to talk infrastructure with Trump Wednesday http://money.cnn.com/2017/03/08/news/companies/elon-musk-donald-trump/ http://money.cnn.com/2017/03/08/news/companies/elon-musk-don... Musk, who is a member of both Trump's economic advisory council and manufacturing council * Elon Musk: Rex Tillerson could be an 'excellent' secretary of state [from January] http://www.businessinsider.com/elon-musk-says-rex-tillerson-excellent-secretary-of-state-2017-1 http://www.businessinsider.com/elon-musk-says-rex-tillerson-... Note that Tillerson was previously CEO of Exxon-Mobil, a captain of the carbon industry. . ---- . How his businesses benefit from the relationship with Trump: Don't forget the strong appearance that Trump is selling access. What will happen to the space exploration goals of Jeff Bezos, owner of the Washington Post, for example, or other Musk competitors? Note that Musk's actions puts pressure on them, too, to support Trump or risk serious damage to their businesses. And also it seriously disrupts the free market to have it depend on personal relationships with the President rather than merit of the companies. * Musk’s Surprise Rapport With Trump Means 40% Rally for Tesla [from January] https://www.bloomberg.com/news/articles/2017-01-26/musk-s-surprising-rapport-with-trump-yields-40-rally-for-tesla https://www.bloomberg.com/news/articles/2017-01-26/musk-s-su... * Elon Musk’s Trump Alliance Indicates Great Things for Tesla Stock http://www.profitconfidential.com/stock/elon-musk-trump-alliance-great-things-tesla-stock/ http://www.profitconfidential.com/stock/elon-musk-trump-alli... * UBS analyst says he can't understand why Tesla shares are up so much this year, sell the stock https://www.cnbc.com/2017/02/16/ubs-analyst-says-he-cant-understand-why-tesla-shares-are-up-so-much.html https://www.cnbc.com/2017/02/16/ubs-analyst-says-he-cant-und... "We struggle to understand the run-up, particular as Q4 deliveries missed, though positive spin on the Musk-Trump relationship, reconfirmed Model 3 launch timing, and expectations of new reveals (including more autonomous features) are likely factors," analyst Colin Langan wrote in a note to clients Wednesday. * UBS (Basically): Tesla’s Path To Profitability Now Dependent On Musk-Trump Bromance [a one-sided editorial] http://dealbreaker.com/2017/03/teslas-profitability-musk-trump-bromance/ http://dealbreaker.com/2017/03/teslas-profitability-musk-tru... UBS notes, “there has been discussion that Trump’s infrastructure project may involve federal subsidies for a nationwide EV charging corridor, which could reduce the cost burden.” * Elon Musk's surprising secret weapon: Trump? [From January] * Elon Musk Has Trump’s Ear, and Wall Street Takes Note http://money.cnn.com/2017/01/20/technology/elon-musk-trump/ http://money.cnn.com/2017/01/20/technology/elon-musk-trump/ https://www.nytimes.com/2017/01/26/business/elon-musk-donald-trump-wall-street.html https://www.nytimes.com/2017/01/26/business/elon-musk-donald... [Both re: Morgan Stanley investor advice:] "Elon Musk has an important line of communication to Donald Trump through his role as a strategic advisor to the President-elect," Adam Jonas, an analyst with Morgan Stanley, wrote in an investor note Thursday. / "We believe this level of coordination with the new administration could actually evolve into greater strategic value than with the prior administration," Jonas added. Mr. Jonas said that the "strategic relationship between Tesla leadership and the new administration is an important development" in his decision to upgrade Tesla stock. . ---- . And some background: * Elon Musk Is Betting Big on Donald Trump https://www.theatlantic.com/technology/archive/2017/02/elon-musk-is-all-in-on-donald-trump/515562/ https://www.theatlantic.com/technology/archive/2017/02/elon-...

deleted 10y ago

[deleted]

exabrial 10y ago

My big question is, why? It seems they are selling vehicles. Are they in trouble or is this just to expand business?

