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The reason why Tesla is able to pay the Dept of Energy loan early is because of a secondary stock and bonds offering worth about >850+ million. In another words

The reason why Tesla is able to pay the Dept of Energy loan early is because of a secondary stock and bonds offering worth about >850+ million. In another words, Tesla is raising funds by generating more debt (from bondholders) and diluting share value (from shareholders), roughly about 3.5 mil out of 40 mil float, and using that money to pay the US govt. TSLA rose on the news despite diluting shareholders is because coupled with the announcement, Elon Musk mentions that he will personally put an additional 100mil into the secondary offer; and general exuberance that TSLA will use the cash for more infrastructure build-out, a la Google, Yahoo during their heyday's. Make no mistake, this is as much a PR ploy by Tesla to pump up their offering. It's incredibly smart for Musk and company to raise money in a very favorable environment as TSLA climbed from 45 to 90 after earnings. However, it remains to be seen if they can be still profitable. Note that they are still selling each car at a material loss; and only managed to show a profitable quarter by trading green credits they gained from their manufacturing. To truly scale, they need to either drive down the production cost of their cars down and broaden their market as there are only so much supply of carbon-emission credits on the market. Disclosure: I trade TSLA options on volatility, without any directional bias.

andrewtbham 13y ago
Where do you get 40M for the float? Yahoo indicates 73M. Plus doesn't dilution go against all outstanding shares (115M)? http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics
Nrsolis 13y ago
If I take a step back from this, I'd say it's bad strategy to bet against Elon Musk. IMHO, part of what makes his companies appealing is that he has a remarkable track record of keeping his head down and just getting sh!* done. I'm very impressed with his work ethic and vision and I think Tesla is going to go far. Secondly, if he is successful and manages to bootstrap and entire electric car industry from the ground up, what kind of effect do you think this innovation is going to have on the world? Think of the massive investment in geopolitical resource availability that will be mitigated by the diversification of fuel options for auto transport. He already hit one home run with PayPal, hit a triple with SpaceX, and might steal home with Tesla. He's a star player in a very sparse field of real innovators right now. Disclosure: I also trade TSLA options, but I'm quite bullish on the company.
- encoderer 13y ago
  Musk had very little to do with PayPal. He built a competing product, X.com, which was acquired by PayPal. Musk then served as CEO and if his interview in "Founders at Work" is any indication, he didn't do much besides piss off Max Levchin before stepping down after a relatively short tenure. I love what Musk has done post PayPal, but no reason to rewrite history here.
  - pbreit 13y ago
    > Musk had very little to do with PayPal That's false.
  - aj37 13y ago
    I know that's what the PayPal Wars book implies but Musk has argued against this version of history pretty strongly - http://gawker.com/230076/an-alternate-history-according-to-elon-musk http://gawker.com/230076/an-alternate-history-according-to-e.... I imagine the truth is somewhere between the two extremes.
  - packetbeats 13y ago
    According to the "PayPal wars" book PayPal didn't acquire X.com, it was a 50-50 merger. It is true (again, according to this book written by a PayPaler) that Musk wasn't as important to the PayPal success as the "funder" title would imply, but he did drive innovation into the space as a competitor and then saved the company from the hands a clueless CEO. It's very hard to say if PayPal would have succeeded without him. For one, it would have probably been much harder for PayPal to raise 100 Mio without the X.com merger. They got that amount shortly before the dotcom crash, so it was crucial for their survival.
  - wamatt 13y ago
    >Musk had very little to do with PayPal. That's rather inaccurate. Musk's company was X.com and Thiel/Levchin/Noseks's was called Confinity. They had a 50/50 merger in early 2000, and at first the new company was called X.com. Furthermore, Confinity[1] was doing Palm Pilot payments under the PayPal brand[2], while X.com was working on internet money transmission over email. Which idea was more useful in the long run? (hint: if you chose Palm Pilot's - you're wrong) Much of the disinformation stems from a book called the "The Paypal Wars" written by a Thiel fanboy, that is embarrassingly biased. Musk writes: "The only negativity in recent years was due to a book called The PayPal Wars, written by a sycophantic jackass called Eric Jackson. This guy was one notch above an intern at PayPal in the first few years of the company, but gives the impression he was a key player and privy to all the high level discussions. Eric couldn't find a real publisher, so Peter funded Eric to self-publish the book. Since Eric worships Peter, the outcome was obvious - Peter sounds like Mel Gibson in Braveheart and my role is somewhere between negligible and a bad seed. However, to his credit, Peter didn't realize the book would be as bad as it was and apologized to me personally at a Room 9 board meeting at David Sacks's home in LA."