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This might also be another way how Elon can keep financing Tesla. SpaceX has in the past bought bonds of SolarCity, with this new cash perhaps SpaceX can buy so

This might also be another way how Elon can keep financing Tesla. SpaceX has in the past bought bonds of SolarCity, with this new cash perhaps SpaceX can buy some Tesla bonds to save it from running out of cash this year.

jcfrei 9y ago
Please no. SpaceX is too important to be pulled into the financial mess of Tesla and Solarcity.
- newnewpdro 9y ago
  SpaceX is the only reason I see Tesla not going bankrupt. Not necessarily by directly funding Tesla, but Musk can certainly prop up Tesla by leveraging SpaceX's success in various ways. Anyone who saw the SpaceX falcon heavy launch should have got the message that SpaceX and Tesla are BFFs.
- lifeformed 9y ago
  IIRC Musk said that Tesla was supposed to be the cash crop that eventually funds SpaceX.
  - otalp 9y ago
    It's far more likely to be the opposite, at least for the next 4-5 years.
  - agildehaus 9y ago
    Can you point to the source? I've been a SpaceX fan for a long time and never heard him say that. Starlink, SpaceX's satellite constellation, is the cash crop.
    - marvin 9y ago
      Don’t remember the source, but I’ve heard Musk say this between the lines in an interview. I.e. something along the lines of «you need a lot of money to get humanity to Mars» on questions of Tesla’s long-term profitability.
    - taneq 9y ago
      The more cash crops you have, the merrier!
    - shasheene 9y ago
      > Can you point to the source? I've been a SpaceX fan for a long time and never heard him say that. Source is from the 2016 International Astronautical Congress talk in Mexico [1]: > And I should say also that the main reason I'm personally accumulating assets is in order to fund this. So I really don't have any other motivation for personally accumulating assets, except to be able to make the biggest contribution I can to making life multiplanetary [1] http://shitelonsays.com/transcript/making-humans-a-multiplanetary-species-mexico-city-2016-09-27# http://shitelonsays.com/transcript/making-humans-a-multiplan...
- quest88 9y ago
  Too important for what?
  - TeMPOraL 9y ago
    For the second space age. For an industry in space, for getting humanity beyond the confines of this single planet.
    - ocdtrekkie 9y ago
      If we are dependent on a single company to get beyond the confines of a single planet, we are probably stuck here. Kinda why I'm happy NASA still has their own plans, and other competitors are out there too. Hinging everything on one rocket isn't a good idea, and when the shuttle was retired, we ended up without a way to space for years.
      - gliboc 9y ago
        You realize this is not how it works? SpaceX is a pioneer: they show the path, others follow. There is no dependency on innovation. Also, NASA can't do any of this, which is why the US government is giving funds to SpaceX. Plus what about the real dependency of the NASA on political agenda and budget votes?
        ocdtrekkie 9y ago
        SpaceX also has a real dependency on political agenda and budget votes (as do all of Musk's companies as the case is: Tesla and SolarCity were built heavily on tax incentives from green initiatives, SpaceX depends on funding from NASA, and the Boring Company looks like it's gearing up to cash in on all those "infrastructure" promises everyone in our government's been demanding). Congress can absolutely decide to fund SpaceX less, or charge SpaceX more for use of government facilities, just as easily as they can pull the funding out from under SLS if they choose to. Elon Musk is very good at designing companies built on government handouts. ;) Not that there's anything inherently wrong with that. We are past the "pioneer" stage of space launches: We've done it lots of times. The exciting part is now making space launches cheaper, regular, and more capable. SpaceX is not the only company working on doing those things.
opportune 9y ago
This may constitute security fraud, as it is almost exactly the same as what got Shkreli in trouble, to my knowledge
- downandout 9y ago
  Shkreli got in trouble for lying to his investors about losses in his hedge fund. He paid them back later, but to the feds that was a little like robbing a bank, then winning the lottery a few years later and deciding to give the bank its money back.
- kss238 9y ago
  As long as Musk's companies accurately disclose what the money they're raising is going to be used for, I don't think there is any issue. Shkreli was convicted because he claimed to investors that he was going to invest in x but actually invested in y.
  - jjeaff 9y ago
    Well, the board members of SpaceX, including musk, have a fiduciary responsibility to SpaceX only, when making decisions about what to do with SpaceX money. So investing or loaning money to Tesla or otherwise giving them some kind of sweetheart deal would inevitably open SpaceX up for a lawsuit from SpaceX shareholders.
adventured 9y ago
SpaceX raising $507 million isn't going to dent much as it pertains to Tesla's funding needs, so that's almost guaranteed to be a no. Maybe they buy $50m or $100m worth of Tesla bonds, it wouldn't be a meaningful scale vs their funding needs in 2019-2020. Tesla will do a minimum of a $2 billion funding raise whenever they need to next. They're claiming they won't need to do a funding raise this year (we'll see). The SpaceX capital would be far more likely purposed to help pay for BFR & Starlink. edit: downvoters want to clarify what's wrong with what I said? It's extraordinarily obvious the $507 million raised by SpaceX isn't going to bailout Tesla. Mathematically it couldn't even if they wanted to put it to that use.
