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Tesla is raising up to $1.5B through convertible note and share sale
- studentrob 7y agoIs this all going towards autonomy? https://youtu.be/Ucp0TTmvqOE?t=13330 https://youtu.be/Ucp0TTmvqOE?t=13330
- gvb 7y agoIt's going towards not dying. The autonomy pitch (IMHO) was showmanship to distract investors from focusing on the real problem: not dying due to running out of funds. If you can just avoid dying, you get rich. That sounds like a joke, but it's actually a pretty good description of what happens in a typical startup. Ref: http://www.paulgraham.com/die.html http://www.paulgraham.com/die.html
- amrrs 7y agoAm I the only one who thinks Tesla is destined to be acquired by a proper Manufacturing company? Can Tesla by itself exist after 5 years ?
- thiago_fm 7y agoAs long as the cashflow is positive, from investors, the company will last.
- Analemma_ 7y ago“Cash-flow positive from investors” is a nonsensical concept. Investors invest because they expect a return. If cash flow, the real kind, is negative forever, eventually the investments will stop. Musk has delayed the reckoning for a while with showmanship, but it can’t go on forever.
- thefounder 7y agoAmazon had no profit for many years and here we are. Some could be told about Uber.
- hef19898 7y agoAFAIK Amazon had only a handful of unprofitable quarters in history. Even more important, Amazon was always cash-flow positive. Uber is a different story, so.
- natch 7y agoWith Amazon we're comparing a web site that sells stuff they don't even make to an auto manufacturer, insanely capital intensive. It's quite a different bar. I realize you're just replying to someone who brought this up, but I'm not convinced comparisons make sense.
- hef19898 7y agoI do get your point, you cannot compare the two. Yet, every time Tesla's finances are brought up someone is repeating the false "Amazon lost money the whole time" statement. Which is wrong both on the P&L and cash flow side. And Tesla would be bankrupt already with their cash burn rate if it wasn't for Elon and his investor magic. But maybe they wouldn't have needed his magic without his other attics in the first place.
- Invictus0 7y agoI believe the parent was making a joke.
- Mvandenbergh 7y agoI feel like "cashflow positive from investors" is a great title for a very snarky book about startups and SV culture.
- saalweachter 7y ago"You Can't Run a Con Without Confidence"
- markmm 7y agoThey are growing every year, they should have millions of cars in the fleet by 2020/21. Once FSD is done they will own the space and generate enough cash to make Apple look poor.
- reitzensteinm 7y agoTesla has in excess of $11bn in debt; even if you could get the equity for nothing, an acquisition would still be extremely expensive - more than 25% of Ford's market cap. I can't see a middle of the road outcome for Tesla; it'll either be wildly successful, or Musk will destroy it in the attempt.
- Roritharr 7y agoStill easily doable by Apple, if they only wanted to.
- nkozyra 7y agoDoable by a lot of companies if they wanted to, I think the suggestion was that someone in the domain would make the acquisition, which seems much tougher a prospect.
- morkfromork 7y agoLarry Ellison invested in TSLA. I would not want to see Oracle buy them.
- erichurkman 7y agoModel 3 suddenly cost $1,000 per wheel and come with a mandatory $40k/year support package, but don't worry, your rep got you a sweet 7.5% discount on future services — and he's never heard of a director approving such an incredible discount.
- qaq 7y agoHmm maybe TSLA should leverage Oracle for corp. fleet sales :)
- richardknop 7y agoDoable by companies like Apple/Google, the issue is why would they do it? Their shareholders would not approve such transaction as it's just throwing your money into a furnace.
- decasteve 7y agoI’m hoping they get out of building their own cars altogether. Sell the car manufacturing and focus on the infrastructure and important parts: charging network, drive train, battery packs, solar, and self-driving tech if that’s their goal. /armchair
- Robotbeat 7y agoI don't think they'll stop building their own cars. But I do think that partnering with other carmakers to produce powertrains for them is not a bad idea. They produced powertrains for the Smart EV and the Toyota Rav4 EV back in the day. Musk has hinted at partnering with utility van companies to electrify them.