[3] Post-merger it's hard to say who did what exactly, and Levchin for example was instrumental in Paypal's anti-fraud system, a key development that allowed the company to navigate around a potentially ruinous situation. The bottom line is, 3 hyper-smart guys (Thiel, Levchin and Nosek), don't give away essentially 50% of their shares to some someone else (X.com) on a whim. This was a calculated and deliberate decision. Similarly, it's unlikely Musk would have succeeded alone either, and thus why they are all called co-founders of PayPal, Inc. [1] http://en.wikipedia.org/wiki/Confinity http://en.wikipedia.org/wiki/Confinity [2] http://www.halplotkin.com/cnbcs029.htm http://www.halplotkin.com/cnbcs029.htm [3] http://gawker.com/230076/an-alternate-history-according-to-elon-musk* http://gawker.com/230076/an-alternate-history-according-to-e...
revelation 13y ago
They already raised all the money prior to this announcement. They raised debt precisely because they didn't want to dilute shareholders (too much) and give existing short positions an easy out. You certainly realize they could have easily funded $1B through shares only at their then stock price level. Elon predicted $200M capex in the next quarter, mainly to complete tooling and optimize factory processes. He clarified that they are not looking to scale the manufacturing process any further than its current level (400-500 cars/wk). Stock price is up because Tesla only had $200M in cash equivalents available, which is a pretty small number for a car manufacturer, especially one looking to develop a new model (Model X) for a 2014 release and expanding charging/sales/service infrastructure. Disclosure: I think technical trading is bullshit.
- Nrsolis 13y ago
  Heh. It's all about the Alpha.
mncolinlee 13y ago
There's something bizarre about griping that they reached profitability from green credits. To clarify, these green credits were voluntarily paid by OTHER CAR COMPANIES like Fiat who did not innovate enough to develop their own green cars. In essence, these credits work similarly to carbon credits or sulfur credits. They are NOT paid by taxpayers or by the government in any way. It was a capitalist regulation in California designed to provide financial incentives and produce more revenue for innovative green companies. Companies have the option to develop their own green cars, buy credits, or else cede the California market to competitors. Those incentives have been very successful. There are far more new models of low and zero emissions vehicles than ever before. Remember the popular Saturn EV-1 from fifteen years ago? It and other green vehicles were killed because California removed its regulations mandating production of low emissions vehicles.
- Shivetya 13y ago
  they are not free, they are paid by any consumer who directly or indirectly has a relationship with someone who purchases a vehicle from one of the makers who is paying these credits. Voluntary my ass. If they don't pay what happens? Your fined. Its a tax. It is paid by consumers because they buy cars. If anything its California's way of having people in other states fund their initiatives. I guess kudos can go to Musk for making sure his company is positioned physically and product wise to make the most from it. It is a disguised transfer from one company to another facilitated by the state. It is not voluntary if a fine results
  - sageikosa 13y ago
    You must remember that when the government decrees that everyone must do something or else and everyone does it, it is considered voluntary.
    - jabits 13y ago
      Yes, because our government is there by our voluntary action. If we find our government is making us do things involuntarily, we can change it.
pbreit 13y ago
> selling each car at a material loss Is that true? I know the company overall would not have turned a profit without the credits but was under the impression that they currently had positive gross margins on the Model S.
- damoncali 13y ago
  Gross margin, and it's tiny without the credits. Tesla's most recent quarter resulted in an operating loss and a net loss. Edit: my bad. Seems the net income was slightly positive last quarter (with regulatory credits included, without them it's a big old negative).
  - pbreit 13y ago
    But the Model S itself is gross margin positive? That's all I was wondering.
    - damoncali 13y ago
      I didn't see it broken out in the financials, but I didn't look terribly hard. I don't think it's unreasonable to assume it's similar to the overall gross margins in the low single digits (2% by my math - ignoring emissions credits).
    - andrewtbham 13y ago
      The gross margin is 17%, but I was surprised to learn that includes ZEV credits. From 10Q: >During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin. http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-13-212354&CIK=1318605 http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-13-...
  - NickM 13y ago
    Even without regulatory credits included, they made a profit. Check the filing: total profit for the quarter was $96.3 million, and revenue from ZEV and other regulatory credits was only about $85M.
jforman 13y ago
