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Tesla raises $1.8B
- erdle 9y agoHow much of this is actually being used to pay down SolarCity debt?
- JSONwebtoken 9y agoYou can't pay debt with debt. They may be getting better interest rates on the bond market to refinance their existing loans but total liabilities are going up, not down.
- koolba 9y agoSure you can. That's the exact definition of "refinancing".
- JSONwebtoken 9y agoYou may be paying off the note and it shows up as a different line item on the balance sheet, but it's not paying the debt.
- Retric 9y agoThis is new debt not stock. These are bonds @5.3% which is close to the rate SolarCity was raising money.
- mattnewton 9y agoIt's heartening to see financial markets helping a company with such potential for positive externalities. Sometimes maybe the system does work!
- diegoperini 9y agoTesla, just like any other successful company games the system well. The system is neutral at its wildest.
- ajross 9y agoThe seventy first worthless coin offering just made umpteen million dollars and this site feels it's the market speaking truth to power. The most innovative industrial manufacturer in decades raises money, and it's "gaming the system". Right.
- quickthrower2 9y agoMy impression is that "this site" is very skeptical of ICOs, so I'm calling strawman on your comment.
- diegoperini 9y agoYour poetic parody reflects a truth, that's why I stated it is neutral. Gaming the system isn't inherently evil, it wasn't an accusation of bad ethics. To clarify my point, I'd like to paraphrase my previous statement without metaphors. Many evil/fraud companies game the system to access unjust benefits. But every now and then one is able to find some company rising among the other, deserves appreciation. It is only natural to think that such companies must have analyzed the system more than the ones they surpassed, otherwise they would go unnoticed among all the cheaters. Back to metaphor; The system is like a blade: a killing device on a killer, a life saving device on a surgeon. It is true that there seems to exist more killers than savers.
- ams6110 9y agoPositive externalities like 8-year-olds mining cobalt to make the batteries?
- deleted 9y ago[deleted]
- ryanwaggoner 9y agoThe "junk bond" rating and high debt load makes me a little nervous, but maybe that's irrelevant and this is just them raising money as an accelerant because they can get it at a good price?
- skybrian 9y agoThey need the money. From a few days ago: "The company burned through $1.16 billion in cash in the second quarter [...] a little more than $3 billion in cash on hand" https://www.bloomberg.com/news/articles/2017-08-02/tesla-burns-through-record-cash-as-musk-brings-model-3-to-market https://www.bloomberg.com/news/articles/2017-08-02/tesla-bur...
- deleted 9y ago[deleted]
- throwaway81122 9y agoTesla should just mint their own crypto. IF filecoin gets 200M for a white paper, Tesla can get 20B.
- ThrustVectoring 9y agoI would not recommend committing securities fraud.
- SubiculumCode 9y agoI'm curious. How is what was flippantly suggested related to securities fraud?
- toomuchtodo 9y agoSEC regulates crypto currency issuances now.
- ringaroundthetx 9y agothe SEC regulates securities issuances even the SEC's report said not all blockchain based cryptographic tokens are securities, so they're not confused about it, why are you?
- ThrustVectoring 9y agoTechnically, they're claiming that the majority of ICO-style crypto currency issuances have always been under their jurisdiction. They're just not enforcing "Sale of unregistered securities" stuff against ones done before they put the market on notice through their legal findings.
- TheSpiceIsLife 9y agoCrytocurrencies serve one purpose very well: they're presently not being prosecuted as Ponzi schemes. Which they argueably are.
- chisleu 9y agoLooking at the stock price, people seemed to know 5 days ago.
- vit05 9y ago"Tesla aims to boost production to 500,000 cars next year, about six times its 2016 output." What is the new goal to 2020? 2 years[0] ago they were expecting delivery 500,000 cars in 2020. If they will do that this year, maybe their new goal is to finally put a foot in the top 20 group of world manufacturers[1]? [0]http://www.businessinsider.com/everything-tesla-promises-to-accomplish-by-2020-2015-12/#create-500000-cars-per-year-by-2020-5 http://www.businessinsider.com/everything-tesla-promises-to-... [1]https://en.wikipedia.org/wiki/List_of_manufacturers_by_motor_vehicle_production https://en.wikipedia.org/wiki/List_of_manufacturers_by_motor...