marricks 10y ago
Well, they plan to sell 500k vehicles a year soon which takes a huge ramp up form current production. Sure, they could increase production with current profits form sales but it would slow them down.
- mikeash 10y ago
  Just to quantify this a bit more: they plan to hit a rate of 500,000/year by the end of 2018, and so far the company has sold something like 200,000 cars total, ever, since it started. (I don't know how likely they are to hit that goal by the end of 2018, but they're trying.)
  - exabrial 10y ago
    That's a very lofty goal indeed. They will definitely have to come down in price
    - mikeash 10y ago
      The Model 3 is supposed to start at $35,000. Demand doesn't seem to be a problem, as they have hundreds of thousands of reservations and pretty much stopped trying to solicit more while they work through the backlog. The major challenge for now is actually getting production up to capacity.
throwaway91111 10y ago
According to Elon it's to qualm investor fears, not because they have anticipated needing the capital.
tomatoman 10y ago
Maybe to grow faster?

patrickg_zill 10y ago

If I were to make a computer analogy, I would probably say that Tesla in having to deliver the Model 3, is right at the point IBM was when they were finishing up the IBM 360 series: it will be a make or break product release for them. http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/system360/words/ http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/system3... quote from Thomas J Watson Jr.: “The expense of the project was indeed staggering. We spent three quarters of a billion dollars just on engineering. Then we invested another $4.5 billion on factories, equipment and the rental machines themselves. It was the biggest privately financed commercial project ever undertaken.”" (note $5 Billion number was in 1964, inflation-adjusted, that is many billions more)

tarlinian 10y ago
Reading about the S/360 is insane...no one makes investments like that anymore. This would be the equivalent of Intel or someone spending $40 billion dollars on engineering the and the infrastructure needed to build a quantum computer today. (What's interesting is that they would survive even if the expense didn't pan out, but no large successful company would ever do this today.)
- adventured 10y ago
  Sure they do. That's an immense spend by IBM, however lots of big companies spend in the 11 figures on projects. Exxon is spending $20 billion in the next five years to expand its oil refining and chemical operations along the gulf coast. Las Vegas Sands is planning to spend at least $10 billion just to build its Japanese operation. Verizon spent $25 billion or so over 12 years trying to build out FiOS. Wanda Group in China is spending $15 billion to build a Disney park competitor. Apple's total cost every time it builds a new iPhone is in the tens of billions including its ahead-of-time purchasing commitments.
  - tarlinian 10y ago
    All of these aren't in defining a new product. There was no guarantee of a customer base for the S/360. There was already an established market for each of these listed items. Maybe if Apple had spent that kind of money on making the first iPhone you could make a similar comparison.

deleted 10y ago

[deleted]

bischofs 10y ago

Tesla looks like they will lose that cool new thing vibe soon, the novelty of an electric car will wear off - especially when porsche or benz come out with an electric sedan or coupe. These companies will offer a much more compelling product with the ownership value that people expect from a luxury car company. I have shopped a model S and besides the electric drivetrain it is not really that nice of a car compared to an E class or a porsche panamera - The interior is weak as far as fit and finish. As soon as the the germans offer a similar product on the high end ( and with GM already offering a full electric on the low end ) tesla is done.

radiorental 10y ago
Curious, where is everyone going to get their batteries?
- bischofs 10y ago
  Tesla doesnt make batteries they just package the cells, anyone can do this if the market demands it. Automotive companies are quite good at supply chains.
  - deleted 10y ago
    [deleted]
  - onmobiletemp 10y ago
    You dont know what youre talking about. They do make batteries. 2170s are rolling off the gig assembly line as we speak. They are already in their products. Please think before you speak.
    - bischofs 10y ago
      you are correct, my bad. I did think before I spoke though so that was not necessary. It is interesting how angry people get when you say anything negative about tesla. And my point stands that anyone has access to battery technology - Samsung sdi and LG chem can scale up with any partner just as tesla and panasonic could

eternalban 10y ago

Fuel cells are the future, not batteries.

