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The purpose of Tesla is not to make money

160 points by imartin2k 9y ago

vasco 9y ago
Tesla looks like Elon's attempt at running a high-stakes Amazon-for-batteries type business where they invest all they get into the business and get massive adoption in the long run. Except for a much much more capital intensive industry, and where so far more than a couple of things have gone wrong. At the moment they're in a very tough spot where they've issued bonds, folded Solar City into Tesla in a weird attempt at bad accounting and pretended like (already 3) new product lines were ready to take in pre-order money. Meanwhile they're using excess battery production capacity not being used for cars (which are stuck in slow production lines) for a quick (small) buck in Australia and Puerto Rico. I think we're going to see either a secondary offer or new bonds being issued soon.
- whamlastxmas 9y ago
  I mean this as nicely as possible: armchair speculation like this doesn't make sense to me. You're insinuating you'd be a better decision maker than an entire team of lawyers, executives, and accountants at a fairly prestigious place to work. Describing things as "bad accounting" or suggesting they're trying to make a "quick buck" just makes it seem like you lack the awareness to realize that you probably don't have all the information and haven't spent the same amount of time and effort in decision making as the executives at Tesla. You're not some lost genius in a world full of idiots. People are generally rationale actors, and the people working at Tesla seem pretty smart to me.
  - csours 9y ago
    As a counterpoint, a lot of high profile people, especially on the production side have quit working at Tesla.
  - setpatchaddress 9y ago
    The typo in your last sentence (“rationale” where you mean “rational”) actually makes it more accurate. It’s possible to rationalize anything. Read history — maybe something by Halberstam — smart people can be very wrong. Groups of smart people, even. Disclosure: I have no opinion on Tesla’s financials. Everything might be fine. I have negative opinions about their cars. I do like SpaceX, and I like the people I’ve met at SpaceX.
  - computerex 9y ago
    Your entire argument hinges on: > People are generally rationale actors This is the internet, and people are allowed to speculate. "I am sure they know what they are doing, they are really smart people" is not an argument.
    - abalashov 9y ago
      Yeah, but "You're not some lost genius in a world full of idiots" is an argument. It's actually a rather punchy restatement of the Efficient Market Hypothesis. :-)
      - lovemenot 9y ago
        >> restatement of the Efficient Market Hypothesis Actually not. The smart people described are all executives (experts) at Tesla. Their interests are therefore aligned, not individuals acting in their own self-interest in the marketplace.
  - Spooky23 9y ago
    Accounting is boring. They don’t call it bean counting for nothing. When your accounting or corporate governance is interesting, that’s a bad sign. In this environment, where the government subsidies they depend on may vaporize at any time, exciting accounting is really dangerous for the business.
  - Danihan 9y ago
    >You're not some lost genius in a world full of idiots. Ehhh..
  - aerovistae 9y ago
    EXACTLY
  - danso 9y ago
    > You're insinuating you'd be a better decision maker than an entire team of lawyers, executives, and accountants at a fairly prestigious place to work. And you're assuming that top-tier people at a company are able to make rational and optimal decisions when their livelihoods depends on the perceived survival and success of their company.
  - posterboy 9y ago
    > I mean this as nicely as possible so, assume the same would be the case for the comment you replied to. As with regards to "insinuating", etc.
hkmurakami 9y ago
A mission (or outcome) driven company can only continue its mission if it can be financially viable. A non financially viable incarnation of a mission driven business will not be able to further its cause compared to its longer lived version. At some point a reckoning will come and take away the path to your objective. See the recent news about Etsy listing its way.
cryptoz 9y ago
> Tesla is losing a massive amount of money This just simply isn't true. Losing the money means they spent it and got nothing for it. But every penny they spend, they get a lot of things - battery technology, market share, mindshare, network effect lockins (superchargers), etc. Tesla isn't losing its money, its investing it. Also, > The purpose of Tesla is not to make money; it is to pioneer fleets of smart mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars. Making money is ancillary. This is also false. It buys into Elon's marketing and it's false. The purpose of Tesla is to make money. Elon likes to say that it's not the money he is after, it's the faster pace of adoption for electric cars. But he also knows that the fastest way for this to happen is for Tesla to make money. The author is false. The purpose of Tesla is indeed to make money.
- deleted 9y ago
  [deleted]
- encoderer 9y ago
  Capital investments aren’t counted as losses on financial statements. So, you are correct about that. But they still do have losses.
  - deleted 9y ago
    [deleted]
- dragontamer 9y ago
  > This just simply isn't true. Losing the money means they spent it and got nothing for it. But every penny they spend, they get a lot of things - battery technology, market share, mindshare, network effect lockins (superchargers), etc. Tesla isn't losing its money, its investing it. Yes, and such things are reflected in their balance sheet under "Assets" and "Goodwill". The problem with Tesla is that after accounting for their "Assets" and "Goodwill", they're still negative. Tesla says its "Goodwill" is worth $461,989,000 in 2016 for example. See its 2017 10k if you don't believe me (its in "thousands", so search for 461,989). http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-3118&CIK=1318605 http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-3118&C... The rest of Tesla's assets, which include every factory, every bit of cash, every investment... was estimated to be $ 692,925,000. That is, Tesla believes itself to be a $1 Billion company, but roughly half of its valuation is "Goodwill" and brand recognition. Believe it or not, Wall Street has names for the things you've described. Its all part of the calculation. ---------- Anyway, after accounting for all of that, Tesla is still losing money, quarter after quarter, year after year.
mbesto 9y ago
> Either way, a far more interesting question, if (like me) you have no financial interest in the business’s success or failure, is: does it matter? I guess the author has glanced over the billions of subsidies that come from taxpayers? [0] So ya, I think American taxpayers should care about Tesla's bankruptcy. PS - The author of this article is the CTO of a company who's customer is, yup, you guessed it, Tesla. [1] TC at it's finest folks. [0] - http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015... [1] - https://happyfuncorp.com/case_studies/hfc-labs-making-tesla-ownership-social https://happyfuncorp.com/case_studies/hfc-labs-making-tesla-...
- maratd 9y ago
  Why are you conflating SpaceX and Tesla?
  - rconti 9y ago
    I would have said "and SolarCity" but of course Tesla owns SolarCity now. It's really quite genius to build a really expensive solar roof tile when the tax breaks are for solar installations. Find a way to charge a premium price for a premium product (eg, a tile, not just a simple panel), get tax breaks for it all!
    - toomuchtodo 9y ago
      Half of what Tesla does is product engineering, the other half is financial engineering. Both are critical to their success on an accelerated time table.
- skybrian 9y ago
  That's a sunk cost, though. It's not a financial interest in the company unless taxpayers could lose more money. (Or gain money.)
- devrand 9y ago
  I think you misunderstood your source [1]. He appears to be the CTO of a company that made a third-party app for Tesla owners, called TezLab. It does not appear to be affiliated with Tesla, and appears to have even rebranded at some point from "Teslab" to "TezLab". The closest relationship appears to be that the CTO owns a Tesla.
lmilcin 9y ago
People are blinded by so called conventional wisdom which is what business people built when working with conventional businesses to make it easier for them to understand what is going on, in most cases. Tesla is not a conventional business. It is more of an edge case where you have to put your thinking hat to make sense of it.
- verletx64 9y ago
  > It is more of an edge case where you have to put your thinking hat to make sense of it. It is far too simplistic to imply that those that are a bit bearish on Tesla's prospects are simply not "wearing their thinking caps". In the end, you can't discount what 'business people' think, because they're the ones on the other end of the table.
- maxxxxx 9y ago
  "Tesla is not a conventional business. " Tesla is a car and battery manufacturer. That's a very conventional business.
