4 ms·

Tesla's liquidity issues are completely overblown. Nevermind that their cashflow and spend numbers are improving. People also tend to overlook the amount of inv

by dmode 8y ago

Tesla's liquidity issues are completely overblown. Nevermind that their cashflow and spend numbers are improving. People also tend to overlook the amount of investor liquidity we have in the market. SoftBank has a $100bn fund. Saudi's have a $1 trillion sovereign wealth fund. I believe the UAE have something similar as well. Raising a couple billion dollars in this environment would be extremely easy. Especially when you have a backlogged demand on your product and the product has a 20% gross margin

jcranmer 8y ago
The complaint isn't that Tesla faces challenges in raising money, but that Tesla is delusional in believing that it doesn't need to raise money.
- dragontamer 8y ago
  Yeah, but Musk always said that he won't raise money, but does so anyway. I bet you Musk does another stock offering by the end of the year. Its kind of a yearly-tradition at this point, with exception of 2014 when Musk decided to raise a few billion in bonds instead.
seebee 8y ago
Tesla automotive does not have a 20% margin, it's much closer to 10%. In the '18-H letter they claimed 20% margins including ZEV/GHG credits and added back Services & Other (in all Tesla 10-Q's the Services & Other are subtracted). Tesla calculates gross margin by not only including the ZEV/GHG credits but by basing the margin on the retail price of the vehicle rather than the bulk invoice. Cost of stores and R&D expense are also omitted from the gross margin.
- dmode 8y ago
  Can you point to a source ? I am looking at Q2 statement and gross margin before ZEV is 20%. With ZEV it is 21%. It's on page 2 here http://ir.tesla.com/static-files/7235e525-db16-470c-8dce-9ecac0ad7712 http://ir.tesla.com/static-files/7235e525-db16-470c-8dce-9ec... Also, gross margin is literally margin after cost of goods. Doesn't include SG&A expense.
  - seebee 8y ago
    >I am looking at Q2 statement and gross margin before ZEV is 20%. With ZEV it is 21%. The statement given is ex ZEV and stock based comp, not ex ZEV/GHG and Services/Other. ZEV/GHG accounted for ~2% of margin in the first half of 2018 while Services/Other accounted for a little over 5%. Check the 10-Qs. > Also, gross margin is literally margin after cost of goods. Doesn't include SG&A expense. Most OEMs use the delta between the retail price and the bulk invoice including cost of stores to calculate their margin.
    - dmode 8y ago
      Sorry, it took me a while to get back. Why would stock based comp be included in gross margin ? That is not part of Cost of Goods sold. That is reflected in net income. I have no idea what your last statement means. There is US Accounting definition of what gross margin is and it is Revenue - Cost of Goods. Other expenses such as compensation, stores, are part of operational expense and it included in net income. https://en.wikipedia.org/wiki/Gross_margin https://en.wikipedia.org/wiki/Gross_margin
brianpgordon 8y ago
I don't think you'll find many people claiming that Tesla is on the brink of bankruptcy. You'll find plenty of people saying that the stock is overvalued and they bet it will go down (possibly to zero over a longer time horizon). The point is that if Tesla wants to remain solvent then it will be forced to offer an attractive chunk of equity as part of a raise, and that will be a blow to the share price. They're out of assets to put up as security and their unsecured debt is already yielding north of 8%. They'll have to offer equity.
- dmode 8y ago
  Who cares if they offer equity ? Would anybody remember that 5 years from now ? I have no recollection of when they raised equity in the past.
  - brianpgordon 8y ago
    With its unsecured 2025 bonds trading at 83 cents on the dollar and an SEC investigation ongoing, they might have to accept a lot of equity dilution on a raise big enough to keep them operating. 10% dilution in exchange for operating cash that will be promptly burned would add 10% more headwind on their earnings per share. If the market had at least to some extent believed Musk that another raise was unnecessary then that would negatively affect the share price.

by dmode 8y ago

jcranmer 8y ago

The complaint isn't that Tesla faces challenges in raising money, but that Tesla is delusional in believing that it doesn't need to raise money.

dragontamer 8y ago
Yeah, but Musk always said that he won't raise money, but does so anyway. I bet you Musk does another stock offering by the end of the year. Its kind of a yearly-tradition at this point, with exception of 2014 when Musk decided to raise a few billion in bonds instead.

seebee 8y ago

Tesla automotive does not have a 20% margin, it's much closer to 10%. In the '18-H letter they claimed 20% margins including ZEV/GHG credits and added back Services & Other (in all Tesla 10-Q's the Services & Other are subtracted). Tesla calculates gross margin by not only including the ZEV/GHG credits but by basing the margin on the retail price of the vehicle rather than the bulk invoice. Cost of stores and R&D expense are also omitted from the gross margin.

dmode 8y ago
Can you point to a source ? I am looking at Q2 statement and gross margin before ZEV is 20%. With ZEV it is 21%. It's on page 2 here http://ir.tesla.com/static-files/7235e525-db16-470c-8dce-9ecac0ad7712 http://ir.tesla.com/static-files/7235e525-db16-470c-8dce-9ec... Also, gross margin is literally margin after cost of goods. Doesn't include SG&A expense.
- seebee 8y ago
  >I am looking at Q2 statement and gross margin before ZEV is 20%. With ZEV it is 21%. The statement given is ex ZEV and stock based comp, not ex ZEV/GHG and Services/Other. ZEV/GHG accounted for ~2% of margin in the first half of 2018 while Services/Other accounted for a little over 5%. Check the 10-Qs. > Also, gross margin is literally margin after cost of goods. Doesn't include SG&A expense. Most OEMs use the delta between the retail price and the bulk invoice including cost of stores to calculate their margin.
  - dmode 8y ago
    Sorry, it took me a while to get back. Why would stock based comp be included in gross margin ? That is not part of Cost of Goods sold. That is reflected in net income. I have no idea what your last statement means. There is US Accounting definition of what gross margin is and it is Revenue - Cost of Goods. Other expenses such as compensation, stores, are part of operational expense and it included in net income. https://en.wikipedia.org/wiki/Gross_margin https://en.wikipedia.org/wiki/Gross_margin

brianpgordon 8y ago

I don't think you'll find many people claiming that Tesla is on the brink of bankruptcy. You'll find plenty of people saying that the stock is overvalued and they bet it will go down (possibly to zero over a longer time horizon). The point is that if Tesla wants to remain solvent then it will be forced to offer an attractive chunk of equity as part of a raise, and that will be a blow to the share price. They're out of assets to put up as security and their unsecured debt is already yielding north of 8%. They'll have to offer equity.

dmode 8y ago
Who cares if they offer equity ? Would anybody remember that 5 years from now ? I have no recollection of when they raised equity in the past.
- brianpgordon 8y ago
  With its unsecured 2025 bonds trading at 83 cents on the dollar and an SEC investigation ongoing, they might have to accept a lot of equity dilution on a raise big enough to keep them operating. 10% dilution in exchange for operating cash that will be promptly burned would add 10% more headwind on their earnings per share. If the market had at least to some extent believed Musk that another raise was unnecessary then that would negatively affect the share price.