- moduspol 7y agoYou're not, but you should ask yourself why people with the same views have been predicting failure since 2012.
- nthompson 7y agoThe product lineup is solid; even if they go bankrupt, the debt owners will simply wipe out the shareholders, prune away the less profitable parts of the business, and scale back the expensive R&D ambitions. The Model 3 will still be produced since the fixed costs are already paid. (Not my view that they actually will go bankrupt. But failure due to overspending on fixed costs tends to work out differently than being unable to cover marginal costs.)
- naveen99 7y agoWhat if tesla acquires a traditional car company instead and start adding auto pilot to gasoline powered cars too?
- ilarum 7y agoThis comment seems prescient. https://news.ycombinator.com/item?id=19723650 https://news.ycombinator.com/item?id=19723650 "Take a moment and think about why are they doing this event now. Elon is setting a stage for a capital raise, he's pitching the autonomy narrative after the Model 3 cash cow narrative failed. They're trying to convince investors (and customers) to give them money because money-printing autonomous taxi service is coming next year."
- thiago_fm 7y agoIf they could do it for next year, why don't they just do it and profit alone, not selling the autonomous cars to anyone -- and make trillions? :-) It is probably because they can't
- oh_sigh 7y agoThey kind of are - usually with car leases there is the ability to buy the car at the end of your contract, but not with new tesla leases(because they will put those vehicles into the autonomous fleet).
- jsight 7y agoI'm a little more cynical about that, tbh. I feel like they will ultimately offer most of these to the leasee as a purchase option, they just aren't providing the buyout price up-front.
- twoodfin 7y agoMy guess is that they will enforce it on the assumption that most leasees will just re-up with a new Tesla. Meanwhile Tesla can get more heavily into the resale game and hit lower price points by selling the same car twice.
- jsight 7y agoThat is possible, I guess, but they've done really badly as a purveyor of used cars in the past. It doesn't exactly seem like a profit center for them.
- ckastner 7y agoQuoting Musk on Twitter[1], about a year ago: The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money. [1] https://twitter.com/elonmusk/status/984705630106673152 https://twitter.com/elonmusk/status/984705630106673152
- username444 7y agoRaise no money EVER? Or just in Q3+Q4?
- ckastner 7y agoThis is from the Economist article that Musk was tweeting about: Well before it confirmed the latest missed production target, investors worried about the firm’s cash-burn rate in 2018. In addition to the $2bn or so of capital that may be required to expand production of the Model 3, Tesla has some $1.2bn in convertible debt maturing by early next year. On March 27th Moody’s, a credit-rating agency, downgraded Tesla’s debt, cautioning that the firm “will likely need to raise additional capital during the second half of 2019”. Jefferies, a bank, predicts that Tesla will need $2.5bn to $3bn this year. The cited prediction by Moody’s was very close, apparently ("likely need to raise capital in the second half of 2019").
- vpj 7y ago"Tesla will need to raise $2.5bn to $3bn this year, according to Jefferies, a bank" This was the tweet (April 2018) Elon has replied to.
- hef19898 7y agoAnd Tesla raised half of it already by early Q2. Doesn't sound to far of, does it?
- shawabawa3 7y ago
- jaimex2 7y agoThey are raising capital to tool up for the Model Y, Semi and Pickup assembly lines as planned. Q2 is going to be a positive quarter as the only reason Q1 fell short was missed deliveries from cars in transit to Europe and China.
- _ph_ 7y agoThe big reduction in S/X played even a larger role, but these models got updated, the smaller and cheaper battery option available again. With the efficiency upgrades, the 80kWh Model S/X are greater value than ever.
- jillesvangurp 7y agoYep, Tesla looks like a nice investment target at this point. They have now proven that they can ship stuff that people want in volume with the model 3 and they have several other products planned that have the potential to be at least as disruptive. They require capital investment to make that happen. That's why they are raising capital.
