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^ Why was this down-voted? This analysis is correct. Tesla is on track to burn >$500m/quarter going forward and will once again have to access capital markets

^ Why was this down-voted? This analysis is correct. Tesla is on track to burn >$500m/quarter going forward and will once again have to access capital markets in 2018. Junk bond markets have been puking for the past 3 months, so that option probably is getting less likely. That leaves equity dilution. Not good for current shareholders. http://archive.fast-edgar.com//20171103/APA8Q22CZM22D262222M2WZ2BOKGZY22H292/ http://archive.fast-edgar.com//20171103/APA8Q22CZM22D262222M... A lot of the "Assets" noted on the balance sheet are the reservation costs for all of Tesla and Solar City's promised products. Tesla recently laid off a significant portion of their workforce at the Model 3 factory. Output was much lower than they had guided to for the quarter. It doesn't look like that's going to change soon. If customers start demanding refunds a lot of the assets listed on the balance sheet go away. The liabilities on the other hand, won't be going anywhere. People can insist that Tesla is effecting some positive changes in the world, but it seems to me that mostly they have been good at repackaging and reselling the tech of other companies in creative ways.

smoll 9y ago
> People can insist that Tesla is effecting some positive changes in the world, but it seems to me that mostly they have been good at repackaging and reselling the tech of other companies in creative ways. I've seen this critique leveled at Apple and it makes more sense there (the Mac borrowing heavily from stuff they witnessed at Xerox PARC and the original iPhone just doing what a lot of other phones at the time were doing, except simpler and more mass-adoptable), but what evidence do you have for this applying to Tesla? Even if you admit that battery technology improvements that made EVs viable were implemented elsewhere, the entire automotive industry was 100% behind the combustion engine before Tesla, and now almost every car company is building EVs. This isn't merely Tesla effecting "positive change in the world", they proved that EVs were manufacturable, that the public wanted it, and solved numerous obstacles to actually bring it to market. The EV would literally not exist (to the public) in 2017 if not for Tesla. How is that merely repackaging tech?
- IBM 9y ago
  People who level that critique at Apple are the equivalent of sports fans of rivals to the Yankees constantly talking trash about the Yankees. That is, it may make fans of Apple angry (and it did all throughout the 90s and 00s) but it had no impact on the fundamentals of Apple's business. While people were leveling that critique against Apple, Apple was selling millions of iMacs, then hundreds of millions of iPods, and now over a billion iPhones. Now I would say it's extremely shallow analysis of Apple as a business to say they were just repackaging tech (you don't do hundreds of billions of dollars in revenue over the past 20 years if you aren't actually innovating [EDIT: actually iOS devices alone have done almost a trillion in revenue], especially if you don't have a monopoly in the relevant markets). Tesla is not Apple though. In order for the analogy to Apple to work, Tesla would have to be shipping a massive amount of EVs (and a growing amount as well) while they were being criticized. They haven't. In fact the penetration of EVs as a % of all cars sold is single digits. If you want to take the perspective of the author of the article, then we can at least say that Tesla may have induced rival car makers to at least get interested in EVs and demonstrated a small market exists for them, but it's not clear that once every automaker begins shipping EVs at scale that it's going to replace non-EVs in the market in a significant way. What if EVs just top out at 20%? On another level it's kind of a silly perspective to take because real people have invested their money in Tesla. A lot of them might be rich tech workers who no one will shed tears for, but big institutional investors like Fidelity own significant stakes in Tesla, and they're managing 401ks for regular people. I don't think too many investors who invested in telecom companies during the tech bubble took comfort in the fact that at least society was left with a lot of fiber and infrastructure. What would Tesla even leave behind anyway? The only thing I can think of is the battery factory which hopefully would be able to produce batteries for other manufacturers. But even that is not clear to me since China is pouring billions into doing that as well (and they're going to have a lower cost of capital compared to some private entity without state backing).