- azernik 9y ago
  Generally Musk's finances aren't built around direct sales of his stock or transfer of capital from one business to another; it's all about borrowing using his ownership stakes in his companies as collateral [1]. Increased valuations give him a much larger ability to draw on third-party loans to dump into whatever business he likes: the risk being if his investments don't pay off, he risks losing control of SpaceX. [1] https://www.economist.com/news/business/21709061-entrepreneurs-finances-are-jaw-dropping-inventive-and-combustible-his-space https://www.economist.com/news/business/21709061-entrepreneu...
  - adventured 9y ago
    The parent was talking about SpaceX directly using the raised cash to assist Tesla, which is what I was replying to. That's not what you're talking about.
    - azernik 9y ago
      That was exactly my point; that SpaceX directly transferring cash from one company to another is indeed unlikely, but that the higher valuation of SpaceX is a bigger help for Musk's finances in general. (EDIT: I was agreeing with you on the details, but also pointing out that there are effects here beyond the money directly raise that could help Tesla.)
    - 9y ago
rory096 9y ago
On the contrary, Musk reportedly took out loans against his Tesla shares in order to participate in this round - to the tune of $100 million. [0] https://techcrunch.com/2018/03/16/spacex-is-making-big-money-moves/ https://techcrunch.com/2018/03/16/spacex-is-making-big-money...
- alttab 9y ago
  I don't see where the article states that Musk took out a loan against his existing shares to literally buy more at a higher valuation. I'm not even certain that would make it past underwriting, much less be legal. Otherwise you could leverage market capitalization without amy downward sell pressure to increase not only your total holdings but it's overall value. Seems illegal. Kinda like EOS.
  - jonknee 9y ago
    He would have taken a loan against Tesla shares to buy SpaceX shares, that is definitely legal (albeit risky considering the volatility of TSLA). The reason it's likely a loan is that he doesn't have $100m sitting around.
jakelarkin 9y ago
that's a great way to lose your CEO job and get sued by your shareholders.
- freedomben 9y ago
  Exactly. That would be a violation of fiduciary duty, which is not a good move for CEO
- mhermher 9y ago
  Well, Tesla bailed out SolarCity to the detriment of Tesla shareholders and that turned out ok for them (Tesla management) it seems like.
  - jakelarkin 9y ago
    Tesla shareholder lawsuit against SolarCity deal set to proceed https://www.reuters.com/article/us-tesla-shareholders/tesla-shareholder-lawsuit-against-solarcity-deal-set-to-proceed-idUSKBN1H43A3 https://www.reuters.com/article/us-tesla-shareholders/tesla-...
Jdam 9y ago
Can imagine very well that the whole Musk cult implodes with an accounting scandal of that sort.
WhompingWindows 9y ago
I think Elon's plan to make cash for Tesla is to produce a lot of cars. The margin on each car is decent, the problem is Tesla isn't making enough of them to fund its gigafactory/Fremont build-out and all of its service centers and stores. If they increase the revenue due to many more cars being delivered, that's the ticket Elon is after.
- tway9001011 9y ago
  >The margin on each car is decent What margin? They are losing upwards of $20,000 per car produced, and as of Q3, it's growing. Sure, if you use their non-GAAP gross margin figures, which remove many costs that other auto manufacturers include, things look downright swell; non-GAAP accounting artifacts can do all kinds of things. But at the end of the day Tesla are burning cash at an increasing rate, even with production and deliveries increasing (around 100k cars per year). Where are all these profits from scale to come from?
  - schiffern 9y ago
    > What margin? They are losing upwards of $20,000 per car produced, and as of Q3, it's growing. Perhaps the 19% "Gross margin total automotive & services and other segment" margin they disclosed on page 51 of their latest 10-K filing?[1] Or the 23% "Gross margin total automotive"? Taking the smaller number, Tesla made $24,741 per vehicle (and yes, that's the correct sig figs). > Sure, if you use their non-GAAP gross margin figures... Tesla hasn't reported non-GAAP figures since 2016.[2] Search the filing yourself: the word "GAAP" appears only eight times, and none of those refer to any non-GAAP accounting. [1] http://ir.tesla.com/secfiling.cfm?filingID=1564590-18-2956&CIK=1318605 http://ir.tesla.com/secfiling.cfm?filingID=1564590-18-2956&C... [2] https://www.accountingtoday.com/news/tesla-backs-away-from-non-gaap-metrics-after-sec-letters https://www.accountingtoday.com/news/tesla-backs-away-from-n...
    - mhermher 9y ago
      Not sure what the other guy meant, but this article goes over the differences in how Tesla reports gross margin: https://seekingalpha.com/article/4153659-just-say-no-teslas-misleading-margin-metric https://seekingalpha.com/article/4153659-just-say-no-teslas-... To summarize: 1. Tesla’s Calculation Ignores The Cost Of Its Service Center Network 2. Tesla Excludes Its R&D From Its Calculation 3. Tesla Allocates Some Supercharger Costs To SG&A 4. Expensing Of Warranty Costs 5. Front-Loading Of Gross Margin You'd have to read the details on what each means or implies.