"Make no mistake, this is as much a PR ploy by Tesla to pump up their offering." I don't get your negativity here. The fact that a major green tech company working with government support is able to shift financing over to the private market is, indeed, a remarkable feat and is absolutely something they have a right to crow about. The government, too — it's an example of a progressive system working as designed. As for PR's impact to stock price...TSLA is 70% institutional owned. Anybody with a material stake in the company is savvy enough to know that they're not suddenly self-sustainably cash-flow positive.
- der3k 13y ago
  "I don't get your negativity here." I didn't get the negativity. He was just stating a reasonably deduced thought.
  - varjag 13y ago
    it's really hard to find a phrase starting with "make no mistake" that doesn't culminate with a negative or dismissive slam. As urbandictionary puts it, "a weasel-y, thought-terminating phrase that is supposed to lend gravitas to a weak position in an argument. Used by doomsayers and the overly dramatic."
    - abstrakraft 13y ago
      urbandictionary also lists "superman" as a sexual maneuver. Your move.
      - der3k 13y ago
        Damn.
- sillysaurus 13y ago
  I don't get your negativity here. It didn't read as negative.
guelo 13y ago
Considering the terms of the government loan were very favorable (rates equal to the interest rates on Treasury notes in 2010) it doesn't make sense to me that they would want to pay it off early and get rid of all that liquidity. As a quickly growing company didn't they have something better to spend that $450 million on?
- orijing 13y ago
  Like a butt-load of positive PR? I think they calculated that the positive PR value (or maybe mitigating negative PR) was worth the incremental cost of capital from the normal markets vs. from the DOE
- Eliezer 13y ago
  Yeah, that puzzled me too. The PR couldn't be worth that much, could it? How could the interest possibly be more expensive than the stock dilution? Unless they just don't like having debt outstanding which seems understandable... though with debt that cheap...
- mathattack 13y ago
  I interpret it as a way to keep competitors at bay. "The public markets can fund electric cars. No more government loans are needed for us, or anyone else for that matter."
- Coko 13y ago
  They paid it off early because the loan came with restrictive agreements that prevented Tesla to stay competitive. This is from Tesla's own words, see my post. https://news.ycombinator.com/item?id=5755082 https://news.ycombinator.com/item?id=5755082
- cjg_ 13y ago
  Well there are some restrictions imposed on Tesla by this load. See http://www.businessinsider.com/elon-musk-borrows-150-million-to-buy-tesla-2013-5 http://www.businessinsider.com/elon-musk-borrows-150-million... There is says that the loan requires Musk to have a 65% ownership of the company which of course is expensive to maintain when they are raising money.
JumpCrisscross 13y ago
"TSLA rose on the news despite diluting shareholders is because coupled with the announcement, Elon Musk mentions that he will personally put an additional 100mil into the secondary offer" Dilution doesn't care who does the diluting - a share issued to Elon Musk dilutes as much as a share issued to TIAA-CREF. Regarding the double down, I do not believe Elon Musk's commitment to Tesla was in doubt previously. Its effects were probably limited to the marketing of the issue. More critical is: (a) TSLA maturing to where it can issue debt (albeit, of the convertible type), (b) its extrication from a volatile political situation, and, (c) its new liquidity buffer. I do not think it is appropriate to characterise it as a "PR ploy". As you mentioned, they are still unit loss-making - that those losses need to be financed is more than superficial.
- newbie12 13y ago
  I've been a vocal critic of Tesla and the DoE loan program, and I'm really glad to see Tesla pay off the loan and move into private markets. I want to root for this company to succeed and now I feel like I can do that. Taxpayers still got ripped off given the size of the loan relative to the company, and the huge downside risk, but I'm glad Musk pulled it off!
ghshephard 13y ago
It's these type of posts that make it to the top of a thread that make me not want to check into HN. Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN. I take particular issue with, "Make no mistake, this is as much a PR ploy by Tesla to pump up their offering." Paying back $450mm in loans isn't just a "ploy" - it's actually raising the money and sending it back to the taxpayers. And, at the same time, doing something innovative and forward looking - building electric cars - which, (look at Fisker) - is NOT a slam dunk, even with green credits. I, for one, am applauding Tesla today. We can do that without saying that they will be successful in everything, and in the future. But today they are.
- BHSPitMonkey 13y ago
  > It's these type of posts that make it to the top of a thread that make me not want to check into HN. Posts that provide insightful explanation about the story? Yes, less of that and more unqualified positive gushing, please. There is nothing wrong with offering an informed opinion, even if (especially if) it's not in full alignment with the prevailing attitude of the hivemind.
  - ryguytilidie 13y ago
    Man, I'm really not sure that you could have missed his point any more. How could you read what he wrote and POSSIBLY think he was arguing that we need "more unqualified gushing"? You pretty much just made up a strawman and beat the bejesus out of it for no reason... I'll be the first to call out unqualified gushing, but if that's what we're calling a factual account of a company paying back a loan I simply have to disagree with you.