  - lmilcin 9y ago
    My understanding is Tesla is development process company focused on learning and iterating with the production being only by-product of that process, necessary to keep the promise of greateness alive and also to support the learning process. My experience, it is neigh impossible to really learn without delivering the product, but you can learn without bringing in profit.
    - mamon 9y ago
      >> development process company focused on learning and iterating with the production being only by-product That's not a company you're describing, that's a research lab. Either they win big by discovering some revolutionary tech that they can patent and sublicense to the established car manufacturers or they go down, because there is only so much people willing to invest their money in a dream.
    - 9y ago
chki 9y ago
>After all, even if Tesla stock goes to zero, and its bonds default to pennies-on-the-dollar, its factories and software repositories and human capital will all be there, and no Chapter 11 court or committee will be blind to the fact that they’re worth far more as a coherent unit than they would be as separate assets. Well, to me that statement seems to be at least dubious. If the company is loosing money and goes bankrupt it is obviously not worth something in its entirety - at least in its current form. (And I highly doubt that simply restructuring Tesla would do something about that.) This does however not neglect the premise of the article. Even if Tesla would no longer exist in any form, there has been some creation of value for society as a whole.
- paulpauper 9y ago
  regarding human capital, when a company goes bankrupt many employees lose their jobs. the current stock price takes into account all those variables. When a bankrupt stock goes to near zero, that takes into account totality of all the intellectual property, factories, etc.
- mjw1007 9y ago
  It's worth something if it was only losing money because it couldn't afford to service its debt.
- empath75 9y ago
  Tesla going bankrupt wouldn’t be an isolated event. It would probably be something like the aol-time Warner merger or the Lehman Brothers bankruptcy and trigger a general market correction.
- neurotech1 9y ago
  > Well, to me that statement seems to be at least dubious. If the company is loosing money and goes bankrupt it is obviously not worth something in its entirety - at least in its current form. (And I highly doubt that simply restructuring Tesla would do something about that.) Bankruptcy means the company has more debt obligations than assets, and has ran out of cash. It does not mean the company assets are worth nothing. In a theoretical Chapter 11, Tesla Energy and the "battery factory" would still be worth many billions, even if they never sold another car. Tesla is doing pretty good for a highly capital intensive and growing company.
skybrian 9y ago
It helps that Tesla isn't in the S&P 500 yet. But I wonder what other indexes they're in?
paulpauper 9y ago
Does techcrunch not realize the gravity of publishing an article with such a false and misleading headline pertaining to solvency of a company? They could get sued..imagine such an article were released during market hours. Many traders and bots make decisions on headlines.
- skybrian 9y ago
  Has a newspaper ever been sued due to publishing something that moves markets? I don't think that's a thing.
  - paulpauper 9y ago
    when I saw the headline, I immediately did a google search to confirm if Tesla actually went bankrupt. Obv. it didn't. Occasionally, companies go bankrupt overnight, with little forewarning. One such example is Gtat, which filed bankruptcy overnight after disclosing the loss of an Apple contract. I'm amazed the editors would allow such a headline considering the potential seriousness of making misleading statements about public companies, where billions of dollars are at stake. What If put up a headline "company X is bankrupt" and then the article continues "bankrupt in ethics..gotcha"
    - slededit 9y ago
      Its not the newspaper's fault people make poor decisions. If you write an algo trading bot its actions are on you.
  - lafar6502 9y ago
    Newspapers are afraid of criticizing Tesla because its a litigious company and they have nothing substantial to suport the hot air baloon they became - any credible criticism and all this BS pyramid is falling apart. So the risk that they will attack anybody writing something not favorable is quite high. On the other side, does anybody sue CEOs for talking BS and using clever tricks to hide the truth, or making new promises without delivering on the previous ones?
- 9y ago
jondubois 9y ago
I never thought I'd read a TechCrunch article which puts into question the integrity of the entire capitalist system... This is very different from the typical capitalist rhetoric that if you're smart and work hard in ways that benefit society, you'll be personally rewarded. Now it seems that the conditions for success are extremely ambiguous. Bankruptcy is essentially a hack on the system and to now pretend that it's a normal part of an efficient capitalist society is quite outrageous. If it were real capitalism, there would be no bankruptcy, you'd have to work to pay back every penny for the rest of your life. I'd prefer that. Because otherwise you're just encouraging people to take risks using other people's money.
- aaavl2821 9y ago
  Investing in ambitious companies that could lose everything or make a fortune is the name of the (venture) capitalist game Also, bankruptcy is not a "hack", it is a legal process to protect creditors / vendors / employees as well as companies. while there is a widespread belief, encouraged by politicians post financial crisis, that companies use bankruptcy as a way to protect themselves from risk, that is incorrect. Bankruptcy is a legal process for dividing up a failed companies assets so that it is not a free for all. It protects employees by preventing powerful creditors from forcefully claiming value until other constituents get paid in accordance with the legal statues of the process
  - jondubois 9y ago
    VCs are a flaw in the system. It costs almost $0 for an engineer to build software and yet VCs have somehow managed to artificially raise the barrier to entry and got huge paychecks for themselves in the process. If VCs did not exist, I'm certain that we would have all the software, websites and apps that we have today except that it would have cost society much less to get to that point... Also maybe these apps and websites wouldn't be the terrible morally bankrupt profit machines they are today.
    - aaavl2821 9y ago
      "If VCs did not exist, I'm certain that we would have all the software, websites and apps that we have today except that it would have cost society much less to get to that point... Also maybe these apps and websites wouldn't be as terrible for society as they are today." That is quite a bold opinion, presented without any evidence at all. And my opinion is that is the opposite of true. For what you said to be true, not only would server / hosting / infrastructure costs need to be zero, but hundreds of thousands of people would have to decide to work 60 hours a week for free It does not cost an engineer $0 to build software. Tell an engineer you think his / her time is worth zero and see what response you get
spo81rty 9y ago
I love Tesla cars. There is no way I would own the stock. Tesla would be better off if they designed cars and let someone else manufacturer them.
- whamlastxmas 9y ago
  Have you really looked into this? How much would it cost Tesla in the long term to let someone else manufacture their cars? How would this impact their long term profitability? Would their competitors even be willing to do this? What kind of terms could they manage to negotiate? How much of a risk is it to let someone else have a stranglehold on your manufacturing? I don't understand sweeping opinions like this when you have no idea what you're talking about.
  - ridgeguy 9y ago
    I think it's an interesting idea. I wouldn't summarily dismiss it. Your questions about it are interesting, unanswered, and not fatal to the idea. After all, don't Foxconn, et al., have a stranglehold on the manufacture of Apple's iPhones? That seems to be working out ok for all parties.
DennisP 9y ago
From a quick look at their balance sheet, in the past year their total assets have increased from $12 billion to $28 billion, and debt from $2 billion to $9 billion, for an increase in net assets of $9 billion. Cash flow is fine too; total cash is up almost half a billion over the past year, for a total of $3.5B. Looking at their cash flow statement, they are spending a lot but mostly on capital expenditures. I don't see any reason to even think about bankruptcy. They're doing fine. https://finance.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii&ei=lPMaWoidLYnHmAHr6LuAAQ https://finance.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii...
- ArmandGrillet 9y ago