jcfrei 9y ago

Please no. SpaceX is too important to be pulled into the financial mess of Tesla and Solarcity.

newnewpdro 9y ago
SpaceX is the only reason I see Tesla not going bankrupt. Not necessarily by directly funding Tesla, but Musk can certainly prop up Tesla by leveraging SpaceX's success in various ways. Anyone who saw the SpaceX falcon heavy launch should have got the message that SpaceX and Tesla are BFFs.
lifeformed 9y ago
IIRC Musk said that Tesla was supposed to be the cash crop that eventually funds SpaceX.
- otalp 9y ago
  It's far more likely to be the opposite, at least for the next 4-5 years.
- agildehaus 9y ago
  Can you point to the source? I've been a SpaceX fan for a long time and never heard him say that. Starlink, SpaceX's satellite constellation, is the cash crop.
  - marvin 9y ago
    Don’t remember the source, but I’ve heard Musk say this between the lines in an interview. I.e. something along the lines of «you need a lot of money to get humanity to Mars» on questions of Tesla’s long-term profitability.
  - taneq 9y ago
    The more cash crops you have, the merrier!
  - shasheene 9y ago
    > Can you point to the source? I've been a SpaceX fan for a long time and never heard him say that. Source is from the 2016 International Astronautical Congress talk in Mexico [1]: > And I should say also that the main reason I'm personally accumulating assets is in order to fund this. So I really don't have any other motivation for personally accumulating assets, except to be able to make the biggest contribution I can to making life multiplanetary [1] http://shitelonsays.com/transcript/making-humans-a-multiplanetary-species-mexico-city-2016-09-27# http://shitelonsays.com/transcript/making-humans-a-multiplan...
quest88 9y ago
Too important for what?
- TeMPOraL 9y ago
  For the second space age. For an industry in space, for getting humanity beyond the confines of this single planet.
  - ocdtrekkie 9y ago
    If we are dependent on a single company to get beyond the confines of a single planet, we are probably stuck here. Kinda why I'm happy NASA still has their own plans, and other competitors are out there too. Hinging everything on one rocket isn't a good idea, and when the shuttle was retired, we ended up without a way to space for years.
    - gliboc 9y ago
      You realize this is not how it works? SpaceX is a pioneer: they show the path, others follow. There is no dependency on innovation. Also, NASA can't do any of this, which is why the US government is giving funds to SpaceX. Plus what about the real dependency of the NASA on political agenda and budget votes?
      - ocdtrekkie 9y ago
        SpaceX also has a real dependency on political agenda and budget votes (as do all of Musk's companies as the case is: Tesla and SolarCity were built heavily on tax incentives from green initiatives, SpaceX depends on funding from NASA, and the Boring Company looks like it's gearing up to cash in on all those "infrastructure" promises everyone in our government's been demanding). Congress can absolutely decide to fund SpaceX less, or charge SpaceX more for use of government facilities, just as easily as they can pull the funding out from under SLS if they choose to. Elon Musk is very good at designing companies built on government handouts. ;) Not that there's anything inherently wrong with that. We are past the "pioneer" stage of space launches: We've done it lots of times. The exciting part is now making space launches cheaper, regular, and more capable. SpaceX is not the only company working on doing those things.

