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A high-risk $500M loan from Uncle Sam (read: You and me, against our knowledge or direct choice) has created a $35B company, in which we the investor have no st

A high-risk $500M loan from Uncle Sam (read: You and me, against our knowledge or direct choice) has created a $35B company, in which we the investor have no stake.

gitah 11y ago
That's the difference between loaning money and buying equity in a company.
- ElComradio 11y ago
  We should have insisted on owning a stake, given the risky nature of the loan, and the size, at the very least.
  - kbenson 11y ago
    Large government loans to big industries are not uncommon. Ford secured a 5.9 billion dollar loan from the government in 2009 (not a bailout, a loan to retool factories).
    - ElComradio 11y ago
      That's not right either, but at least it's less wrong, as Ford had a far greater chance of repayment. Government just should not be making loans like this to private entities at all.
mikeash 11y ago
Better than blowing another $1 trillion on another pointless Mideast war or a fighter jet that can't fight. If making a $500 million loan that not only gets paid back but produces a valuable and productive American company is the worst thing my government did today, I'd count us all extremely lucky.
randomaxes 11y ago
US Govt will collect at least 15% capital gains on that 35B plus 20-40% of the salaries. It's not equity, but it's pretty close.
- mikeyouse 11y ago
  And local governments get sales tax on each car sold as well.. Figure 7% average sales tax (most cars are sold in CA - 7.5%, NY - 4.5%, MA & TX - 6.25%), and an average price of $80k; 11,500 Model Ss would equate to about $65M into state coffers for Q2 alone. Of course, many are sold overseas so discount that number a bit, but either way, states are probably happy.
efuquen 11y ago
I don't understand why this is getting downvoted. The 'loan' the US made was extremely high risk and taxpayers got a terrible ROI for the amount given and the risk taken: http://www.slate.com/articles/business/moneybox/2013/05/tesla_is_worse_than_solyndra_how_the_u_s_government_bungled_its_investment.html http://www.slate.com/articles/business/moneybox/2013/05/tesl... Edit: I am a big fan of Tesla, SpaceX, and the feats Elon Musk has accomplished, but I don't think that means one can't be critical of him, his companies, or the way taxpayer money might have been spent to prop them up. It's undeniable that if the US govt had received some equity stake taxpayers could have more equally shared in Tesla's success, and I don't think there would have been anything unreasonable about that.
- epistasis 11y ago
  It's getting downvoted because it's unnecessarily inflammatory, and ignorant of common practices with many other companies, both for companies that are well-established and for companies that bringing forth strategic emerging technologies.
  - ElComradio 11y ago
    Please describe how it is inflammatory. Please describe how I implied Tesla was the only company who benefits from government largess.
- mikeash 11y ago
  I think we as taxpayers got a great ROI on it, since new economic activity within the country translates into increased prosperity and increased tax revenue. Looking purely at interest earned on a government loan misses half the picture since the government gets to essentially double-dip on all the success stories.
- pbreit 11y ago
  Tesla is almost single-handedly dragging the world into the electric car age so I think the loan served its purpose quite magnificently. Oh, and the government got all its money back and then some. The only mistake was allowing the buyback in lieu of equity upside.
cyrus_ 11y ago
That loan was made because the US has significant interests in catalyzing the growth of electric transport, for many reasons. It was not designed to make the country money directly. Tesla is far from alone in receiving such loans from the government. Oil companies receive far more money as direct tax breaks (i.e. never paid back).
jonknee 11y ago
That loan will end up enabling billions of dollars of tax revenue for Uncle Sam. Probably the single most successful loan in the history of government loans.
- ElComradio 11y ago
  Any tax revenue increase would remain if Uncle Sam had equity as well. Look at this way: It's your money. Literally. Would you, as a VC, or as a kickstarter-type group, give $500M to a company, with no equity stake, but Elon telling you, "Hey, it's risky I know, but it's a great investment because it will kick off all this other economic activity that will benefit you in the long run, so you don't really need equity; you will reap the benefits indirectly in greater magnitude." Of course not. It's only acceptable because it's a cause many HNers believe in, and the money does not seem "real" since it's abstracted out through tax collection and distribution. How much of a pay cut would you accept being forced on you to pursue these dreams? Might be the next dream, you don't agree with (like a trillion dollar war).