- dragontamer 7y ago> Q2 is going to be a positive quarter Tesla sold 10,000ish Model 3 cars in April. That's 2500 Model 3 cars/week. Remember, 5000ish cars/week is the breakeven point, when Tesla is profitable. https://insideevs.com/news/347137/tesla-model-3-s-x-sales-april/amp/ https://insideevs.com/news/347137/tesla-model-3-s-x-sales-ap... Inside EV is pumping the story. But anyone paying attention recognizes that Q3 2018 and Q4 2018 were the quarters to look at. Q3 2018 sold 4653 Model 3 cars / week (and also sold way more Model S / Model X cars). Tesla is severely behind on Q2 numbers, there's almost no way they're going to hit their guidance. 100%, Q2 will be a miss as well, I guarantee it. The numbers are already quite bad for Q2. Either that, or "Inside EVs" is wrong (quite possible... but buy the rumor, sell the news, amirite?) Q3 is where you can hope for Tesla to become profitable. They gotta expand into Europe and China and make up for all the lost sales. Americans are at the end of an automotive cycle, Americans are not going to be buying cars for a long time (in general).
- glenneroo 7y ago
- yingw787 7y agoI was on Jeju Island in South Korea and apparently it's where the South Korean government tests renewable technologies like electric vehicles. Our tour guide had this electric Hyundai that was indistinguishable from the gas-powered version. It was quiet, and that's about it. I remember thinking that this is the future of electric vehicles. Boring. Reliable. No drama or shenanigans about CEOs doing weed or pissing off regulators or stiffing suppliers or "production hells" or falcon wing doors and touchscreen dashboards or getting rich people to adopt it first and making everybody else wonder if the price will ever come down. Everything just works. China's already there with electric buses and electric scooters. I think they own those markets now (well-deserved based on their execution BTW). If you haven't been paying attention to renewable tech in East Asia, you should definitely explore more; I think it would be valuable experience for the rest of the world's big-volume automakers. At least I learned a lot.
- rubber_duck 7y agoAFAIK Hyundai Kona EV and Kia Nero EV have 1 year waiting list because they can't source batteries ? Even the higher end Jaguar I Pace has a waiting list. AFAIK no EV manufacturer has managed to ramp the productions enough to meet the demand
- jdhawk 7y agoIf there is one thing Capitalism is good at, its scaling to meet demand. It might take another 2-3 years but the writing is on the wall
- rubber_duck 7y agoNo doubt about it - but my point is other manufacturers will be facing similar issues Tesla is facing right now - time will tell if they are better equipped at dealing with them - I have 0 insight in to the industry - but as a potential customer I see the results on the market and Tesla still seems ahead of others in terms of actually delivering.
- maxerickson 7y ago
- _Microft 7y agoAll-out war between fanbois and the hate crew in 3...2...1? I wish there were a forum were decent discussion about Tesla would still be possible but wherever (HN, Reddit, Ars Technica, ...) you look, it always ends the same way. Any recommendations, maybe?
- deleted 7y ago[deleted]
- jaimex2 7y agoArse Technica is a vortex of hate, purposely mind you. Twitter and Reddit are good as long as you use the Mute/block buttons to weed out the crap from both sides.
- goshx 7y agoIt’s better to not read them. I usually try to debate and clarify to people who clearly don’t know what they are talking about how the actual cars work and etc., but the amount of bull crap that haters post in articles like this is so ridiculous that it isn’t even worth reading the comments. They are still stuck hating the CEO, regardless of the company’s achievements, so it is useless to try to debate.
- _Microft 7y agoThe problem is that you do not know on first sight if they are just misguided or actually malicious. I remember a few names of the worst offenders that I just ignore now but it sucks anyways. Edit: Using Stylus, the following solution is possible to highlight the names of selected people (the list needs to be updated when you want to add someone): a[href$="username1"], a[href$="username2"], ... { color: darkred !important; } Hiding the sub-thread in a similarly easy way is not possible though, due to the nature of the tree.
- justin66 7y ago> I wish there were a forum were decent discussion about Tesla would still be possible but wherever (HN, Reddit, Ars Technica, ...) you look, it always ends the same way. A forum where this is possible would be highly exclusionary, nothing like Ars Technica or Reddit or HN. Those forums handle simple disagreements in a decent, typical way but there is no way to have a balanced, thoughtful discussion with cultists. Elon Musk has cultists.