opportune 9y ago

This may constitute security fraud, as it is almost exactly the same as what got Shkreli in trouble, to my knowledge

downandout 9y ago
Shkreli got in trouble for lying to his investors about losses in his hedge fund. He paid them back later, but to the feds that was a little like robbing a bank, then winning the lottery a few years later and deciding to give the bank its money back.
kss238 9y ago
As long as Musk's companies accurately disclose what the money they're raising is going to be used for, I don't think there is any issue. Shkreli was convicted because he claimed to investors that he was going to invest in x but actually invested in y.
- jjeaff 9y ago
  Well, the board members of SpaceX, including musk, have a fiduciary responsibility to SpaceX only, when making decisions about what to do with SpaceX money. So investing or loaning money to Tesla or otherwise giving them some kind of sweetheart deal would inevitably open SpaceX up for a lawsuit from SpaceX shareholders.

adventured 9y ago

SpaceX raising $507 million isn't going to dent much as it pertains to Tesla's funding needs, so that's almost guaranteed to be a no. Maybe they buy $50m or $100m worth of Tesla bonds, it wouldn't be a meaningful scale vs their funding needs in 2019-2020. Tesla will do a minimum of a $2 billion funding raise whenever they need to next. They're claiming they won't need to do a funding raise this year (we'll see). The SpaceX capital would be far more likely purposed to help pay for BFR & Starlink. edit: downvoters want to clarify what's wrong with what I said? It's extraordinarily obvious the $507 million raised by SpaceX isn't going to bailout Tesla. Mathematically it couldn't even if they wanted to put it to that use.

azernik 9y ago
Generally Musk's finances aren't built around direct sales of his stock or transfer of capital from one business to another; it's all about borrowing using his ownership stakes in his companies as collateral [1]. Increased valuations give him a much larger ability to draw on third-party loans to dump into whatever business he likes: the risk being if his investments don't pay off, he risks losing control of SpaceX. [1] https://www.economist.com/news/business/21709061-entrepreneurs-finances-are-jaw-dropping-inventive-and-combustible-his-space https://www.economist.com/news/business/21709061-entrepreneu...
- adventured 9y ago
  The parent was talking about SpaceX directly using the raised cash to assist Tesla, which is what I was replying to. That's not what you're talking about.
  - azernik 9y ago
    That was exactly my point; that SpaceX directly transferring cash from one company to another is indeed unlikely, but that the higher valuation of SpaceX is a bigger help for Musk's finances in general. (EDIT: I was agreeing with you on the details, but also pointing out that there are effects here beyond the money directly raise that could help Tesla.)
  - 9y ago

rory096 9y ago

On the contrary, Musk reportedly took out loans against his Tesla shares in order to participate in this round - to the tune of $100 million. [0] https://techcrunch.com/2018/03/16/spacex-is-making-big-money-moves/ https://techcrunch.com/2018/03/16/spacex-is-making-big-money...