A high-risk $500M loan from Uncle Sam (read: You and me, against our knowledge or direct choice) has created a $35B company, in which we the investor have no stake.

gitah 11y ago

That's the difference between loaning money and buying equity in a company.

ElComradio 11y ago
We should have insisted on owning a stake, given the risky nature of the loan, and the size, at the very least.
- kbenson 11y ago
  Large government loans to big industries are not uncommon. Ford secured a 5.9 billion dollar loan from the government in 2009 (not a bailout, a loan to retool factories).
  - ElComradio 11y ago
    That's not right either, but at least it's less wrong, as Ford had a far greater chance of repayment. Government just should not be making loans like this to private entities at all.

mikeash 11y ago

Better than blowing another $1 trillion on another pointless Mideast war or a fighter jet that can't fight. If making a $500 million loan that not only gets paid back but produces a valuable and productive American company is the worst thing my government did today, I'd count us all extremely lucky.

randomaxes 11y ago

US Govt will collect at least 15% capital gains on that 35B plus 20-40% of the salaries. It's not equity, but it's pretty close.

mikeyouse 11y ago
And local governments get sales tax on each car sold as well.. Figure 7% average sales tax (most cars are sold in CA - 7.5%, NY - 4.5%, MA & TX - 6.25%), and an average price of $80k; 11,500 Model Ss would equate to about $65M into state coffers for Q2 alone. Of course, many are sold overseas so discount that number a bit, but either way, states are probably happy.

efuquen 11y ago

I don't understand why this is getting downvoted. The 'loan' the US made was extremely high risk and taxpayers got a terrible ROI for the amount given and the risk taken: http://www.slate.com/articles/business/moneybox/2013/05/tesla_is_worse_than_solyndra_how_the_u_s_government_bungled_its_investment.html http://www.slate.com/articles/business/moneybox/2013/05/tesl... Edit: I am a big fan of Tesla, SpaceX, and the feats Elon Musk has accomplished, but I don't think that means one can't be critical of him, his companies, or the way taxpayer money might have been spent to prop them up. It's undeniable that if the US govt had received some equity stake taxpayers could have more equally shared in Tesla's success, and I don't think there would have been anything unreasonable about that.

epistasis 11y ago
It's getting downvoted because it's unnecessarily inflammatory, and ignorant of common practices with many other companies, both for companies that are well-established and for companies that bringing forth strategic emerging technologies.
- ElComradio 11y ago
  Please describe how it is inflammatory. Please describe how I implied Tesla was the only company who benefits from government largess.
mikeash 11y ago
I think we as taxpayers got a great ROI on it, since new economic activity within the country translates into increased prosperity and increased tax revenue. Looking purely at interest earned on a government loan misses half the picture since the government gets to essentially double-dip on all the success stories.
pbreit 11y ago
Tesla is almost single-handedly dragging the world into the electric car age so I think the loan served its purpose quite magnificently. Oh, and the government got all its money back and then some. The only mistake was allowing the buyback in lieu of equity upside.

cyrus_ 11y ago

That loan was made because the US has significant interests in catalyzing the growth of electric transport, for many reasons. It was not designed to make the country money directly. Tesla is far from alone in receiving such loans from the government. Oil companies receive far more money as direct tax breaks (i.e. never paid back).

jonknee 11y ago

That loan will end up enabling billions of dollars of tax revenue for Uncle Sam. Probably the single most successful loan in the history of government loans.

ElComradio 11y ago
Any tax revenue increase would remain if Uncle Sam had equity as well. Look at this way: It's your money. Literally. Would you, as a VC, or as a kickstarter-type group, give $500M to a company, with no equity stake, but Elon telling you, "Hey, it's risky I know, but it's a great investment because it will kick off all this other economic activity that will benefit you in the long run, so you don't really need equity; you will reap the benefits indirectly in greater magnitude." Of course not. It's only acceptable because it's a cause many HNers believe in, and the money does not seem "real" since it's abstracted out through tax collection and distribution. How much of a pay cut would you accept being forced on you to pursue these dreams? Might be the next dream, you don't agree with (like a trillion dollar war).