- heartofgold 7y agoA lot of people want to trash Musk and Tesla, but I look at it this way: - Sure the CEO might be too active on twitter and at times say or do things typically considered inappropriate CEO behavior. - Musk often makes bold claims and sometimes misses his projected dates. However: - Musk also is often right. - He delivered amazing things with the model s. The Audi e-tron looks quite nice and I think competition is nice, but it still doesn't match the 2012 model s specs. - He wanted the model 3 entry price to be $35k. Lots of peopple doubted he could do it, and many projected it wouldn't be available until 2020 or later. It looks like the base model 3 I can order is about $39k and with tax credit brings you downt to $35k and change. - He promised autonomous driving 2 years from 2016, and honestly many people thought he was nuts. And his prediction was overly optimistic here, but there have been a steady stream of amazing incremental improvements to auto-pilot. On freeways, the tesla can now determine when to change lanes and does it. It can follow navigation within freeways, and it can warn you if a stoplight or stopsign is approaching. They demoed true autonomy, and I believe it's actually getting quite close. Given 1 or 2 more years of incremental improvements, your tesla would be capable of driving you most places I would think. He didn't make his 2 year prediction, but his team at tesla is still doing amazing innovation in this space. - Part of what makes a great innovator is being able to fail sometimes. Musk will continue to make bold claims, sometimes he will fail to fulfill it, but many times he will deliver. What he's doing is nothing short of amazing. He's doing things people keep saying can't be done. Re-usable rockets that land? Electric cars? Cars that drive themselves? I'm willing to tolerate a little shenanigans in exchange for this kind of innovation.
- codeulike 7y agoAgreed, Musk/Tesla/SpaceX set very ambitious targets and then scramble like mad to meet them or almost meet them. This means they're always pushing the limit, and hence you get an endless parade of 'Tesla are going to go bankrupt' stories. In a way they are kind of right, Musk is pushing Tesla so hard that they teeter on the edge of disaster quite often. I wouldn't quite say bankruptcy, but they teeter on the edge of a serious loss of confidence quite often. I think this is kinda deliberate, a tactic of shoot for the stars or just dont bother. I wouldn't invest, but its great to watch whats being acheived from the sidelines. I think people have forgotten what innovation looks like. Innovation, from the outside, looks like a huge gamble, and thats because it is. Tesla is a series of huge gambles, and the people pointing out 'hey what Tesla are doing could go terribly wrong' have a point. But they are also missing the point. Thankfully I think Tesla have enough cars on the road now that if they do strike disaster, there will be enough momentum to have some sort of Tesla remnant to keep the fleet running. But the progress would stop.
- privateSFacct 7y agoDon't underestimate how badly demand is dropping / going to drop. You basically cannot get timely repairs on a tesla. This is getting mainstream coverage. Your car could be out of service for 5 months. That's simply a no-go for a lot of more mainstream buyers myself included. My own prediction, some skinny / dark days ahead until they work out some of the kinks. Execute on getting parts inventory up / available. Model Y execution. And price - a huge segment at 32K or so especially in Model Y segment - my worry is that with federal rebates going away the price issue becomes much worse.