  Those financial statements are not in the article and that's a shame. I would expect journalists writing about the potential bankruptcy of a company to give more numbers and less "maybe"s (word used 5 times in the article).
  - majewsky 9y ago
    The point of the article (as I understood) was precisely to explore every other angle except for the financial statement (since that's what every other article about TSLA covers).
  - chipotle_coyote 9y ago
    It's an opinion piece, not journalistic reporting -- the thesis isn't "Tesla is going to go bankrupt and here's why," but rather "here's why I don't think it matters whether Tesla goes bankrupt." It'd arguably be nice to have a sentence or two about "of course, they may not be in trouble after all," but it doesn't really affect the author's argument. I don't think this is really written for folks who are bullish on Tesla, anyway. It's written for critics, and for folks like myself who might describe themselves as "fascinated skeptics."
- eru 9y ago
  Thanks for crunching the numbers!
- aaavl2821 9y ago
sharpercoder 9y ago
One substantial possible factor in Tesla's bankruptcy is competition. You suddenly now deal with car manufacturers which are woken up to the electric drive age. Thought exercise: how can competition take serious levels while Tesla produces half or more of the world's battery capacity?
- will_hughes 9y ago
  > You suddenly now deal with car manufacturers which are woken up to the electric drive age. This keeps getting repeated, but all I see are some meagre efforts which seem primarily focussed on headlines rather than actually delivering mass-scale EVs. Concepts. Demonstrators. The closest any of them have come is the Bolt (which is limited in availability, and their dealer networks regularly push people away from buying), and the Leaf (which until the most recent model still looked far too much like a golf buggy and had very limited range). These are large companies with massive departments used to pushing out new vehicle models every year and updating production lines to suit. I'm still yet to hear of any of the major manufacturers sign contracts for large scale battery deliveries to support any mass EV production. I don't understand why their outlook is always 2019-2020-2025-2030 for their full EV range unless they're just hoping for Tesla to fail and finally be able to point out and say "See, EV doesn't work!" so they can go back to what they've been doing for a long while.
  - sharpercoder 9y ago
    Exactly my point. They can design an electric car just fine, they can produce an electric car sans battery just fine, they can sell them just fine. They can't setup scale-up battery production sites within years. That's why serious competition from traditional car manufacturers won't happen anytime before 2022. Chinese producers are a different story. They have the government behind them for resourcing (Lithium and Cobalt). I see Chinese manufacturers as the most serious possible competition. However, it's not unlikely the government will not allow exporting of electric vehicles on a mass scale since they will want to use them theirselves.
agumonkey 9y ago
Anybody listened to one recent conf call with Musk ? it was on youtube. He seems to be in some good sht (subpar assembly line for the batteries and/or engine having to be reassembled from scratch which is done according to him) so so far this particular problem is not out of control for Tesla, but then time is critical too, competition is ramping up, and laws are shifting (EV tax cut is gone now I believe). I like Musk approach of going legacy free to stretch the limits of the current model, as he did for SpaceX. I'd be sad if Tesla choked enough to crash. If he just made it to the model 3 production that would be "cool". I don't know how people in the know understand the recent Semi/Roadster unveiling, is it distraction to get some buzz or a final scheme to finance the model3 step with easier things to be done in 2020 (smaller market for Semi and I believe a litle less complex to build than a cramped 4 seater)
- rockinghigh 9y ago
  EV tax cuts are not gone. Some versions of the tax bill proposed to remove the federal tax credits. Also Tesla will reach the 200,000 threshold of cars sold where the credit starts to phase out. But there are still state incentives.
  - agumonkey 9y ago
    Ha, I forgot the 200K figure, but I believe there was a year limit too. Otherwise the blame is on Musk u_u
lafar6502 9y ago
It’s not about money, it’s about wasteful and parasitic businesses financed unknowingly by society
acjohnson55 9y ago
Check out the book Doing Capitalism In The Innovation Economy for a defense of the government encouraging exactly this sort of thing. I reviewed it on Amazon here: https://www.amazon.com/review/R2SCHS5SXNDF30 https://www.amazon.com/review/R2SCHS5SXNDF30. Point being, we want exactly this sort of thing, but it's foolish to expect the market to make this sort of investment very often.
xrayarx 9y ago
We should not forget, that bad press about tesla is in the interest of Jim Chanos, who is a billionaire and has a big short against tesla. If Tesla stock falls, he wins. Since he holds this short position, he is in the press once a month.
- aaavl2821 9y ago
  On the other hand, good press about tesla is in the interest of Elon musk and tesla shareholders. Wars between bulls and bears on controversial stocks are waged largely in the press
- Xunxi 9y ago
  https://www.bloomberg.com/news/articles/2017-10-12/chanos-s-short-hedge-funds-decline-this-year-amid-stock-rally https://www.bloomberg.com/news/articles/2017-10-12/chanos-s-...
deleted 9y ago
[deleted]
Apocryphon 9y ago
What if, Tesla is simply a Silicon Valley startup, and the endgame is to get one of the Big Three to acquire them so they don't have to worry about their day-to-day finances?
- gozur88 9y ago
  I'm not sure if that was the goal, but I think that's the way it's going to play out.
- SimbaOnSteroids 9y ago
  They've already IPO'd.
  - stevenj 9y ago
    It can still be acquired and/or taken private.
blake8086 9y ago
From what I've seen, the point of Tesla is to burn money as fast as possible. I have two episodes of a podcast with a friend about exactly this topic: First episode: https://www.youtube.com/watch?v=6bQW1fEUsbk https://www.youtube.com/watch?v=6bQW1fEUsbk Most recent episode: https://www.youtube.com/watch?v=VXyIriINVK0 https://www.youtube.com/watch?v=VXyIriINVK0 I highly recommend them if you're interested in investing in Tesla (long or short)
- dmfdmf 9y ago
  I enjoyed your podcast and I agree, it looks dire for Tesla.
tim333 9y ago
>Jim Chanos summarized all of the reasons why nicely: “If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.” A major box it doesn't tick from a short sellers perspective is the "make something people want" thing. Loads of people want it's cars and would be trucks. The main question is can they deliver them but I'd be wary being short in case they can.
- nCwLABXpfJLz 9y ago
  make something people want... at a profit. Also, unless I'm mistaken, very few people want Tesla's trucks.
- bob_theslob646 9y ago
  The issue is time frame. Chanos smells blood in the water for the upcoming quarter(s). The question he is going to have to face is whether he can stay solvent longer than Tsla stock price is irrational. My bet is he stays in 2-3 quarters until he makes his kill and then exits.
ChuckMcM 9y ago
I've made money in the past buying out of the money call options on TSLA, I'm guessing all those short sellers buying butterflies. That said, the point that sticks out at me in the article is this one -- "... because money is how we measure success. And this is in fact true of most companies. But it is not true of Tesla. 'When a measure becomes a target, it ceases to be a good measure,' and this is as true of money as it is of any other measure. The purpose of Tesla is not to make money;" There is a tremendous amount of visibility put on the company, and Elon is up front about what they are trying to achieve. The arguments against them succeeding boil down to either 'we don't believe you can do what you say you can do.' or 'we don't understand why you are doing what you're doing, so it must be wrong.' It used to really bug me when someone told me that what I was proposing was impossible. I work to do the necessary research and foundation work to understand the risks and challenges of a course of action and someone says "Well, I've never heard of anyone who could do that so you clearly are missing something." No discussion of the idea, no attempt to understand how I came to believe what I did. One of the things I admire in Elon is that he seems really good at just completely ignoring that noise. It is something I have tried to cultivate as it is helpful in starting new businesses or projects to be able to not get bogged down by people who want to tell you why you are wrong and are unwilling to listen to how you think you may be right.
- mlevental 9y ago
  how do you make money buying call options that are out of the money? do they go back into the money before expiry?
  - ChuckMcM 9y ago