    - BHSPitMonkey 13y ago
      > It's these type of posts that make it to the top of a thread that make me not want to check into HN. > Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN. It's right there in black in white: "I don't like that we have posts that aren't strictly celebratory in nature" (at least about Tesla). For the record, I'm most definitely a fan of Tesla and have utmost respect for the company, but that didn't stop me from appreciating the critical view of this story that was offered by noname123 (in which I learned some things I didn't know about).
NickM 13y ago
Note that they are still selling each car at a material loss; and only managed to show a profitable quarter by trading green credits they gained from their manufacturing. I'm not sure that's entirely accurate. I'm looking at their quarterly results for Q1 2013: gross profit was $96.3 million, but the ZEV credit sales were only $67.9 million for the quarter. Unless I'm missing something, it would appear that they are profitable even without taking the ZEV credit sales into account.
- hncommenter13 13y ago
  I believe you are missing something. "During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin. ZEV credit revenue should decline in future quarters relative to our automotive sales as we grow our sales outside the United States and earn fewer credits on the 60 kWh Model S battery variant for those sales that occur in the United States. Other regulatory credit sales recognized during the first quarter of 2013 were $17.1 million." (1Q2013 10Q, p. 22). $67.9 + 17.1 = $85M in revenue from ZEV + other regulatory credits. Presuming these credits have a nominal cost-I would imagine they're almost 100% margin, given that they're pieces of paper--that leaves $96.3 - 85 = $11.3M in gross profit from selling cars.
  - NickM 13y ago
    Ah, good catch! I did miss that note about the $17.1 million. Also, the $11.3M is partly from other stuff - selling drivetrains for the RAV4 EV, selling apparel, etc - not just selling cars. However, it would seem my main point still stands: it's not accurate to say Tesla wouldn't be profitable without the ability to sell energy credits.
tomasien 13y ago
WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN? What is this? How does this happen? I'm just stunned. Every single time. It's never even the "that's awesome! Keep in mind, there's this additional context" posts, it's just the "this isn't actually awesome, here's why" posts. NO. It's awesome that a private company sold stock that is hot because they're doing well to pay back public debt. Good for fucking them. People wanted to buy it because they see it as valuable, and they paid back the American people with some of that money. Good for them, period.
- csense 13y ago
  > WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN? People who are interested in views that are contrary to the mainstream and don't want HN to become an echo chamber. People who value critical, insightful analysis and discussion by people who are willing to question the "party line" of a particular product's marketing department and fan club. People who don't care about catering to the whims of people who can't stand to read "negative" things on the internet. > NEGATIVE SHIT I question this characterization of noname123's comment. The third paragraph I read as healthy skepticism, not negativity for its own sake. It's certainly information that a responsible investor would want to carefully consider. The comment certainly wasn't "shit," it was well-thought-out and informative. The commenter certainly did his homework.
  - tomasien 13y ago
    HN needs to not be an echo chamber, but the comment sections are becoming the opposite. If you're trying to justify a really pedantic but generally uniformative post (you say it's informative - how? I suppose you could have missed the 10 earlier HN threads about the stock sale, but it wasn't unknown info) by its third paragraph being healthily skeptical I think you're losing steam. The problem isn't pointing out these facts - it's framing them as THE narrative and in a purely negative light.
tomasien 13y ago
I'm not even mad at noname123 for posting this! I'm not! It's totally legit to make this post, although it's not as good as it could be, it's fine. JUST STOP UPVOTING IT!
deleted 13y ago
[deleted]
jjuliano 13y ago
I'm looking at the 'Not Cool Dude' button.
codex 13y ago
There's one more reason to repay the loan early: it prevents the US from exercising 3M stock warrants worth about $250M. The fund raising also allowed Elon to borrow money against his other holdings to purchase more Tesla stock off the open market. Agreed that sustainable profitability is an open question: because Tesla knew they would be raising more money after their first profitable quarter, they could pull put all the stops for maximum profitability, and go back to spending more once the round was in the bank. Will that happen? Unclear. But when you raise money you usually spend it.
TrevorJ 13y ago
The point about green credits in interesting. I suspect you will find many people who argue that it should be considered a legitimate business strategy, and other who view it as an artificial market that could evaporate at any given time depending on the whims of congress.
daniel-cussen 13y ago
I still think it's better for the private sector to assume the risk inherent in that debt than it is for the public sector to do so.

