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Why is Tesla a bankruptcy risk and Uber is not?

by leesec 7y ago

hyperbovine 7y ago
Where did I say that?
hef19898 7y ago
My opinion? Competition with deep pockets and a lot of relevant expertise. Tesla is going against the whole automotive OEM sector and did well dor quite some time. Continuing so requires a lot of cash for a long time which Tesla has trouble generating from operations. Uber on the other hand is going against a fractured market with uncoordinated incumbents that are to large part protected by regulations. That means small competitors who are not used to that kind of competition. Also requires a lot of cash, yet has a clear end game and less market penetration challenges. Both are a gamble, sure, but Tesla is IMHO the riskier bet.
- tasubotadas 7y ago
  >Competition with deep pockets and a lot of relevant expertise. Tesla is going against the whole automotive OEM sector and did well dor quite some time. The same story was told 5 years ago. I think Tesla proved that it has enough expertise in the industry and the deep pockets do not matter if you can't produce one decent EV model.
- dominotw 7y ago
  > Uber on the other hand is going against a fractured market with uncoordinated incumbents Isn't uber going against lyft, ola, didi in the short term and going against tsla, waymo long term. Its almost trivial to start your own uber but almost impossible to start your own tesla.
danso 7y ago
Where did you read that Uber is financially stable?
johannes1234321 7y ago
Aside from actual numbers those are very different businesses. Manufacturing vs service. For a manufacturing company cutting costs is hard. If they reduce production they lose lots of scale effects. Supply contracts become more expensive etc. Uber can to some degree easily pull out of competive markets and focus on high margin markets. At some point they damage their brand, but zu there is room.
rchaud 7y ago
Nobody can say if Uber is a bankruptcy risk at this time, because they went public just a couple of days ago, and are still swimming in VC cash that the public markets are paying back. Tesla on the other hand is years past its IPO, and can only raise money now via junk bond issues, which costs them much more in interest payments than their competition. Their 2025 unsecured note had a coupon rate of 5.3%, and the cost to insure against default was 22 cents on the dollar. At worst, VCs only seek to be repaid in shares. Source: https://www.reuters.com/article/tesla-bonds/update-1-teslas-junk-bond-slammed-on-car-deliveries-miss-cds-cost-surges-idUSL1N21M0EP https://www.reuters.com/article/tesla-bonds/update-1-teslas-...
- bryanlarsen 7y ago
  The coupon on Tesla's latest issue is under 2%, so it's costing them considerably less than their competitors. Of course the reason it's so low is because it's convertible, but... And while its competitors may be not be rated junk, Ford is just one step away. It's priced at junk levels and Moody's has warned that the likelihood of a downgrade to junk is high. Ford has $150B of debt.
  - reitzensteinm 7y ago
    If you're going to ignore the terms of the conversion, of course it's going to look extremely cheap. Tesla spent over 10% of the money they raised (in equity+debt) on partially hedging against the potential dilution from the conversion, so clearly they didn't see the terms as rosily as you do. Then you jump to how much debt Ford has, but the vast majority of it is in their financial services division. Having large amounts of debt is not some red flag, it's the nature of the business - well or poorly run. I'm not exactly a Tesla fan, but there are plenty of good things you could say about the company without resorting to manufacturing whatever the opposite of FUD is called. https://www.fool.com/investing/general/2016/03/11/why-ford-motor-companys-debt-often-misunderstood.aspx https://www.fool.com/investing/general/2016/03/11/why-ford-m...

Why is Tesla a bankruptcy risk and Uber is not?

by leesec 7y ago

Why is Tesla a bankruptcy risk and Uber is not?

hyperbovine 7y ago

Where did I say that?

hef19898 7y ago

My opinion? Competition with deep pockets and a lot of relevant expertise. Tesla is going against the whole automotive OEM sector and did well dor quite some time. Continuing so requires a lot of cash for a long time which Tesla has trouble generating from operations. Uber on the other hand is going against a fractured market with uncoordinated incumbents that are to large part protected by regulations. That means small competitors who are not used to that kind of competition. Also requires a lot of cash, yet has a clear end game and less market penetration challenges. Both are a gamble, sure, but Tesla is IMHO the riskier bet.

tasubotadas 7y ago
>Competition with deep pockets and a lot of relevant expertise. Tesla is going against the whole automotive OEM sector and did well dor quite some time. The same story was told 5 years ago. I think Tesla proved that it has enough expertise in the industry and the deep pockets do not matter if you can't produce one decent EV model.
dominotw 7y ago
> Uber on the other hand is going against a fractured market with uncoordinated incumbents Isn't uber going against lyft, ola, didi in the short term and going against tsla, waymo long term. Its almost trivial to start your own uber but almost impossible to start your own tesla.

danso 7y ago

Where did you read that Uber is financially stable?

johannes1234321 7y ago

Aside from actual numbers those are very different businesses. Manufacturing vs service. For a manufacturing company cutting costs is hard. If they reduce production they lose lots of scale effects. Supply contracts become more expensive etc. Uber can to some degree easily pull out of competive markets and focus on high margin markets. At some point they damage their brand, but zu there is room.

rchaud 7y ago

Nobody can say if Uber is a bankruptcy risk at this time, because they went public just a couple of days ago, and are still swimming in VC cash that the public markets are paying back. Tesla on the other hand is years past its IPO, and can only raise money now via junk bond issues, which costs them much more in interest payments than their competition. Their 2025 unsecured note had a coupon rate of 5.3%, and the cost to insure against default was 22 cents on the dollar. At worst, VCs only seek to be repaid in shares. Source: https://www.reuters.com/article/tesla-bonds/update-1-teslas-junk-bond-slammed-on-car-deliveries-miss-cds-cost-surges-idUSL1N21M0EP https://www.reuters.com/article/tesla-bonds/update-1-teslas-...

bryanlarsen 7y ago
The coupon on Tesla's latest issue is under 2%, so it's costing them considerably less than their competitors. Of course the reason it's so low is because it's convertible, but... And while its competitors may be not be rated junk, Ford is just one step away. It's priced at junk levels and Moody's has warned that the likelihood of a downgrade to junk is high. Ford has $150B of debt.
- reitzensteinm 7y ago
  If you're going to ignore the terms of the conversion, of course it's going to look extremely cheap. Tesla spent over 10% of the money they raised (in equity+debt) on partially hedging against the potential dilution from the conversion, so clearly they didn't see the terms as rosily as you do. Then you jump to how much debt Ford has, but the vast majority of it is in their financial services division. Having large amounts of debt is not some red flag, it's the nature of the business - well or poorly run. I'm not exactly a Tesla fan, but there are plenty of good things you could say about the company without resorting to manufacturing whatever the opposite of FUD is called. https://www.fool.com/investing/general/2016/03/11/why-ford-motor-companys-debt-often-misunderstood.aspx https://www.fool.com/investing/general/2016/03/11/why-ford-m...