    This is not investment advice! I'm just explaining how it works ... These days they have gone a bit crazy but it works like this, I would buy Jan '19 call options that are out of the money[1]. Looking at some that are 'fairly close' (closed at $315, options at $320). They are selling for about $55 [ibid]. So you buy a contract (100 shares) which costs you $5,500. Now if TSLA goes up during 2018 people will want to buy those calls from you for more than $55. Of course if TSLA goes down, or stays down all year then come January 19 you can either buy your 100 shares for an additional $32,000 (which you won't since you would lose money on that deal) or let the call expire in which case the person who sold the option keeps the shares and the $5,500 you spent. But here is the fun part, if TSLA goes up 10% (315 -> 346), now your calls are "in the money by $31", and if you look at calls in 2019 that are in the money for $30[2] you see they are trading around $69. Which if you sold your contract for that would get you $6,900 or a gain of 25%. Compared to the alternative of buying 18 shares at 315 for $5,670, and selling them when they went up 10% to 346 at $6,228 for a 10% gain. Buying actual shares is the safer way to go because if you buy a call option you lose the entire $5,500 if the stock doesn't go up above the strike price! Buying the call options gives you an opportunity to leverage the volatility for a higher return. I've observed there is a lot of 'passion' investing (rather than say reasonable investing) in TSLA where people buy it regardless and so it defies gravity and goes up anyway. [1] http://www.nasdaq.com/symbol/tsla/option-chain?dateindex=7&callput=call&money=out http://www.nasdaq.com/symbol/tsla/option-chain?dateindex=7&c... [2] http://www.nasdaq.com/symbol/tsla/option-chain?callput=call&money=in&dateindex=7&page=2 http://www.nasdaq.com/symbol/tsla/option-chain?callput=call&...
volgo 9y ago
I don't believe in Tesla's long term business, but you have to be either a naive fool or insanely rich to short Tesla. As Warren Buffett once said, the market can be delusional a lot longer than you can be liquid. You can be right and still lose a ton of money
scotty79 9y ago
The idea that stocks exist for some investors to get rich is utterly silly. Stocks exist to trick investors into funding someone elses ideas that they wouldn't fund otherwise by selling them casino chips that they can use to gamble among themselves. The only reason the company should be concerned about their share price would be that they want to issue more and they'd like to get as much money for them as possible. The law that makes boards care about value for investors is the most ignorant thing ever written.
danso 9y ago
> Maybe; maybe not. Either way, a far more interesting question, if (like me) you have no financial interest in the business’s success or failure, is: does it matter? If you're an American, it does matter in the sense that the subsidies that allow Tesla to keep moonshotting with relative comfort are paid through your tax dollars [0]. Tax dollars that could either go back to your pocket, or otherwise indirectly benefit you by subsidizing a more effective venture. Hell, some of those tax dollars could even be used to help the original moonshot institution. I think what Tesla and Musk are doing is very cool. But let's face it, lots of companies and individuals could promise cool things if they had a multi-billion cushion. I think the OP makes some decent points about how silly it is to care about immediate or substantial profit margins -- hell, any investor in Amazon would agree with that. But it seems dangerously naive to just think this: > But it is not true of Tesla. “When a measure becomes a target, it ceases to be a good measure,” and this is as true of money as it is of any other measure. The purpose of Tesla is not to make money; it is to pioneer fleets of smart mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars. Making money is ancillary. That is the claimed purpose of Tesla. The author is confusing Tesla's self-interested claims with reality -- this is basically Kool-Aid-drinking-cultism. And giving Tesla and Musk the complete benefit of the doubt in terms of altruism, that doesn't mean that their positive dreaming has an infinite buffer against shitty implementation and business practices. Profit is definitely not everything, but it's a potentially very useful signal (among others) to weed out non-performance and incompetence. [0] http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015...
- mjamesaustin 9y ago
  Tesla's primary method of financing is through debt and equity, not through any government subsidy. Yes they get ZEV credits, but the revenue from those pales in comparison to their sales, loans, and stock offerings. Not to mention that most of the traditional car manufacturers in America received huge government bailouts to stay afloat in 2008, so even if you slight Tesla for receiving a loan (which they repaid early with interest) they are still on equal footing with other manufacturers.
yters 9y ago
Not a fan of giving sci-fi idealism a blank check. Moonshot is ok, that's how we got ICBMs and spy satellites, arguably necessary to keep a check on our enemies, though that is arguable these days. Roads and the Internet made even more sense. But, funding a for profit company with billions of tax money for sci-fi promises with unproven premises seems much more questionable.
- fragmede 9y ago
  The company's finances may be shaky, but electric cars aren't a "sci-fi promise with (an) unproven premise". The original Tesla Roadster came out in 2009 (or so), so there are 8-year old electric cars by Tesla driving around out there.
  - yters 9y ago
    To throw so much money at the enterprise hinges on the assumption that electric cars can be a significant replacement for fossil fueled cars, and displace the electricity production (and other manufacturing costs) in such a way to be much more environmentally and economically viable. Just because we have a few (proportionally) working electric cars does not mean this vision is plausible. The original automobile did not need this kind of extrapolated justification, it was immediately obvious the car was much better than the wagon, and combined with the assembly line established a clear and very large market. I do not see this happening with the electric car.
pocketsquare2 9y ago
The title now is "In praise of Tesla’s bankruptcy." Did Tesla file for bankruptcy? I'm confused. Nikolai Tesla filed for bankruptcy in 1916. This is phenomenally irresponsible of TechCrunch generally, and Jon Evans specifically.
- jaimex2 9y ago
  Gets the clicks.
- salvar 9y ago
  If you read the article, or even just the beginning of it, instead of just relying on the headline then I think you'll be less confused.
  - nickik 9y ago
    Missing the point.
    - salvar 9y ago
      I got the point, just wanted to help since you said you were confused.
vadimberman 9y ago
I am not entirely sure why Musk has to be the CEO there. He is a tech whiz and has his hands full, why not appoint a COO material instead to fix the P&L?
zerostar07 9y ago
... or cars
jaimex2 9y ago
I don't think Tesla or Elon have ever said their goal was to make money. Their mission statement has always been "To accelerate the adoption of sustainable transportation." "Whenever you have an unpriced externality you can't quite rely on the market to do the right thing. So in order to have electric vehicles come sooner than they otherwise would... electric vehicles were always going to be the long-term transportation mechanism, but to make that day come sooner, you have to bridge the gap with innovation. That was the goal with Tesla is to try to serve as a catalyst to accelerate the day, the day of electric vehicles. And I think when all is said and done, I am hopeful that historians will look back on Tesla and say that Tesla advanced that by at least 10 years, which that would be a huge victory of mine... in my mind." - https://www.youtube.com/watch?v=jpcJ3jX-2DA https://www.youtube.com/watch?v=jpcJ3jX-2DA It's the same with SpaceX, even though its been profitable I don't think they have ever celebrated that. They keep aiming to burn money towards getting to Mars which itself is another money pit. I think Elon is genuine, he's actions do follow his words. He doesn't care about money, he cares about advancing humanity for the thrills and exploration.
mankash666 9y ago
I'm a pragmatist - Tesla has had years to prove it could eke out a profit. Everytime it hasn't met this expectation, Elon Musk has managed to change the conversation to something forward looking, pie in the sky BS. And surprisingly, investors bet on short term stock inflation based on these fables, probably fully knowing they aren't achieveable. At this point they're betting on stock movements triggered by Musk, not company fundamentals. It's Vegas glorified
- greglindahl 9y ago
  I'm always surprised by the number of people on Hacker News who want to complain that Tesla is acting like a startup trying to "go big or go home".
irhd 9y ago
> The purpose of Tesla is not to make money Yes it is. It is a publicly traded company. if that's not Musk's purpose then he should (rightfully) be forced out and replaced with someone who has the right view. Then he should pay his PR people a massive bonus.