- deleted 9y ago[deleted]
- rmason 9y agoIf there are any college student hackers interested in pushing boundaries MHacks is going to allow you to hack a Tesla this September in Ann Arbor.
- lawrenceyan 9y agoAre applications open?
- rmason 9y agoGo to mhacks.org and create an account. According to the FAQ that will let you then apply.
- nanch 9y agoSounds like fun, I took the time to apply on https://mhacks.org https://mhacks.org. The mhacks.org site could use some work though: - no password reset - you lose your profile after saving it and re-navigating
- simonebrunozzi 9y agoA little imprecision in the article: "The company, founded by Musk in 2003" is untrue. Musk joined the company after it was funded.
- KGIII 9y agoI keep seeing that. I'm not sure where it comes from. You're correct, obviously. I'm just not sure why people think he was a founder, or the founder?
- droidist2 9y agoI'm surprised to learn he wasn't, but I hadn't given it that much thought.
- KGIII 9y agoI thought it common knowledge. That's probably a mistake on my part. I know it because I invested pretty early on. My mistake is in thinking others would have read the history and knew the details. I'd like to hope a journalist would know, however. Well, at least research it. I'm pretty sure Wikipedia knows all about it. Still, I think it's a mistake on my part, to think others would know - more so, given the pervasiveness of the misinformation.
- justicezyx 9y agoMusk is a genius business man... You should not underestimate his skill of creating illusions. I for myself only learnt this ~2010... Before I always thought he was the founder...
- Robotbeat 9y agoIt's not much of an illusion. Tesla was still working on hybrids when Musk joined on. For better or for worse, Tesla as it is now is Musk's baby. Not untruthful to say he was a cofounder, though with a heavy caveat.
- dopamean 9y agoIt's interesting to me that in May of last year Snap, Inc raised about the same amount of money. I've never understood how some companies need so much money. To me it makes sense for Tesla. They are building actual cars and that is expensive. What on earth did Snap need a 1.8 billion for?
- Mz 9y agoWhat on earth did Snap need a 1.8 billion for? To put it in a pool and swim in it, like Scrooge McDuck?
- sondr3 9y agoBurning (through) it mostly.
- Pulcinella 9y agoOn what though?
- Inconel 9y agoThis[0] discussion from the other day has some interesting comments about employee compensation. And then there are acquisitions like this[1], in addition to the infrastructure costs that have been mentioned. [0]https://news.ycombinator.com/item?id=14983800 https://news.ycombinator.com/item?id=14983800 [1]https://techcrunch.com/2017/06/21/snapchat-buys-zenly/ https://techcrunch.com/2017/06/21/snapchat-buys-zenly/
- Animats 9y agoTesla sold $1.8 billion of eight-year unsecured bonds at a yield of 5.30 percent. That's considered junk bond level today. Historically, it's not a bad interest rate. It's an OK deal for Tesla.
- moxious 9y agoYes, it's a testament to how strange the financial environment is that people would lend such money speculatively at low interest. Those are the prevailing rates but I think the bond holders are getting a lousy deal considering tesla's actual risks
- deleted 9y ago[deleted]
- gozur88 9y agoIt's hard to quantify those risks when you have a rock star CEO. As long as Musk can keep the hype train going he'll be able to borrow money cheaply, which will make today's investment less risky.
- kchoudhu 9y agoDoesn't seem to be phasing internet financiers: they're all in on this issue on Reddit. Shorts take note: Tesla has access to dumb capital that you haven't necessarily factored into your models.
- d_t_w 9y agoIs there a difference between 'raises' and 'borrows'? I read this as Tesla took investment of $1.8B (presumably in return for shares), but in this case they have issued $1.8B of bonds, so they've effectively taken out a loan.
- austenallred 9y ago"Raises" could be a debt or equity event. If you're selling portions of a company (equity) you would call it a "raise" but you're not "borrowing."