onmobiletemp 10y ago
No, they arent
- eternalban 10y ago
  We'll see.
  - onmobiletemp 10y ago
    The one thing we can agree on! Im sure that all fuels will have some limited role for as long as there are vehicles operating in adverse or unusual conditions. Hydrogen systems depend and will always depend on being adjacent to substantial batteries in the cars powertrain. This is because fuel cells can contain lots of energy but are much more limited in the rate at which they can offer that energy. In the mirai, the fuel cell keeps a battery topped off. When the car needs to accelerate quickly it draws charge from the battery.
unknown_apostle 10y ago
How's that (honestly interested in your opinion).

csours 10y ago

Disclaimer up front: I work for a Tesla competitor. If I were a Tesla investor I'd want to hear more about how Design for Automation is going. If you plan to automate vehicle assembly in a cost effective manner (as Musk has indicated), your components and your assembly operations must be designed for that automation. Tesla has had notable problems getting suppliers to understand and implement their plans (BorgWarner? - original transmission for the Roadster; Mobile Eye - self driving components; Falcon wing door component supplier). Tesla regularly asks suppliers to do things that no other car company has asked them to do (see list above). Design for Automation is a new requirement for many components, so this may be a challenge for suppliers, and thus Tesla. Tesla may win this gamble, or they may not. It will be interesting and educational either way.

bflesch 10y ago
Their agility in comparison to GM is communicated very well. At least they tackle innovative moonshot projects, it motivates people to give their best. In other companies the ones innovating are the minority and people dwell on past successes. I'd rather work at an innovative company than for GM.
- bischofs 10y ago
  The bolt and the volt are well engineered products at a very reasonable price point. I think GM is innovative with these platforms
  - csours 10y ago
    To bflesch's point, GM is making a different gamble: that the vast majority of consumers will continue to prefer fossil fuel engines for the next few engineering cycles (10-15 years). GM has a side bet on electric cars in the form of a joint venture to build electric cars with LG, and another side bet in the form of a joint venture to build hydrogen fuel cells with Honda. Tesla is making a VERY big bet that a vertically integrated, highly automated, battery electric carmaker will be able to take an increasing amount of market share. To be clear, I'm extremely impressed with what Tesla has accomplished so far - if Musk accomplishes what he plans, manufacturing will never be the same. Like I said above, it will be educational to see what happens.