andrewtbham 13y ago

Where do you get 40M for the float? Yahoo indicates 73M. Plus doesn't dilution go against all outstanding shares (115M)? http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics

Nrsolis 13y ago

If I take a step back from this, I'd say it's bad strategy to bet against Elon Musk. IMHO, part of what makes his companies appealing is that he has a remarkable track record of keeping his head down and just getting sh!* done. I'm very impressed with his work ethic and vision and I think Tesla is going to go far. Secondly, if he is successful and manages to bootstrap and entire electric car industry from the ground up, what kind of effect do you think this innovation is going to have on the world? Think of the massive investment in geopolitical resource availability that will be mitigated by the diversification of fuel options for auto transport. He already hit one home run with PayPal, hit a triple with SpaceX, and might steal home with Tesla. He's a star player in a very sparse field of real innovators right now. Disclosure: I also trade TSLA options, but I'm quite bullish on the company.

encoderer 13y ago
Musk had very little to do with PayPal. He built a competing product, X.com, which was acquired by PayPal. Musk then served as CEO and if his interview in "Founders at Work" is any indication, he didn't do much besides piss off Max Levchin before stepping down after a relatively short tenure. I love what Musk has done post PayPal, but no reason to rewrite history here.
- pbreit 13y ago
  > Musk had very little to do with PayPal That's false.
- aj37 13y ago
  I know that's what the PayPal Wars book implies but Musk has argued against this version of history pretty strongly - http://gawker.com/230076/an-alternate-history-according-to-elon-musk http://gawker.com/230076/an-alternate-history-according-to-e.... I imagine the truth is somewhere between the two extremes.
- packetbeats 13y ago
  According to the "PayPal wars" book PayPal didn't acquire X.com, it was a 50-50 merger. It is true (again, according to this book written by a PayPaler) that Musk wasn't as important to the PayPal success as the "funder" title would imply, but he did drive innovation into the space as a competitor and then saved the company from the hands a clueless CEO. It's very hard to say if PayPal would have succeeded without him. For one, it would have probably been much harder for PayPal to raise 100 Mio without the X.com merger. They got that amount shortly before the dotcom crash, so it was crucial for their survival.
- wamatt 13y ago
  >Musk had very little to do with PayPal. That's rather inaccurate. Musk's company was X.com and Thiel/Levchin/Noseks's was called Confinity. They had a 50/50 merger in early 2000, and at first the new company was called X.com. Furthermore, Confinity[1] was doing Palm Pilot payments under the PayPal brand[2], while X.com was working on internet money transmission over email. Which idea was more useful in the long run? (hint: if you chose Palm Pilot's - you're wrong) Much of the disinformation stems from a book called the "The Paypal Wars" written by a Thiel fanboy, that is embarrassingly biased. Musk writes: "The only negativity in recent years was due to a book called The PayPal Wars, written by a sycophantic jackass called Eric Jackson. This guy was one notch above an intern at PayPal in the first few years of the company, but gives the impression he was a key player and privy to all the high level discussions. Eric couldn't find a real publisher, so Peter funded Eric to self-publish the book. Since Eric worships Peter, the outcome was obvious - Peter sounds like Mel Gibson in Braveheart and my role is somewhere between negligible and a bad seed. However, to his credit, Peter didn't realize the book would be as bad as it was and apologized to me personally at a Room 9 board meeting at David Sacks's home in LA."[3] Post-merger it's hard to say who did what exactly, and Levchin for example was instrumental in Paypal's anti-fraud system, a key development that allowed the company to navigate around a potentially ruinous situation. The bottom line is, 3 hyper-smart guys (Thiel, Levchin and Nosek), don't give away essentially 50% of their shares to some someone else (X.com) on a whim. This was a calculated and deliberate decision. Similarly, it's unlikely Musk would have succeeded alone either, and thus why they are all called co-founders of PayPal, Inc. [1] http://en.wikipedia.org/wiki/Confinity http://en.wikipedia.org/wiki/Confinity [2] http://www.halplotkin.com/cnbcs029.htm http://www.halplotkin.com/cnbcs029.htm [3] http://gawker.com/230076/an-alternate-history-according-to-elon-musk* http://gawker.com/230076/an-alternate-history-according-to-e...

