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1) I agree that it can cost a material amount to raise money in any manner, be it debt or equity. That said, Tesla was in an okay place to raise money after the

1) I agree that it can cost a material amount to raise money in any manner, be it debt or equity. That said, Tesla was in an okay place to raise money after the success of Models S and X, and had all of the information to reasonably project that spending on Model 3 production would outstrip inflows from existing sales to a degree that could put the company's finances in a relatively precarious state. They were not reasonably inhibited from raising further cash to justify not doing so prior to ramping Model 3 production. 2) You're right, by car manufacturer standards the company is trading at an incredible premium, I should have been more clear. I meant discounted in the sense that "the street" marked their targets on Tesla down from where they had been as a result of these financial concerns. 3) The term "discussions" may even be too strong for the few conversations that occurred prior to the tweet. It was incredibly irresponsible, and it's somewhat difficult to interpret his intent as anything but to manipulate the stock price and punish short sellers. The author did not debunk the claim that cash management was a problem. Cash management was a problem and may continue to be a problem in the future. Rapid cost-cutting and non-payment to vendors seems indicative of poor cash management to me. Anytime that a company's runway becomes a relevant part of an objective analysis, there are cash issues. Tesla did not need to give cause for investors to call into question its financial stability in order to make the Model 3. Don't get me wrong, I want Tesla to thrive. It just seems as though many of these issues of financial stability need not have occurred. I agree that better governance is in order and that Tesla and many other organizations can benefit from a greater degree of independent oversight.

InTheArena 8y ago
1) Yep, and anyone who has worked in a startup knows that these are "bet the company" moments. They had to ramp to model 3, they thought they gave themselves enough room. Turns out the engineering on factories were wrong - in particular Panasonic fscked up the battery assembly system and Tesla screwed up by over automating. That made it closer then they should have. 2) I've never thought that anything the street did around Tesla was rational. I just watched Mark Speigal still hold on to his position that Tesla is doomed. 3) I agree it was irresponsible - but I also disagree with your thesis that it was manipulation. Elon had access to the sales number, and the ramp. He didn't need tweet to inflate the stock - that would have happened (with a much larger market cap then today) at the end of the quarter. That just puts it back to twitter induced stupidity. Thanks for the well-reasoned response here. I think we are agreed on Tesla governance going forward. I am really praying that the Mullally runner is correct. That would make me a very happy camper.
- calabin 8y ago
  1) I agree that there are certain instances, especially in startup-land, where we have to bet the company. Lord knows I've had to do it with the company I'm a part of. That said, I don't think that this was one of those moments. 2) I've worked intimately with both buy and sell side clients, so I have pretty good first-hand knowledge of analysts on "the street". I can confirm to you that they are as irrational and misinformed as much of the general public. Bringing attention to themselves and their firms plays a big role in what they say/do. I agree that there has been a ton of irrational work done on Tesla, but I think that a reduction in target prices to reflect the company's financial state was reasonable. 3) I think we both just see this very differently. I agree on Mulally, that would be great. Thanks for the detailed responses and thoughtful back-and-forth.

InTheArena 8y ago

1) Yep, and anyone who has worked in a startup knows that these are "bet the company" moments. They had to ramp to model 3, they thought they gave themselves enough room. Turns out the engineering on factories were wrong - in particular Panasonic fscked up the battery assembly system and Tesla screwed up by over automating. That made it closer then they should have. 2) I've never thought that anything the street did around Tesla was rational. I just watched Mark Speigal still hold on to his position that Tesla is doomed. 3) I agree it was irresponsible - but I also disagree with your thesis that it was manipulation. Elon had access to the sales number, and the ramp. He didn't need tweet to inflate the stock - that would have happened (with a much larger market cap then today) at the end of the quarter. That just puts it back to twitter induced stupidity. Thanks for the well-reasoned response here. I think we are agreed on Tesla governance going forward. I am really praying that the Mullally runner is correct. That would make me a very happy camper.

calabin 8y ago
1) I agree that there are certain instances, especially in startup-land, where we have to bet the company. Lord knows I've had to do it with the company I'm a part of. That said, I don't think that this was one of those moments. 2) I've worked intimately with both buy and sell side clients, so I have pretty good first-hand knowledge of analysts on "the street". I can confirm to you that they are as irrational and misinformed as much of the general public. Bringing attention to themselves and their firms plays a big role in what they say/do. I agree that there has been a ton of irrational work done on Tesla, but I think that a reduction in target prices to reflect the company's financial state was reasonable. 3) I think we both just see this very differently. I agree on Mulally, that would be great. Thanks for the detailed responses and thoughtful back-and-forth.