4SomeReason 10y ago

Dude's user name is 'losers'. Lol

JumpCrisscross 10y ago

Ah, convertible bonds. On the trading floor, a converts-trading colleague had a Post-It note on his monitor: "Interest rates up: converts down Interest rates down: converts down Volatility up: converts down Volatility down: converts down Apple strudels up: converts down et cetera" Converts are complicated. For one, nobody is fighting for you post-issuance. You don't (yet) hold stock, so the Board doesn't think you're pretty. Yet your bonds will be subordinated, making them swim like equity. This leads to all kinds of fun [2] when markets fail to maintain monotonicity. Monotonicity means if a line is going up it keeps going up; never down (and vice versa) [3]. A graph for the Empire State Building with the floor number on the X axis and the height of said floor on the Y axis would be monotonically increasing. If I bent the building into a U shape, that graph would not be. If you graph pay-offs for people in your company as a function of the stock price, you want it to be monotonic. That means interest are aligned. If your CFO makes a million dollars when the stock tanks, he's going to want the stock to tank. Let's consider HappyCo. HappyCo has issued 10,000 shares of Common Stock. They trade at $100 per share (a $1MM market capitalization [4]). HappyCo issues 1,000 convertible bonds that can be turned into one share of Common Stock in exchange for $120 per share. To keep this easy for now, let's say HappyCo issue these converts secretly, i.e. the market can't price them in before exercise. If the stock price is way above 130 everyone wins. If the stock price is below 130, converts lose. (Stockholders also lose.) But what if the price is exactly 130? The market, thinking there are 10,000 shares outstanding, weighs the company in at a $1.31MM market cap. But then--dun dun dun--everyone converts. Holy shit, 1,000 new shares! At what price does this new share count (11,000) yield a $1.31MM market cap? 119.09 per share. At 129 pre-conversion, the $1.29MM company trades at 129 per share after accounting for the converts (nobody converts). At 130 pre-conversion it trades at 118.18 post-conversion. It takes us until 141.90 pre-conversion to get back to 129 post-conversion. The price goes monotonically up, but the stockholders do okay, then worse, then better again. Monotonicity was broken. An evil shareholder learning of the converts might prefer a pre-conversion price of 129 over 140. This may seem silly. Nobody secretly issues stock [5]. The market would start pricing the converts in as the stock price approached the conversion price. How does it do that? Options! A convert is a bond married to an option. (People once made a lot of money arbitraging converts against the issuer's stock, bond and options markets [6]). You get all the legal complexity of bonds [7] entangled with the mathematical complexity of options [8]. As I said, fun [2]. But bankers would just price things properly at the outset to ensure they maintain monotonicity, right? Well, they try to. But look at the variables in a common option valuation equation [9]. Rates, volatility, dividends, et cetera. Each of these changes the balance for converts holders. (For example, if dividends go up one might want to convert sooner, i.e. at a lower price. What if taxes go up at the same time? Who knows! Fun [2]!) In a perfect world, each variable would iterate, one by one, like an Excel spreadsheet that isn't complaining about circularity. Investors would, one by one, plug new numbers into their models to get a clean answer. Unfortunately, we inhabit a reality where more than two aspects of it can change simultaneously. Upshot: converts commonly ram through their boundaries all the time. When this happens, everyone converts. Actually, not everyone since each investor has a different break-even conversion price. An insurance company, with lower borrowing costs, will convert differently than an individual investor on margin. Similarly, an invest trading out of a tax-deferred IRA will convert differently than one trading straight. Fun [2]! TL; DR Converts a lots of fun [2] for financial theoreticians, fun for market makers and hedge funds, a little less fun for bankers and an affordable source of entertainment for all. [2] http://dwarffortresswiki.org/index.php/DF2012:Losing http://dwarffortresswiki.org/index.php/DF2012:Losing [3] https://en.wikipedia.org/wiki/Monotonic_function https://en.wikipedia.org/wiki/Monotonic_function [4] http://www.investopedia.com/terms/m/marketcapitalization.asp http://www.investopedia.com/terms/m/marketcapitalization.asp [5] http://sharesleuth.com/investigations/2012/12/small-companies-big-questions-who-secretly-got-millions-of-shares-of-stock-in-chinese-reverse-merger-companies http://sharesleuth.com/investigations/2012/12/small-companie... [6] http://www.institutionalinvestor.com/article/1027772/boy-wonder.html http://www.institutionalinvestor.com/article/1027772/boy-won... [7] http://www.treasurer.ca.gov/cdiac/debtpubs/handbook.pdf http://www.treasurer.ca.gov/cdiac/debtpubs/handbook.pdf [8] https://en.wikipedia.org/wiki/Black–Scholes_model https://en.wikipedia.org/wiki/Black–Scholes_model [9] https://en.wikipedia.org/wiki/Black–Scholes_model#Black.E2.80.93Scholes_equation https://en.wikipedia.org/wiki/Black–Scholes_model#Black.E2.8...

dilemma 10y ago

It's correct that if EVs take off, there is going to be a lot of new demand for batteries. It is also correct that as a car manufacturer, owning a battery producing company and selling to the rest of the industry, is a competitive advantage. It is not correct that building both of these companies from scratch, in parallel, is the way to do it. Focus on building cars an become the leader in that, then buy Panasonic or a flailing manufacturer. Or become the leader in battery technology, and buy a car company couldn't get on the EV train fast enough and turn it around. Tesla is spreading itself too thin, losing focus and eventually competitiveness and then, control