160 points by imartin2k 9y ago

Tesla looks like Elon's attempt at running a high-stakes Amazon-for-batteries type business where they invest all they get into the business and get massive adoption in the long run. Except for a much much more capital intensive industry, and where so far more than a couple of things have gone wrong. At the moment they're in a very tough spot where they've issued bonds, folded Solar City into Tesla in a weird attempt at bad accounting and pretended like (already 3) new product lines were ready to take in pre-order money. Meanwhile they're using excess battery production capacity not being used for cars (which are stuck in slow production lines) for a quick (small) buck in Australia and Puerto Rico. I think we're going to see either a secondary offer or new bonds being issued soon.

whamlastxmas 9y ago
I mean this as nicely as possible: armchair speculation like this doesn't make sense to me. You're insinuating you'd be a better decision maker than an entire team of lawyers, executives, and accountants at a fairly prestigious place to work. Describing things as "bad accounting" or suggesting they're trying to make a "quick buck" just makes it seem like you lack the awareness to realize that you probably don't have all the information and haven't spent the same amount of time and effort in decision making as the executives at Tesla. You're not some lost genius in a world full of idiots. People are generally rationale actors, and the people working at Tesla seem pretty smart to me.
- csours 9y ago
  As a counterpoint, a lot of high profile people, especially on the production side have quit working at Tesla.
- setpatchaddress 9y ago
  The typo in your last sentence (“rationale” where you mean “rational”) actually makes it more accurate. It’s possible to rationalize anything. Read history — maybe something by Halberstam — smart people can be very wrong. Groups of smart people, even. Disclosure: I have no opinion on Tesla’s financials. Everything might be fine. I have negative opinions about their cars. I do like SpaceX, and I like the people I’ve met at SpaceX.
- computerex 9y ago
  Your entire argument hinges on: > People are generally rationale actors This is the internet, and people are allowed to speculate. "I am sure they know what they are doing, they are really smart people" is not an argument.
  - abalashov 9y ago
    Yeah, but "You're not some lost genius in a world full of idiots" is an argument. It's actually a rather punchy restatement of the Efficient Market Hypothesis. :-)
    - lovemenot 9y ago
      >> restatement of the Efficient Market Hypothesis Actually not. The smart people described are all executives (experts) at Tesla. Their interests are therefore aligned, not individuals acting in their own self-interest in the marketplace.
- Spooky23 9y ago
  Accounting is boring. They don’t call it bean counting for nothing. When your accounting or corporate governance is interesting, that’s a bad sign. In this environment, where the government subsidies they depend on may vaporize at any time, exciting accounting is really dangerous for the business.
- Danihan 9y ago
  >You're not some lost genius in a world full of idiots. Ehhh..
- aerovistae 9y ago
  EXACTLY
- danso 9y ago
  > You're insinuating you'd be a better decision maker than an entire team of lawyers, executives, and accountants at a fairly prestigious place to work. And you're assuming that top-tier people at a company are able to make rational and optimal decisions when their livelihoods depends on the perceived survival and success of their company.
- posterboy 9y ago
  > I mean this as nicely as possible so, assume the same would be the case for the comment you replied to. As with regards to "insinuating", etc.

hkmurakami 9y ago

A mission (or outcome) driven company can only continue its mission if it can be financially viable. A non financially viable incarnation of a mission driven business will not be able to further its cause compared to its longer lived version. At some point a reckoning will come and take away the path to your objective. See the recent news about Etsy listing its way.

cryptoz 9y ago

> Tesla is losing a massive amount of money This just simply isn't true. Losing the money means they spent it and got nothing for it. But every penny they spend, they get a lot of things - battery technology, market share, mindshare, network effect lockins (superchargers), etc. Tesla isn't losing its money, its investing it. Also, > The purpose of Tesla is not to make money; it is to pioneer fleets of smart mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars. Making money is ancillary. This is also false. It buys into Elon's marketing and it's false. The purpose of Tesla is to make money. Elon likes to say that it's not the money he is after, it's the faster pace of adoption for electric cars. But he also knows that the fastest way for this to happen is for Tesla to make money. The author is false. The purpose of Tesla is indeed to make money.

deleted 9y ago
[deleted]
encoderer 9y ago
Capital investments aren’t counted as losses on financial statements. So, you are correct about that. But they still do have losses.
- deleted 9y ago
  [deleted]
dragontamer 9y ago
> This just simply isn't true. Losing the money means they spent it and got nothing for it. But every penny they spend, they get a lot of things - battery technology, market share, mindshare, network effect lockins (superchargers), etc. Tesla isn't losing its money, its investing it. Yes, and such things are reflected in their balance sheet under "Assets" and "Goodwill". The problem with Tesla is that after accounting for their "Assets" and "Goodwill", they're still negative. Tesla says its "Goodwill" is worth $461,989,000 in 2016 for example. See its 2017 10k if you don't believe me (its in "thousands", so search for 461,989). http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-3118&CIK=1318605 http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-3118&C... The rest of Tesla's assets, which include every factory, every bit of cash, every investment... was estimated to be $ 692,925,000. That is, Tesla believes itself to be a $1 Billion company, but roughly half of its valuation is "Goodwill" and brand recognition. Believe it or not, Wall Street has names for the things you've described. Its all part of the calculation. ---------- Anyway, after accounting for all of that, Tesla is still losing money, quarter after quarter, year after year.

mbesto 9y ago

> Either way, a far more interesting question, if (like me) you have no financial interest in the business’s success or failure, is: does it matter? I guess the author has glanced over the billions of subsidies that come from taxpayers? [0] So ya, I think American taxpayers should care about Tesla's bankruptcy. PS - The author of this article is the CTO of a company who's customer is, yup, you guessed it, Tesla. [1] TC at it's finest folks. [0] - http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015... [1] - https://happyfuncorp.com/case_studies/hfc-labs-making-tesla-ownership-social https://happyfuncorp.com/case_studies/hfc-labs-making-tesla-...

maratd 9y ago
Why are you conflating SpaceX and Tesla?
- rconti 9y ago
  I would have said "and SolarCity" but of course Tesla owns SolarCity now. It's really quite genius to build a really expensive solar roof tile when the tax breaks are for solar installations. Find a way to charge a premium price for a premium product (eg, a tile, not just a simple panel), get tax breaks for it all!
  - toomuchtodo 9y ago
    Half of what Tesla does is product engineering, the other half is financial engineering. Both are critical to their success on an accelerated time table.
skybrian 9y ago
That's a sunk cost, though. It's not a financial interest in the company unless taxpayers could lose more money. (Or gain money.)
devrand 9y ago
I think you misunderstood your source [1]. He appears to be the CTO of a company that made a third-party app for Tesla owners, called TezLab. It does not appear to be affiliated with Tesla, and appears to have even rebranded at some point from "Teslab" to "TezLab". The closest relationship appears to be that the CTO owns a Tesla.

lmilcin 9y ago

People are blinded by so called conventional wisdom which is what business people built when working with conventional businesses to make it easier for them to understand what is going on, in most cases. Tesla is not a conventional business. It is more of an edge case where you have to put your thinking hat to make sense of it.