- colechristensen 9y agoQuite a few of the "investment" rounds for companies have terms which look like loans more than ownership as well. It can get rather fuzzy distinguishing one from the other.
- Aron 9y agoYeah this was just a loan. The first time for them that it wasn't attached in some way to shares.
- lancewiggs 9y agoNot only that it is unsecured "junk" debt, and the interest rate is incredibly low at 5.3%.
- calafrax 9y ago5.3% is not incredibly low for a corporation borrowing 1.8 billion. it is pretty high which is why investors are jumping on it. This adds $95 million in interest expense per year which is pretty substantial.
- howinator 9y agoIt is incredibly low for bonds in the "junk" trough. For companies with Tesla's credit rating, you're typically looking at 6.5-7.8%. If you're GE, you're of course going to pay a lot less, but GE has a much more robust credit history.
- mack1001 9y agoIf tesla can get 500,000 cars out there, ICE cars are toast. Enough of legacy cars and makers.
- scott_karana 9y agoThe Camry alone sells 400,000 a year in the US, where the market for new cars was 17.55 million units last year. If Tesla can pump out 500K globally, that's respectable, but hardly a death knell to the 80 million unit industry. http://www.latimes.com/business/autos/la-fi-hy-auto-sales-20170104-story.html http://www.latimes.com/business/autos/la-fi-hy-auto-sales-20... https://www.statista.com/statistics/200002/international-car-sales-since-1990/ https://www.statista.com/statistics/200002/international-car...
- sxates 9y agoWatch the trends, not the current year.
- paganel 9y agoThe Renault-Nissan group sold almost 500k EV worldwide in the first six months of the year (481,151 units, to be more exact), and I don't see any news out-there of ICE cars "being toast". Link: http://www.media.blog.alliance-renault-nissan.com/news/the-renault-nissan-alliance-reports-record-sales-increase-in-first-half-2017/ http://www.media.blog.alliance-renault-nissan.com/news/the-r...
- calafrax 9y agoeconomics: as market share for electric cars grows demand for gasoline goes down and the price for gasoline (already low) goes down thus exacerbating the already large gap in cost between electric and gas. electric will always be a victim of its own success unless it can actually become competitive with ice on cost and energy density. remember that the baseline cost for an ice car is about $1000 (used) and $5000 (new). there is a world outside of california (shock) and it has billions of potential customers. ice isnt going anywhere.
- 11thEarlOfMar 9y agoLet's talk about Solar City. Their product is intended to be a solar roof, indistinguishable from a typical roof from street level. Costs look to be in the $50,000+ range. The marketing is that homeowners will not only drive electric vehicles, but go completely off grid by storing the energy collected into Tesla batteries. In order for this to make financial sense, there needs to be an ROI for the homeowner. So... how long will it take the homeowner to recoup that, say, $75,000 investment? I am currently spending about $125/month on electricity. That's $1,500 per year. Two Tesla's would run through about $1,000 [0] of electricity in the same year. That's $2,500 per year I'd spend on electricity to my grid operator. That's 30 years to break even. I could probably buy an equivalent roof-mounted system for half that, and the batteries, and see a return in 15 years. Is the aesthetic worth the longer term payoff? Or would Tesla see more uptake in new home construction where the cost of the roof can be amortized into the construction cost? I understand that Solar City has a different financing biz model, are they going to continue with that. [0] http://www.greencarreports.com/news/1090685_life-with-tesla-model-s-one-year-and-15000-miles-later http://www.greencarreports.com/news/1090685_life-with-tesla-...
- sowbug 9y ago(Pacific time zone waking up....) Either you forgot the cost of externalities from the nonrenewable power generation that is likely supplying your electricity today, or you believe it's zero. Tesla's mission isn't to make cheaper roofs; it's to accelerate the transition to sustainable energy. If you place any value on that mission, then you should be able to quantify it here.
- mattnewton 9y agoYeah, I kinda think they and the investors are hoping that electricity demand increases and the tech becomes much cheaper while their RnD is funded by millionaires who care about the aesthetics and the environment.