- natch 7y ago>You basically cannot get timely repairs on a tesla. This is getting mainstream coverage. You get a loaner Tesla during repairs so it's not that bad. I was at work and discovered a flat tire at lunchtime. By 2pm there was a truck there with a loaner wheel, identical to my wheel. Not a lame low-speed wheel. The tire was also identical... same brand, same model. They took my wheel away and when it got to the service center, they called me and said that the tire would need to be replaced, as the flat was not fixable. After a week they called me and said they couldn't find my wheel. It was lost somewhere. They said they would keep looking. Sounds like a nightmare, right? Well I had the perfectly good loaner wheel, so I was fine. It's a company going through some growth spurts, so there are bumps in the road sometimes. Then a week later I came too close to a curb and put curb rash on their new loaner wheel. I had signed a document saying I would be responsible for damage. I called them (no hold time btw) and said hey, you lost my wheel, and you're taking a while to get it back to me, are you going to hold me to this thing about no damage on the loaner wheel? And they said, no, some wear and tear is fine. I mentioned the curb rash and they said don't worry about it, it's fine. A week later they called and said they had found the wheel, replaced the tire, and the new tire replacement would be free, comped by Tesla because of the extra delay. That day they brought my wheel with the new tire on it to my workplace and mounted it onto the car in the parking lot, which took all of 10 minutes out of my work day. No charge for the tire, no charge for the time, no charge for the curb rash damage to their loaner wheel, no charge for anything whatsoever. During this entire time notice I did not lose use of my car at all. Nor did I have to go to any service center. People who do lose use of their cars get loaners... different from their own cars, but a bit too first world of a problem for me to complain about.
- dragontamer 7y agoWith 2.2 Billion in remaining cash and $700 million loss in Q1, it was clear that Tesla needed to raise more money to survive. Tesla can't take 3 more quarters of that kind of cash burn. Assuming Tesla improves their cash flow, this new +$1.5 Billion raise will provide Tesla with another 1 to 2 years to turn the company around... for a total of 3ish years worth of cash reserves. Remember the key profitability calculation from years past: 5000 Model 3 Cars / week is the break-even point. (Its a very blurry estimate, Tesla managed to be profitable with ~4500 M3 cars in Q3 2018... margins and other services may change that). With cheaper cars and fewer cash credits, maybe the new profitability point will be ~6000 cars/week instead. But that's Tesla's overriding goal. Tesla is currently selling 2500 Model 3 Cars / week based on latest estimates. A drop from Q3 2018. USA is at the end of a car cycle, so the USA is dropping sales in general (this is why Ford and GM shut down so many of their factories, in preparation for this cyclical downturn). Tesla is feeling the effects of this as their sales drop. They HAVE to get Chinese and European sales numbers up now, to make up for the loss of American sales.
- bsaul 7y agoWith the current chinese policy against anything non-chinese, as well as the tariff wars i don't think china is going to represent any kind of market for tesla (especially since electric vehicle are seing as a strategic industry for the chineese regime). Europe is completely stuck in economical weak growth, and has an extremely high population density and good public transport system that makes it clearly try to steer away from personal vehicle. Not to mention the fact that german cars are starting to embrace electric engines, and have an insanely better reputation regarding manufacturing quality than tesla. There again, i don't see how a 40k vehicle is going to sell well enough to compensate from the american market decline.
- cubaia 7y agoHe used Tesla to save SolarCity, he can still continue using SpaceX to save Tesla.
- gcb0 7y agothat's not how it works. thankfully.
- Robotbeat 7y agoIn 3 years, it's not terribly unlikely that SpaceX will be worth more than Tesla is now (with most of the value from deploying Starlink). And Elon is significantly more vested in SpaceX than Tesla. If Tesla has continued to face challenges, it's not beyond the realm of possibility that Starlink is spun-off as a highly profitable company (allowing Musk to maintain a majority interest in SpaceX proper) and Musk uses the capital from that to stabilize Tesla. Of course, in 3 years, Tesla's situation could easily be vastly different in both directions. And Musk would probably prefer to fund Mars ambitions than necessarily Tesla.
- golfer 7y agoFYI. Tesla Net income in millions. Q1 2019: -702 2018: -976 2017: -1,961 2016: -675 2015: -889 2014: -294 2013: -74 2012: -396 2011: -254 2010: -154 2009: -56 2008: -82 2007: -78
- alex_young 7y agoI think it's odd that Musk says he's buying 10M of shares to boost confidence, but he is already very highly leveraged with loans against his current shares. If you use a loan against your shares to buy more shares and that causes your share value to increase, that's a very interesting chain of events.
- fooker 7y agoAh, the self sufficient pyramid scheme!
- tardo99 7y agoWhere is Elon Musk getting the $10M of cash to buy into this offering? Isn't his wealth tied up in his companies?