revelation 13y ago

They already raised all the money prior to this announcement. They raised debt precisely because they didn't want to dilute shareholders (too much) and give existing short positions an easy out. You certainly realize they could have easily funded $1B through shares only at their then stock price level. Elon predicted $200M capex in the next quarter, mainly to complete tooling and optimize factory processes. He clarified that they are not looking to scale the manufacturing process any further than its current level (400-500 cars/wk). Stock price is up because Tesla only had $200M in cash equivalents available, which is a pretty small number for a car manufacturer, especially one looking to develop a new model (Model X) for a 2014 release and expanding charging/sales/service infrastructure. Disclosure: I think technical trading is bullshit.

Nrsolis 13y ago
Heh. It's all about the Alpha.

mncolinlee 13y ago

There's something bizarre about griping that they reached profitability from green credits. To clarify, these green credits were voluntarily paid by OTHER CAR COMPANIES like Fiat who did not innovate enough to develop their own green cars. In essence, these credits work similarly to carbon credits or sulfur credits. They are NOT paid by taxpayers or by the government in any way. It was a capitalist regulation in California designed to provide financial incentives and produce more revenue for innovative green companies. Companies have the option to develop their own green cars, buy credits, or else cede the California market to competitors. Those incentives have been very successful. There are far more new models of low and zero emissions vehicles than ever before. Remember the popular Saturn EV-1 from fifteen years ago? It and other green vehicles were killed because California removed its regulations mandating production of low emissions vehicles.

Shivetya 13y ago
they are not free, they are paid by any consumer who directly or indirectly has a relationship with someone who purchases a vehicle from one of the makers who is paying these credits. Voluntary my ass. If they don't pay what happens? Your fined. Its a tax. It is paid by consumers because they buy cars. If anything its California's way of having people in other states fund their initiatives. I guess kudos can go to Musk for making sure his company is positioned physically and product wise to make the most from it. It is a disguised transfer from one company to another facilitated by the state. It is not voluntary if a fine results
- sageikosa 13y ago
  You must remember that when the government decrees that everyone must do something or else and everyone does it, it is considered voluntary.
  - jabits 13y ago
    Yes, because our government is there by our voluntary action. If we find our government is making us do things involuntarily, we can change it.

pbreit 13y ago

> selling each car at a material loss Is that true? I know the company overall would not have turned a profit without the credits but was under the impression that they currently had positive gross margins on the Model S.

damoncali 13y ago
Gross margin, and it's tiny without the credits. Tesla's most recent quarter resulted in an operating loss and a net loss. Edit: my bad. Seems the net income was slightly positive last quarter (with regulatory credits included, without them it's a big old negative).
- pbreit 13y ago
  But the Model S itself is gross margin positive? That's all I was wondering.
  - damoncali 13y ago
    I didn't see it broken out in the financials, but I didn't look terribly hard. I don't think it's unreasonable to assume it's similar to the overall gross margins in the low single digits (2% by my math - ignoring emissions credits).
  - andrewtbham 13y ago
    The gross margin is 17%, but I was surprised to learn that includes ZEV credits. From 10Q: >During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin. http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-13-212354&CIK=1318605 http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-13-...
- NickM 13y ago
  Even without regulatory credits included, they made a profit. Check the filing: total profit for the quarter was $96.3 million, and revenue from ZEV and other regulatory credits was only about $85M.

jforman 13y ago

"Make no mistake, this is as much a PR ploy by Tesla to pump up their offering." I don't get your negativity here. The fact that a major green tech company working with government support is able to shift financing over to the private market is, indeed, a remarkable feat and is absolutely something they have a right to crow about. The government, too — it's an example of a progressive system working as designed. As for PR's impact to stock price...TSLA is 70% institutional owned. Anybody with a material stake in the company is savvy enough to know that they're not suddenly self-sustainably cash-flow positive.