pcurve 10y ago
"It is also correct that as a car manufacturer, owning a battery producing company and selling to the rest of the industry, is a competitive advantage." You really don't get rich off of building commoditized foundational parts like battery. Any competitive edge you have is going to be short lived.
- rwallace 10y ago
  You say that, but in recent decades, Intel was more profitable than the typical PC manufacturer that bought chips from them. Hard technology can be a very lucrative competitive advantage.
chmaynard 10y ago
I was really hoping that Tesla and Toyota would form a partnership to build and service the Model 3. From a purely business point of view, I think this would have been a huge win for both companies. Despite the success of the Prius, Toyota made a decision to focus exclusively on fuel cell technology and wasted 10 precious years. They lost that bet, and now they need access to Tesla's superior EV technology to catch up with the competition. Tesla has no experience with the formidable supply chain and production issues involved in building cars on a large scale. This is one of Toyota's great strengths. Unfortunately, there seems to be some bad blood between Toyota and Tesla management. I suspect this may have prevented consideration of such a partnership. (Disclaimer: I just decided to sell my modest investment in Tesla stock.)

Animats 10y ago

The notes: will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes, (in other words, they're not senior to anything no explicitly listed as junior, or any existing debt) will rank equally in right of payment with any of our unsecured indebtedness that is not so subordinated (including our Existing Convertible Notes), will be effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of our subsidiaries... That's a rather junior senior note. None of this matters unless they go bust, in which case it really matters.

kumarski 10y ago

Uber as a ponzi scheme of ambition 1/ Basic premise was they keep highlighting their entry into larger and larger markets and so investors keep ponying up $ for the ambition. 2/ First, it was taxis 3/ Then, it was taxis + logistics 4/ Then taxis, logistics, vehicle ownership 5/ Then taxis, logistics, vehicle ownership, autonomous 6/ Then taxis, logistics, vehicle ownership, autonomous, trucking 7 / Then taxis, logistics, vehicle ownership, autonomous, trucking, drones 8/ I might have the order wrong but each spins Uber into addressing an even larger Total Addressable Market 9/ While they never actually own even the first one (taxis) yet. But investors love the ambition and keep ponying up. 10/ Hence, the ponzi scheme of ambition https://twitter.com/asanwal/status/820365771834531841" https://twitter.com/asanwal/status/820365771834531841" It's hard to say whether Musk is doing something similar or not. Satellites, boring company, mars mission, electrified grid, etc....Obviously, Kalanick is much different than Musk, but I can't help but feel pattern recognition creeping up on me.

taytus 10y ago
At some point we should stop calling them investors and start calling them what they really are: idiots.
- xarien 10y ago
  So I've personally made 6 figures on TSLA. If I'm an idiot, what does that make someone who thought they were smarter than someone who would invest in TSLA? Here's the thing about investment: whether you're playing the long or short game, the only way you make money is through stock volatility. And as far as volatility is concerned, TSLA has been fantastic to play over and over again.
  - taytus 10y ago
    The comment I replied to talked about Uber, not TSLA. I can't understand your need to brag about how much money you made, but yeah, it would be cool if you could read first.
    - 10y ago

ww520 10y ago

Why does the after hour market going up for the news?

marvin 10y ago
Market probably expected just a stock issue instead of convertible notes, and this delays dilution for a bit.

tmsldd 10y ago

Nothing wrong with Tesla raising money, after all they basically burn it to sustain the company.. The curios part is that it looks so few.. 1 B isn't a really much.

elmar 10y ago
I agree with you they will have to raise more, model 3 unit economics will probably be horrible and they will need much more cash.

thewhitetulip 10y ago

I think the time is ripe for TESLA to launch into India, a manufacturing plant. Modi govt is keen to ratify the Paris accord and raise the clean energy initiatives. On another side, it would help TESLA brand if they first launch a high end car in India and later market the mass market car as a better luxury car, they'll earn an awfully large income on this.

deleted 10y ago
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cbhl 10y ago

I'm surprised that this bond issue specifically calls out launching the Model 3 (as opposed to being used for e.g. further SolarCity installs).