verletx64 9y ago
> It is more of an edge case where you have to put your thinking hat to make sense of it. It is far too simplistic to imply that those that are a bit bearish on Tesla's prospects are simply not "wearing their thinking caps". In the end, you can't discount what 'business people' think, because they're the ones on the other end of the table.
maxxxxx 9y ago
"Tesla is not a conventional business. " Tesla is a car and battery manufacturer. That's a very conventional business.
- lmilcin 9y ago
  My understanding is Tesla is development process company focused on learning and iterating with the production being only by-product of that process, necessary to keep the promise of greateness alive and also to support the learning process. My experience, it is neigh impossible to really learn without delivering the product, but you can learn without bringing in profit.
  - mamon 9y ago
    >> development process company focused on learning and iterating with the production being only by-product That's not a company you're describing, that's a research lab. Either they win big by discovering some revolutionary tech that they can patent and sublicense to the established car manufacturers or they go down, because there is only so much people willing to invest their money in a dream.
  - 9y ago

chki 9y ago

>After all, even if Tesla stock goes to zero, and its bonds default to pennies-on-the-dollar, its factories and software repositories and human capital will all be there, and no Chapter 11 court or committee will be blind to the fact that they’re worth far more as a coherent unit than they would be as separate assets. Well, to me that statement seems to be at least dubious. If the company is loosing money and goes bankrupt it is obviously not worth something in its entirety - at least in its current form. (And I highly doubt that simply restructuring Tesla would do something about that.) This does however not neglect the premise of the article. Even if Tesla would no longer exist in any form, there has been some creation of value for society as a whole.

paulpauper 9y ago
regarding human capital, when a company goes bankrupt many employees lose their jobs. the current stock price takes into account all those variables. When a bankrupt stock goes to near zero, that takes into account totality of all the intellectual property, factories, etc.
mjw1007 9y ago
It's worth something if it was only losing money because it couldn't afford to service its debt.
empath75 9y ago
Tesla going bankrupt wouldn’t be an isolated event. It would probably be something like the aol-time Warner merger or the Lehman Brothers bankruptcy and trigger a general market correction.
neurotech1 9y ago
> Well, to me that statement seems to be at least dubious. If the company is loosing money and goes bankrupt it is obviously not worth something in its entirety - at least in its current form. (And I highly doubt that simply restructuring Tesla would do something about that.) Bankruptcy means the company has more debt obligations than assets, and has ran out of cash. It does not mean the company assets are worth nothing. In a theoretical Chapter 11, Tesla Energy and the "battery factory" would still be worth many billions, even if they never sold another car. Tesla is doing pretty good for a highly capital intensive and growing company.

skybrian 9y ago

It helps that Tesla isn't in the S&P 500 yet. But I wonder what other indexes they're in?

paulpauper 9y ago

Does techcrunch not realize the gravity of publishing an article with such a false and misleading headline pertaining to solvency of a company? They could get sued..imagine such an article were released during market hours. Many traders and bots make decisions on headlines.

skybrian 9y ago
Has a newspaper ever been sued due to publishing something that moves markets? I don't think that's a thing.
- paulpauper 9y ago
  when I saw the headline, I immediately did a google search to confirm if Tesla actually went bankrupt. Obv. it didn't. Occasionally, companies go bankrupt overnight, with little forewarning. One such example is Gtat, which filed bankruptcy overnight after disclosing the loss of an Apple contract. I'm amazed the editors would allow such a headline considering the potential seriousness of making misleading statements about public companies, where billions of dollars are at stake. What If put up a headline "company X is bankrupt" and then the article continues "bankrupt in ethics..gotcha"
  - slededit 9y ago
    Its not the newspaper's fault people make poor decisions. If you write an algo trading bot its actions are on you.
- lafar6502 9y ago
  Newspapers are afraid of criticizing Tesla because its a litigious company and they have nothing substantial to suport the hot air baloon they became - any credible criticism and all this BS pyramid is falling apart. So the risk that they will attack anybody writing something not favorable is quite high. On the other side, does anybody sue CEOs for talking BS and using clever tricks to hide the truth, or making new promises without delivering on the previous ones?
9y ago

jondubois 9y ago

I never thought I'd read a TechCrunch article which puts into question the integrity of the entire capitalist system... This is very different from the typical capitalist rhetoric that if you're smart and work hard in ways that benefit society, you'll be personally rewarded. Now it seems that the conditions for success are extremely ambiguous. Bankruptcy is essentially a hack on the system and to now pretend that it's a normal part of an efficient capitalist society is quite outrageous. If it were real capitalism, there would be no bankruptcy, you'd have to work to pay back every penny for the rest of your life. I'd prefer that. Because otherwise you're just encouraging people to take risks using other people's money.

aaavl2821 9y ago
Investing in ambitious companies that could lose everything or make a fortune is the name of the (venture) capitalist game Also, bankruptcy is not a "hack", it is a legal process to protect creditors / vendors / employees as well as companies. while there is a widespread belief, encouraged by politicians post financial crisis, that companies use bankruptcy as a way to protect themselves from risk, that is incorrect. Bankruptcy is a legal process for dividing up a failed companies assets so that it is not a free for all. It protects employees by preventing powerful creditors from forcefully claiming value until other constituents get paid in accordance with the legal statues of the process
- jondubois 9y ago
  VCs are a flaw in the system. It costs almost $0 for an engineer to build software and yet VCs have somehow managed to artificially raise the barrier to entry and got huge paychecks for themselves in the process. If VCs did not exist, I'm certain that we would have all the software, websites and apps that we have today except that it would have cost society much less to get to that point... Also maybe these apps and websites wouldn't be the terrible morally bankrupt profit machines they are today.
  - aaavl2821 9y ago
    "If VCs did not exist, I'm certain that we would have all the software, websites and apps that we have today except that it would have cost society much less to get to that point... Also maybe these apps and websites wouldn't be as terrible for society as they are today." That is quite a bold opinion, presented without any evidence at all. And my opinion is that is the opposite of true. For what you said to be true, not only would server / hosting / infrastructure costs need to be zero, but hundreds of thousands of people would have to decide to work 60 hours a week for free It does not cost an engineer $0 to build software. Tell an engineer you think his / her time is worth zero and see what response you get

spo81rty 9y ago

I love Tesla cars. There is no way I would own the stock. Tesla would be better off if they designed cars and let someone else manufacturer them.

whamlastxmas 9y ago
Have you really looked into this? How much would it cost Tesla in the long term to let someone else manufacture their cars? How would this impact their long term profitability? Would their competitors even be willing to do this? What kind of terms could they manage to negotiate? How much of a risk is it to let someone else have a stranglehold on your manufacturing? I don't understand sweeping opinions like this when you have no idea what you're talking about.
- ridgeguy 9y ago
  I think it's an interesting idea. I wouldn't summarily dismiss it. Your questions about it are interesting, unanswered, and not fatal to the idea. After all, don't Foxconn, et al., have a stranglehold on the manufacture of Apple's iPhones? That seems to be working out ok for all parties.

DennisP 9y ago

From a quick look at their balance sheet, in the past year their total assets have increased from $12 billion to $28 billion, and debt from $2 billion to $9 billion, for an increase in net assets of $9 billion. Cash flow is fine too; total cash is up almost half a billion over the past year, for a total of $3.5B. Looking at their cash flow statement, they are spending a lot but mostly on capital expenditures. I don't see any reason to even think about bankruptcy. They're doing fine. https://finance.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii&ei=lPMaWoidLYnHmAHr6LuAAQ https://finance.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii...