der3k 13y ago
"I don't get your negativity here." I didn't get the negativity. He was just stating a reasonably deduced thought.
- varjag 13y ago
  it's really hard to find a phrase starting with "make no mistake" that doesn't culminate with a negative or dismissive slam. As urbandictionary puts it, "a weasel-y, thought-terminating phrase that is supposed to lend gravitas to a weak position in an argument. Used by doomsayers and the overly dramatic."
  - abstrakraft 13y ago
    urbandictionary also lists "superman" as a sexual maneuver. Your move.
    - der3k 13y ago
      Damn.
sillysaurus 13y ago
I don't get your negativity here. It didn't read as negative.

guelo 13y ago

Considering the terms of the government loan were very favorable (rates equal to the interest rates on Treasury notes in 2010) it doesn't make sense to me that they would want to pay it off early and get rid of all that liquidity. As a quickly growing company didn't they have something better to spend that $450 million on?

orijing 13y ago
Like a butt-load of positive PR? I think they calculated that the positive PR value (or maybe mitigating negative PR) was worth the incremental cost of capital from the normal markets vs. from the DOE
Eliezer 13y ago
Yeah, that puzzled me too. The PR couldn't be worth that much, could it? How could the interest possibly be more expensive than the stock dilution? Unless they just don't like having debt outstanding which seems understandable... though with debt that cheap...
mathattack 13y ago
I interpret it as a way to keep competitors at bay. "The public markets can fund electric cars. No more government loans are needed for us, or anyone else for that matter."
Coko 13y ago
They paid it off early because the loan came with restrictive agreements that prevented Tesla to stay competitive. This is from Tesla's own words, see my post. https://news.ycombinator.com/item?id=5755082 https://news.ycombinator.com/item?id=5755082
cjg_ 13y ago
Well there are some restrictions imposed on Tesla by this load. See http://www.businessinsider.com/elon-musk-borrows-150-million-to-buy-tesla-2013-5 http://www.businessinsider.com/elon-musk-borrows-150-million... There is says that the loan requires Musk to have a 65% ownership of the company which of course is expensive to maintain when they are raising money.

JumpCrisscross 13y ago

"TSLA rose on the news despite diluting shareholders is because coupled with the announcement, Elon Musk mentions that he will personally put an additional 100mil into the secondary offer" Dilution doesn't care who does the diluting - a share issued to Elon Musk dilutes as much as a share issued to TIAA-CREF. Regarding the double down, I do not believe Elon Musk's commitment to Tesla was in doubt previously. Its effects were probably limited to the marketing of the issue. More critical is: (a) TSLA maturing to where it can issue debt (albeit, of the convertible type), (b) its extrication from a volatile political situation, and, (c) its new liquidity buffer. I do not think it is appropriate to characterise it as a "PR ploy". As you mentioned, they are still unit loss-making - that those losses need to be financed is more than superficial.

newbie12 13y ago
I've been a vocal critic of Tesla and the DoE loan program, and I'm really glad to see Tesla pay off the loan and move into private markets. I want to root for this company to succeed and now I feel like I can do that. Taxpayers still got ripped off given the size of the loan relative to the company, and the huge downside risk, but I'm glad Musk pulled it off!

ghshephard 13y ago

It's these type of posts that make it to the top of a thread that make me not want to check into HN. Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN. I take particular issue with, "Make no mistake, this is as much a PR ploy by Tesla to pump up their offering." Paying back $450mm in loans isn't just a "ploy" - it's actually raising the money and sending it back to the taxpayers. And, at the same time, doing something innovative and forward looking - building electric cars - which, (look at Fisker) - is NOT a slam dunk, even with green credits. I, for one, am applauding Tesla today. We can do that without saying that they will be successful in everything, and in the future. But today they are.

BHSPitMonkey 13y ago
> It's these type of posts that make it to the top of a thread that make me not want to check into HN. Posts that provide insightful explanation about the story? Yes, less of that and more unqualified positive gushing, please. There is nothing wrong with offering an informed opinion, even if (especially if) it's not in full alignment with the prevailing attitude of the hivemind.
- ryguytilidie 13y ago
  Man, I'm really not sure that you could have missed his point any more. How could you read what he wrote and POSSIBLY think he was arguing that we need "more unqualified gushing"? You pretty much just made up a strawman and beat the bejesus out of it for no reason... I'll be the first to call out unqualified gushing, but if that's what we're calling a factual account of a company paying back a loan I simply have to disagree with you.
  - BHSPitMonkey 13y ago
    > It's these type of posts that make it to the top of a thread that make me not want to check into HN. > Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN. It's right there in black in white: "I don't like that we have posts that aren't strictly celebratory in nature" (at least about Tesla). For the record, I'm most definitely a fan of Tesla and have utmost respect for the company, but that didn't stop me from appreciating the critical view of this story that was offered by noname123 (in which I learned some things I didn't know about).