alttab 9y ago
I don't see where the article states that Musk took out a loan against his existing shares to literally buy more at a higher valuation. I'm not even certain that would make it past underwriting, much less be legal. Otherwise you could leverage market capitalization without amy downward sell pressure to increase not only your total holdings but it's overall value. Seems illegal. Kinda like EOS.
- jonknee 9y ago
  He would have taken a loan against Tesla shares to buy SpaceX shares, that is definitely legal (albeit risky considering the volatility of TSLA). The reason it's likely a loan is that he doesn't have $100m sitting around.

jakelarkin 9y ago

that's a great way to lose your CEO job and get sued by your shareholders.

freedomben 9y ago
Exactly. That would be a violation of fiduciary duty, which is not a good move for CEO
mhermher 9y ago
Well, Tesla bailed out SolarCity to the detriment of Tesla shareholders and that turned out ok for them (Tesla management) it seems like.
- jakelarkin 9y ago
  Tesla shareholder lawsuit against SolarCity deal set to proceed https://www.reuters.com/article/us-tesla-shareholders/tesla-shareholder-lawsuit-against-solarcity-deal-set-to-proceed-idUSKBN1H43A3 https://www.reuters.com/article/us-tesla-shareholders/tesla-...

Jdam 9y ago

Can imagine very well that the whole Musk cult implodes with an accounting scandal of that sort.

WhompingWindows 9y ago

I think Elon's plan to make cash for Tesla is to produce a lot of cars. The margin on each car is decent, the problem is Tesla isn't making enough of them to fund its gigafactory/Fremont build-out and all of its service centers and stores. If they increase the revenue due to many more cars being delivered, that's the ticket Elon is after.

tway9001011 9y ago
>The margin on each car is decent What margin? They are losing upwards of $20,000 per car produced, and as of Q3, it's growing. Sure, if you use their non-GAAP gross margin figures, which remove many costs that other auto manufacturers include, things look downright swell; non-GAAP accounting artifacts can do all kinds of things. But at the end of the day Tesla are burning cash at an increasing rate, even with production and deliveries increasing (around 100k cars per year). Where are all these profits from scale to come from?
- schiffern 9y ago
  > What margin? They are losing upwards of $20,000 per car produced, and as of Q3, it's growing. Perhaps the 19% "Gross margin total automotive & services and other segment" margin they disclosed on page 51 of their latest 10-K filing?[1] Or the 23% "Gross margin total automotive"? Taking the smaller number, Tesla made $24,741 per vehicle (and yes, that's the correct sig figs). > Sure, if you use their non-GAAP gross margin figures... Tesla hasn't reported non-GAAP figures since 2016.[2] Search the filing yourself: the word "GAAP" appears only eight times, and none of those refer to any non-GAAP accounting. [1] http://ir.tesla.com/secfiling.cfm?filingID=1564590-18-2956&CIK=1318605 http://ir.tesla.com/secfiling.cfm?filingID=1564590-18-2956&C... [2] https://www.accountingtoday.com/news/tesla-backs-away-from-non-gaap-metrics-after-sec-letters https://www.accountingtoday.com/news/tesla-backs-away-from-n...
  - mhermher 9y ago
    Not sure what the other guy meant, but this article goes over the differences in how Tesla reports gross margin: https://seekingalpha.com/article/4153659-just-say-no-teslas-misleading-margin-metric https://seekingalpha.com/article/4153659-just-say-no-teslas-... To summarize: 1. Tesla’s Calculation Ignores The Cost Of Its Service Center Network 2. Tesla Excludes Its R&D From Its Calculation 3. Tesla Allocates Some Supercharger Costs To SG&A 4. Expensing Of Warranty Costs 5. Front-Loading Of Gross Margin You'd have to read the details on what each means or implies.