ArmandGrillet 9y ago
Those financial statements are not in the article and that's a shame. I would expect journalists writing about the potential bankruptcy of a company to give more numbers and less "maybe"s (word used 5 times in the article).
- majewsky 9y ago
  The point of the article (as I understood) was precisely to explore every other angle except for the financial statement (since that's what every other article about TSLA covers).
- chipotle_coyote 9y ago
  It's an opinion piece, not journalistic reporting -- the thesis isn't "Tesla is going to go bankrupt and here's why," but rather "here's why I don't think it matters whether Tesla goes bankrupt." It'd arguably be nice to have a sentence or two about "of course, they may not be in trouble after all," but it doesn't really affect the author's argument. I don't think this is really written for folks who are bullish on Tesla, anyway. It's written for critics, and for folks like myself who might describe themselves as "fascinated skeptics."
eru 9y ago
Thanks for crunching the numbers!
aaavl2821 9y ago

sharpercoder 9y ago

One substantial possible factor in Tesla's bankruptcy is competition. You suddenly now deal with car manufacturers which are woken up to the electric drive age. Thought exercise: how can competition take serious levels while Tesla produces half or more of the world's battery capacity?

will_hughes 9y ago
> You suddenly now deal with car manufacturers which are woken up to the electric drive age. This keeps getting repeated, but all I see are some meagre efforts which seem primarily focussed on headlines rather than actually delivering mass-scale EVs. Concepts. Demonstrators. The closest any of them have come is the Bolt (which is limited in availability, and their dealer networks regularly push people away from buying), and the Leaf (which until the most recent model still looked far too much like a golf buggy and had very limited range). These are large companies with massive departments used to pushing out new vehicle models every year and updating production lines to suit. I'm still yet to hear of any of the major manufacturers sign contracts for large scale battery deliveries to support any mass EV production. I don't understand why their outlook is always 2019-2020-2025-2030 for their full EV range unless they're just hoping for Tesla to fail and finally be able to point out and say "See, EV doesn't work!" so they can go back to what they've been doing for a long while.
- sharpercoder 9y ago
  Exactly my point. They can design an electric car just fine, they can produce an electric car sans battery just fine, they can sell them just fine. They can't setup scale-up battery production sites within years. That's why serious competition from traditional car manufacturers won't happen anytime before 2022. Chinese producers are a different story. They have the government behind them for resourcing (Lithium and Cobalt). I see Chinese manufacturers as the most serious possible competition. However, it's not unlikely the government will not allow exporting of electric vehicles on a mass scale since they will want to use them theirselves.

agumonkey 9y ago

Anybody listened to one recent conf call with Musk ? it was on youtube. He seems to be in some good sht (subpar assembly line for the batteries and/or engine having to be reassembled from scratch which is done according to him) so so far this particular problem is not out of control for Tesla, but then time is critical too, competition is ramping up, and laws are shifting (EV tax cut is gone now I believe). I like Musk approach of going legacy free to stretch the limits of the current model, as he did for SpaceX. I'd be sad if Tesla choked enough to crash. If he just made it to the model 3 production that would be "cool". I don't know how people in the know understand the recent Semi/Roadster unveiling, is it distraction to get some buzz or a final scheme to finance the model3 step with easier things to be done in 2020 (smaller market for Semi and I believe a litle less complex to build than a cramped 4 seater)

rockinghigh 9y ago
EV tax cuts are not gone. Some versions of the tax bill proposed to remove the federal tax credits. Also Tesla will reach the 200,000 threshold of cars sold where the credit starts to phase out. But there are still state incentives.
- agumonkey 9y ago
  Ha, I forgot the 200K figure, but I believe there was a year limit too. Otherwise the blame is on Musk u_u

lafar6502 9y ago

It’s not about money, it’s about wasteful and parasitic businesses financed unknowingly by society

acjohnson55 9y ago

Check out the book Doing Capitalism In The Innovation Economy for a defense of the government encouraging exactly this sort of thing. I reviewed it on Amazon here: https://www.amazon.com/review/R2SCHS5SXNDF30 https://www.amazon.com/review/R2SCHS5SXNDF30. Point being, we want exactly this sort of thing, but it's foolish to expect the market to make this sort of investment very often.

xrayarx 9y ago

We should not forget, that bad press about tesla is in the interest of Jim Chanos, who is a billionaire and has a big short against tesla. If Tesla stock falls, he wins. Since he holds this short position, he is in the press once a month.

aaavl2821 9y ago
On the other hand, good press about tesla is in the interest of Elon musk and tesla shareholders. Wars between bulls and bears on controversial stocks are waged largely in the press
Xunxi 9y ago
https://www.bloomberg.com/news/articles/2017-10-12/chanos-s-short-hedge-funds-decline-this-year-amid-stock-rally https://www.bloomberg.com/news/articles/2017-10-12/chanos-s-...

deleted 9y ago

[deleted]

Apocryphon 9y ago

What if, Tesla is simply a Silicon Valley startup, and the endgame is to get one of the Big Three to acquire them so they don't have to worry about their day-to-day finances?

gozur88 9y ago
I'm not sure if that was the goal, but I think that's the way it's going to play out.
SimbaOnSteroids 9y ago
They've already IPO'd.
- stevenj 9y ago
  It can still be acquired and/or taken private.

blake8086 9y ago

From what I've seen, the point of Tesla is to burn money as fast as possible. I have two episodes of a podcast with a friend about exactly this topic: First episode: https://www.youtube.com/watch?v=6bQW1fEUsbk https://www.youtube.com/watch?v=6bQW1fEUsbk Most recent episode: https://www.youtube.com/watch?v=VXyIriINVK0 https://www.youtube.com/watch?v=VXyIriINVK0 I highly recommend them if you're interested in investing in Tesla (long or short)

dmfdmf 9y ago
I enjoyed your podcast and I agree, it looks dire for Tesla.

tim333 9y ago

>Jim Chanos summarized all of the reasons why nicely: “If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.” A major box it doesn't tick from a short sellers perspective is the "make something people want" thing. Loads of people want it's cars and would be trucks. The main question is can they deliver them but I'd be wary being short in case they can.

nCwLABXpfJLz 9y ago
make something people want... at a profit. Also, unless I'm mistaken, very few people want Tesla's trucks.
bob_theslob646 9y ago
The issue is time frame. Chanos smells blood in the water for the upcoming quarter(s). The question he is going to have to face is whether he can stay solvent longer than Tsla stock price is irrational. My bet is he stays in 2-3 quarters until he makes his kill and then exits.

ChuckMcM 9y ago

I've made money in the past buying out of the money call options on TSLA, I'm guessing all those short sellers buying butterflies. That said, the point that sticks out at me in the article is this one -- "... because money is how we measure success. And this is in fact true of most companies. But it is not true of Tesla. 'When a measure becomes a target, it ceases to be a good measure,' and this is as true of money as it is of any other measure. The purpose of Tesla is not to make money;" There is a tremendous amount of visibility put on the company, and Elon is up front about what they are trying to achieve. The arguments against them succeeding boil down to either 'we don't believe you can do what you say you can do.' or 'we don't understand why you are doing what you're doing, so it must be wrong.' It used to really bug me when someone told me that what I was proposing was impossible. I work to do the necessary research and foundation work to understand the risks and challenges of a course of action and someone says "Well, I've never heard of anyone who could do that so you clearly are missing something." No discussion of the idea, no attempt to understand how I came to believe what I did. One of the things I admire in Elon is that he seems really good at just completely ignoring that noise. It is something I have tried to cultivate as it is helpful in starting new businesses or projects to be able to not get bogged down by people who want to tell you why you are wrong and are unwilling to listen to how you think you may be right.