NickM 13y ago

Note that they are still selling each car at a material loss; and only managed to show a profitable quarter by trading green credits they gained from their manufacturing. I'm not sure that's entirely accurate. I'm looking at their quarterly results for Q1 2013: gross profit was $96.3 million, but the ZEV credit sales were only $67.9 million for the quarter. Unless I'm missing something, it would appear that they are profitable even without taking the ZEV credit sales into account.

hncommenter13 13y ago
I believe you are missing something. "During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin. ZEV credit revenue should decline in future quarters relative to our automotive sales as we grow our sales outside the United States and earn fewer credits on the 60 kWh Model S battery variant for those sales that occur in the United States. Other regulatory credit sales recognized during the first quarter of 2013 were $17.1 million." (1Q2013 10Q, p. 22). $67.9 + 17.1 = $85M in revenue from ZEV + other regulatory credits. Presuming these credits have a nominal cost-I would imagine they're almost 100% margin, given that they're pieces of paper--that leaves $96.3 - 85 = $11.3M in gross profit from selling cars.
- NickM 13y ago
  Ah, good catch! I did miss that note about the $17.1 million. Also, the $11.3M is partly from other stuff - selling drivetrains for the RAV4 EV, selling apparel, etc - not just selling cars. However, it would seem my main point still stands: it's not accurate to say Tesla wouldn't be profitable without the ability to sell energy credits.

tomasien 13y ago

WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN? What is this? How does this happen? I'm just stunned. Every single time. It's never even the "that's awesome! Keep in mind, there's this additional context" posts, it's just the "this isn't actually awesome, here's why" posts. NO. It's awesome that a private company sold stock that is hot because they're doing well to pay back public debt. Good for fucking them. People wanted to buy it because they see it as valuable, and they paid back the American people with some of that money. Good for them, period.

csense 13y ago
> WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN? People who are interested in views that are contrary to the mainstream and don't want HN to become an echo chamber. People who value critical, insightful analysis and discussion by people who are willing to question the "party line" of a particular product's marketing department and fan club. People who don't care about catering to the whims of people who can't stand to read "negative" things on the internet. > NEGATIVE SHIT I question this characterization of noname123's comment. The third paragraph I read as healthy skepticism, not negativity for its own sake. It's certainly information that a responsible investor would want to carefully consider. The comment certainly wasn't "shit," it was well-thought-out and informative. The commenter certainly did his homework.
- tomasien 13y ago
  HN needs to not be an echo chamber, but the comment sections are becoming the opposite. If you're trying to justify a really pedantic but generally uniformative post (you say it's informative - how? I suppose you could have missed the 10 earlier HN threads about the stock sale, but it wasn't unknown info) by its third paragraph being healthily skeptical I think you're losing steam. The problem isn't pointing out these facts - it's framing them as THE narrative and in a purely negative light.

tomasien 13y ago

I'm not even mad at noname123 for posting this! I'm not! It's totally legit to make this post, although it's not as good as it could be, it's fine. JUST STOP UPVOTING IT!

deleted 13y ago

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jjuliano 13y ago

I'm looking at the 'Not Cool Dude' button.

codex 13y ago

There's one more reason to repay the loan early: it prevents the US from exercising 3M stock warrants worth about $250M. The fund raising also allowed Elon to borrow money against his other holdings to purchase more Tesla stock off the open market. Agreed that sustainable profitability is an open question: because Tesla knew they would be raising more money after their first profitable quarter, they could pull put all the stops for maximum profitability, and go back to spending more once the round was in the bank. Will that happen? Unclear. But when you raise money you usually spend it.

TrevorJ 13y ago

The point about green credits in interesting. I suspect you will find many people who argue that it should be considered a legitimate business strategy, and other who view it as an artificial market that could evaporate at any given time depending on the whims of congress.

daniel-cussen 13y ago

I still think it's better for the private sector to assume the risk inherent in that debt than it is for the public sector to do so.