- friendzis 9y ago
  > The EV would literally not exist (to the public) in 2017 if not for Tesla. According to wikipedia a rather well known EV Nissan Leaf predates Tesla Model S by 2 years. First hybrid Toyota Prius is 20 years old. Toyota had concepts of plug-in hybrids for quite some time. Countless local teams make electric swaps. We had electric golf cars and what not for quite some time. What Tesla more or less pioneered is premium class performance EV and proved that there is market in this segment. They proved that not only "convenient home-work-home trip" (free parking, bus lanes, subsidies) can be market for EVs.
kc10 9y ago
>If customers start demanding refunds a lot of the assets listed on the balance sheet go away. I know a lot of people who reserved their model-3 paying the deposit. Pretty much they all know that their deliveries are going to be delayed but still put up the deposit. They just don't want to cancel their reservation and lose their spot as long as they get their car. I think once Tesla's battery problems are resolved and start delivering the model-3s, they should see the cash flowing.
conjecTech 9y ago
Characterizing negative cashflows from investment as 'burn' is incredibly disingenuous. The cashflows from any capital intensive startup would look similar. The cashflows from operation are negative, but not egregiously so. In fact, they are probably dragged down by the increased headcount associated with unreleased products. If Tesla had decided to stop with the model S and X, they'd likely be profitable right now. Your description of their assets is also off. Customer deposits have NO net effect on their balance sheet/equity value. They very clearly have a liability of $686 million to cancel out the cash received.
- Hypx 9y ago
  https://www.marketwatch.com/investing/stock/tsla/financials/cash-flow/quarter https://www.marketwatch.com/investing/stock/tsla/financials/... Tesla's cash flow from investment was -$1.21B last quarter alone. I can scarcely think of a startup that consumed cash at this rate. That's an annualized rate of -$4.84B. Not even the pets.com or Webvans of the world ever reached this level of "cash burn." Cash flow from operations were -$300.56M last quarter, and losses were $671.16M. Annualized, this puts them at around -$1.2B and -$2.68B per year respectively. If this is due to excess headcount from unreleased products, I say that's crazy and they should stop attempting those unreleased products.
  - conjecTech 9y ago
    Sure, the absolute numbers are large. But in percent terms of market cap, they are far more reasonable. To put them in perspective another way, Tesla has around 450k net reservations for the model 3. Even if half of those people cancel, and everyone buys the base unit with no add-ons, that is nearly $8 billion of revenue. I have no idea what acceptable ratios of plant/equipment to revenue are, but that doesn't seem absurd if they can fulfill those orders in 2-3 years and amortize the equipment over 15-30 years. I'm not going to necessarily make the argument that Tesla's share price is rational, but I do think this spending is good for shareholders. The balance sheet equity is a pittance compared to market cap. People are betting on large future profits. And there is just no way the level of production they are currently at could earn enough to justify the price. They have to grow. To grow they have to invest. It's just the nature of the business they are in. I think being in tech gives people the idea that you can create enormous value without capital risk, but that just isn't reality in most of the physical world. I think they are at least being responsible about it. They went out and established there was substantial interest for the 3 prior to undertaking all of this - something Ford didn't do for the Edsel, which in terms of financial sins would be on par with this failing. To get back to the initial point here, I do think the amount of debt they are using might be a bit on the high side if you consider their current and not future revenue, but the capital markets have shown a huge willingness to stomach secondary offerings of the stock, so it seems like they can and probably will remedy that.