mlevental 9y ago
how do you make money buying call options that are out of the money? do they go back into the money before expiry?
- ChuckMcM 9y ago
  This is not investment advice! I'm just explaining how it works ... These days they have gone a bit crazy but it works like this, I would buy Jan '19 call options that are out of the money[1]. Looking at some that are 'fairly close' (closed at $315, options at $320). They are selling for about $55 [ibid]. So you buy a contract (100 shares) which costs you $5,500. Now if TSLA goes up during 2018 people will want to buy those calls from you for more than $55. Of course if TSLA goes down, or stays down all year then come January 19 you can either buy your 100 shares for an additional $32,000 (which you won't since you would lose money on that deal) or let the call expire in which case the person who sold the option keeps the shares and the $5,500 you spent. But here is the fun part, if TSLA goes up 10% (315 -> 346), now your calls are "in the money by $31", and if you look at calls in 2019 that are in the money for $30[2] you see they are trading around $69. Which if you sold your contract for that would get you $6,900 or a gain of 25%. Compared to the alternative of buying 18 shares at 315 for $5,670, and selling them when they went up 10% to 346 at $6,228 for a 10% gain. Buying actual shares is the safer way to go because if you buy a call option you lose the entire $5,500 if the stock doesn't go up above the strike price! Buying the call options gives you an opportunity to leverage the volatility for a higher return. I've observed there is a lot of 'passion' investing (rather than say reasonable investing) in TSLA where people buy it regardless and so it defies gravity and goes up anyway. [1] http://www.nasdaq.com/symbol/tsla/option-chain?dateindex=7&callput=call&money=out http://www.nasdaq.com/symbol/tsla/option-chain?dateindex=7&c... [2] http://www.nasdaq.com/symbol/tsla/option-chain?callput=call&money=in&dateindex=7&page=2 http://www.nasdaq.com/symbol/tsla/option-chain?callput=call&...

volgo 9y ago

I don't believe in Tesla's long term business, but you have to be either a naive fool or insanely rich to short Tesla. As Warren Buffett once said, the market can be delusional a lot longer than you can be liquid. You can be right and still lose a ton of money

scotty79 9y ago

The idea that stocks exist for some investors to get rich is utterly silly. Stocks exist to trick investors into funding someone elses ideas that they wouldn't fund otherwise by selling them casino chips that they can use to gamble among themselves. The only reason the company should be concerned about their share price would be that they want to issue more and they'd like to get as much money for them as possible. The law that makes boards care about value for investors is the most ignorant thing ever written.

danso 9y ago

> Maybe; maybe not. Either way, a far more interesting question, if (like me) you have no financial interest in the business’s success or failure, is: does it matter? If you're an American, it does matter in the sense that the subsidies that allow Tesla to keep moonshotting with relative comfort are paid through your tax dollars [0]. Tax dollars that could either go back to your pocket, or otherwise indirectly benefit you by subsidizing a more effective venture. Hell, some of those tax dollars could even be used to help the original moonshot institution. I think what Tesla and Musk are doing is very cool. But let's face it, lots of companies and individuals could promise cool things if they had a multi-billion cushion. I think the OP makes some decent points about how silly it is to care about immediate or substantial profit margins -- hell, any investor in Amazon would agree with that. But it seems dangerously naive to just think this: > But it is not true of Tesla. “When a measure becomes a target, it ceases to be a good measure,” and this is as true of money as it is of any other measure. The purpose of Tesla is not to make money; it is to pioneer fleets of smart mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars. Making money is ancillary. That is the claimed purpose of Tesla. The author is confusing Tesla's self-interested claims with reality -- this is basically Kool-Aid-drinking-cultism. And giving Tesla and Musk the complete benefit of the doubt in terms of altruism, that doesn't mean that their positive dreaming has an infinite buffer against shitty implementation and business practices. Profit is definitely not everything, but it's a potentially very useful signal (among others) to weed out non-performance and incompetence. [0] http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015...

mjamesaustin 9y ago
Tesla's primary method of financing is through debt and equity, not through any government subsidy. Yes they get ZEV credits, but the revenue from those pales in comparison to their sales, loans, and stock offerings. Not to mention that most of the traditional car manufacturers in America received huge government bailouts to stay afloat in 2008, so even if you slight Tesla for receiving a loan (which they repaid early with interest) they are still on equal footing with other manufacturers.

yters 9y ago

Not a fan of giving sci-fi idealism a blank check. Moonshot is ok, that's how we got ICBMs and spy satellites, arguably necessary to keep a check on our enemies, though that is arguable these days. Roads and the Internet made even more sense. But, funding a for profit company with billions of tax money for sci-fi promises with unproven premises seems much more questionable.

fragmede 9y ago
The company's finances may be shaky, but electric cars aren't a "sci-fi promise with (an) unproven premise". The original Tesla Roadster came out in 2009 (or so), so there are 8-year old electric cars by Tesla driving around out there.
- yters 9y ago
  To throw so much money at the enterprise hinges on the assumption that electric cars can be a significant replacement for fossil fueled cars, and displace the electricity production (and other manufacturing costs) in such a way to be much more environmentally and economically viable. Just because we have a few (proportionally) working electric cars does not mean this vision is plausible. The original automobile did not need this kind of extrapolated justification, it was immediately obvious the car was much better than the wagon, and combined with the assembly line established a clear and very large market. I do not see this happening with the electric car.

pocketsquare2 9y ago

The title now is "In praise of Tesla’s bankruptcy." Did Tesla file for bankruptcy? I'm confused. Nikolai Tesla filed for bankruptcy in 1916. This is phenomenally irresponsible of TechCrunch generally, and Jon Evans specifically.

jaimex2 9y ago
Gets the clicks.
salvar 9y ago
If you read the article, or even just the beginning of it, instead of just relying on the headline then I think you'll be less confused.
- nickik 9y ago
  Missing the point.
  - salvar 9y ago
    I got the point, just wanted to help since you said you were confused.

vadimberman 9y ago

I am not entirely sure why Musk has to be the CEO there. He is a tech whiz and has his hands full, why not appoint a COO material instead to fix the P&L?

zerostar07 9y ago

... or cars

jaimex2 9y ago

I don't think Tesla or Elon have ever said their goal was to make money. Their mission statement has always been "To accelerate the adoption of sustainable transportation." "Whenever you have an unpriced externality you can't quite rely on the market to do the right thing. So in order to have electric vehicles come sooner than they otherwise would... electric vehicles were always going to be the long-term transportation mechanism, but to make that day come sooner, you have to bridge the gap with innovation. That was the goal with Tesla is to try to serve as a catalyst to accelerate the day, the day of electric vehicles. And I think when all is said and done, I am hopeful that historians will look back on Tesla and say that Tesla advanced that by at least 10 years, which that would be a huge victory of mine... in my mind." - https://www.youtube.com/watch?v=jpcJ3jX-2DA https://www.youtube.com/watch?v=jpcJ3jX-2DA It's the same with SpaceX, even though its been profitable I don't think they have ever celebrated that. They keep aiming to burn money towards getting to Mars which itself is another money pit. I think Elon is genuine, he's actions do follow his words. He doesn't care about money, he cares about advancing humanity for the thrills and exploration.

mankash666 9y ago

I'm a pragmatist - Tesla has had years to prove it could eke out a profit. Everytime it hasn't met this expectation, Elon Musk has managed to change the conversation to something forward looking, pie in the sky BS. And surprisingly, investors bet on short term stock inflation based on these fables, probably fully knowing they aren't achieveable. At this point they're betting on stock movements triggered by Musk, not company fundamentals. It's Vegas glorified

greglindahl 9y ago
I'm always surprised by the number of people on Hacker News who want to complain that Tesla is acting like a startup trying to "go big or go home".

irhd 9y ago

> The purpose of Tesla is not to make money Yes it is. It is a publicly traded company. if that's not Musk's purpose then he should (rightfully) be forced out and replaced with someone who has the right view. Then he should pay his PR people a massive bonus.