- dpiers 9y agoWhich is basically how Tesla started - toys for rich people funded RnD until they could scale and get their costs down.
- mathattack 9y agoSo much for their running out of money. Impressive that they can get it from the bond markets. Highlights maturity as a company.
- akvadrako 9y agoMore likely it suggests they would have trouble selling that many new shares. Even Musk has said their share price is higher than they deserve, so selling shares makes more economic sense. But this amount will only cover their loses for a few months and they probably want to demonstrate their ability to make future profits before diluting their stock significantly. If they sell equity too quickly, it'll look like the stock is crashing and encourage even more selling. This is how Solar City floundered at the end - under crushing debt from junk bonds.
- mathattack 9y agoIsn't debt harder to raise than equity? My impression is that the risk tolerance for junk bond buyers is somewhere between high grade credit and equity, perhaps closer to equity. Certainly more conservative than growth or venture equity. I'm the first to admit that I don't follow their specific financials to know how much runway they need to be profitable.
- akvadrako 9y agoNormally, I would say that's the case, but Tesla stock isn't normal. When they sell debt, their stock price goes up. Debt has one big advantage over equity too, which is that if the company goes under, bond holders are repaid if possible. Equity holders only own whatever is leftover.
- Aron 9y agoThe tension is building! They've got all this money, they've shown a few of the cars, they've got half a million deposits, but the cars are just dribbling out of the factory right now like pre-ejaculate.
- nyxtom 9y agoI hope this works, otherwise we are all screwed when earth continues to catch fire
- ChuckMcM 9y ago5.3% counts as junk these days? Wow, I miss the 13 - 22% days :-). Certainly shows a lot of confidence in Teslas ability to produce Model 3's. It also is going to squeeze the short sellers a bit harder as the capital is going to push out their 'dead by' dates. I feel no pity for them.
- doener 9y ago"Tesla (TSLA) bonds were oversubscribed by $300 million, $1.8 billion raised for Model 3 production" https://electrek.co/2017/08/11/tesla-tsla-bonds-oversubscribed-model-3-production/ https://electrek.co/2017/08/11/tesla-tsla-bonds-oversubscrib...
- legulere 9y agoMaybe they can use it to pay their workers fair wages [0] or to improve work conditions to be not twice as bad as in the rest of the industry [1] [0] https://www.forbes.com/sites/alanohnsman/2017/02/09/unionizing-tesla-worker-says-uaw-help-sought-for-factory-pay-and-conditions/amp/ https://www.forbes.com/sites/alanohnsman/2017/02/09/unionizi... [1] https://amp.theguardian.com/technology/2017/may/24/tesla-factory-workers-injuries-higher-than-industry-average https://amp.theguardian.com/technology/2017/may/24/tesla-fac...
- golergka 9y agoDo they have incentive to do that?
- posguy 9y agoNot really, Tesla is very much like Apple in the sense that they expect their employees to be 100% compliant and not "overshare", with overbearing corporate security that'll handle you if you step out of line one iota. I don't see why Tesla would change, apparently working conditions are terrible at their factories: http://www.thedailybeast.com/workers-say-tesla-is-trying-to-scare-them-out-of-a-union http://www.thedailybeast.com/workers-say-tesla-is-trying-to-... On a vaguely related tangent, the sheer duplication of work I saw at Apple was impressive, their corporate culture has secrecy so ingrained that large chunks of the company are duplicating eachother's work needlessly, out of fear of communicating effectively.
- jacobush 9y agoFunny you should say that about Apple. I think about the saying about software reflecting the organization in structure. Apples effectively static binaries are a bit the same thing. (The ".app" folders.) They contain everything needed to run the application, no libraries are shared between apps. Massive waste, but at the same time, the system is more robust this way. Apps can be upgraded and redone without caring about potential sharing and conflicts with other applications. This has benefits. I think it's the same with organisations. The secrecy and keeping to yourself, also means you are free to do your thing and there is less need to communicate, "build a shared view" and so on.