smoll 9y ago

> People can insist that Tesla is effecting some positive changes in the world, but it seems to me that mostly they have been good at repackaging and reselling the tech of other companies in creative ways. I've seen this critique leveled at Apple and it makes more sense there (the Mac borrowing heavily from stuff they witnessed at Xerox PARC and the original iPhone just doing what a lot of other phones at the time were doing, except simpler and more mass-adoptable), but what evidence do you have for this applying to Tesla? Even if you admit that battery technology improvements that made EVs viable were implemented elsewhere, the entire automotive industry was 100% behind the combustion engine before Tesla, and now almost every car company is building EVs. This isn't merely Tesla effecting "positive change in the world", they proved that EVs were manufacturable, that the public wanted it, and solved numerous obstacles to actually bring it to market. The EV would literally not exist (to the public) in 2017 if not for Tesla. How is that merely repackaging tech?

IBM 9y ago
People who level that critique at Apple are the equivalent of sports fans of rivals to the Yankees constantly talking trash about the Yankees. That is, it may make fans of Apple angry (and it did all throughout the 90s and 00s) but it had no impact on the fundamentals of Apple's business. While people were leveling that critique against Apple, Apple was selling millions of iMacs, then hundreds of millions of iPods, and now over a billion iPhones. Now I would say it's extremely shallow analysis of Apple as a business to say they were just repackaging tech (you don't do hundreds of billions of dollars in revenue over the past 20 years if you aren't actually innovating [EDIT: actually iOS devices alone have done almost a trillion in revenue], especially if you don't have a monopoly in the relevant markets). Tesla is not Apple though. In order for the analogy to Apple to work, Tesla would have to be shipping a massive amount of EVs (and a growing amount as well) while they were being criticized. They haven't. In fact the penetration of EVs as a % of all cars sold is single digits. If you want to take the perspective of the author of the article, then we can at least say that Tesla may have induced rival car makers to at least get interested in EVs and demonstrated a small market exists for them, but it's not clear that once every automaker begins shipping EVs at scale that it's going to replace non-EVs in the market in a significant way. What if EVs just top out at 20%? On another level it's kind of a silly perspective to take because real people have invested their money in Tesla. A lot of them might be rich tech workers who no one will shed tears for, but big institutional investors like Fidelity own significant stakes in Tesla, and they're managing 401ks for regular people. I don't think too many investors who invested in telecom companies during the tech bubble took comfort in the fact that at least society was left with a lot of fiber and infrastructure. What would Tesla even leave behind anyway? The only thing I can think of is the battery factory which hopefully would be able to produce batteries for other manufacturers. But even that is not clear to me since China is pouring billions into doing that as well (and they're going to have a lower cost of capital compared to some private entity without state backing).
friendzis 9y ago
> The EV would literally not exist (to the public) in 2017 if not for Tesla. According to wikipedia a rather well known EV Nissan Leaf predates Tesla Model S by 2 years. First hybrid Toyota Prius is 20 years old. Toyota had concepts of plug-in hybrids for quite some time. Countless local teams make electric swaps. We had electric golf cars and what not for quite some time. What Tesla more or less pioneered is premium class performance EV and proved that there is market in this segment. They proved that not only "convenient home-work-home trip" (free parking, bus lanes, subsidies) can be market for EVs.

kc10 9y ago

>If customers start demanding refunds a lot of the assets listed on the balance sheet go away. I know a lot of people who reserved their model-3 paying the deposit. Pretty much they all know that their deliveries are going to be delayed but still put up the deposit. They just don't want to cancel their reservation and lose their spot as long as they get their car. I think once Tesla's battery problems are resolved and start delivering the model-3s, they should see the cash flowing.

conjecTech 9y ago

Characterizing negative cashflows from investment as 'burn' is incredibly disingenuous. The cashflows from any capital intensive startup would look similar. The cashflows from operation are negative, but not egregiously so. In fact, they are probably dragged down by the increased headcount associated with unreleased products. If Tesla had decided to stop with the model S and X, they'd likely be profitable right now. Your description of their assets is also off. Customer deposits have NO net effect on their balance sheet/equity value. They very clearly have a liability of $686 million to cancel out the cash received.

Hypx 9y ago
https://www.marketwatch.com/investing/stock/tsla/financials/cash-flow/quarter https://www.marketwatch.com/investing/stock/tsla/financials/... Tesla's cash flow from investment was -$1.21B last quarter alone. I can scarcely think of a startup that consumed cash at this rate. That's an annualized rate of -$4.84B. Not even the pets.com or Webvans of the world ever reached this level of "cash burn." Cash flow from operations were -$300.56M last quarter, and losses were $671.16M. Annualized, this puts them at around -$1.2B and -$2.68B per year respectively. If this is due to excess headcount from unreleased products, I say that's crazy and they should stop attempting those unreleased products.
- conjecTech 9y ago
  Sure, the absolute numbers are large. But in percent terms of market cap, they are far more reasonable. To put them in perspective another way, Tesla has around 450k net reservations for the model 3. Even if half of those people cancel, and everyone buys the base unit with no add-ons, that is nearly $8 billion of revenue. I have no idea what acceptable ratios of plant/equipment to revenue are, but that doesn't seem absurd if they can fulfill those orders in 2-3 years and amortize the equipment over 15-30 years. I'm not going to necessarily make the argument that Tesla's share price is rational, but I do think this spending is good for shareholders. The balance sheet equity is a pittance compared to market cap. People are betting on large future profits. And there is just no way the level of production they are currently at could earn enough to justify the price. They have to grow. To grow they have to invest. It's just the nature of the business they are in. I think being in tech gives people the idea that you can create enormous value without capital risk, but that just isn't reality in most of the physical world. I think they are at least being responsible about it. They went out and established there was substantial interest for the 3 prior to undertaking all of this - something Ford didn't do for the Edsel, which in terms of financial sins would be on par with this failing. To get back to the initial point here, I do think the amount of debt they are using might be a bit on the high side if you consider their current and not future revenue, but the capital markets have shown a huge willingness to stomach secondary offerings of the stock, so it seems like they can and probably will remedy that.