Are you also investing in Tesla?

[AnOutsider]

For a change of pace:

I'm expecting a secondary offering in Q3 or Q4. I expect Elon will announce that they are accelerating the BlueStar program and want to raise cash to help them get it to market in late 2014, but I don't think they will make the move until the Model S is out there. The've already asked the market for money twice on nothing but promises, I think this time they will want to have something to show before they ask again, but I do think it has to be this year. That's why I say Q3 or Q4.

Discuss.

I could see that scenario happening, and I can see it being well-received as well. Delivered on Model S and trying to deliver on something more mainstream? Take our money!

 

[Norbert]

I think I was skeptical until they began producing the Roadster without the two-speed transmission. I never liked the idea of the transmission, and when they took it out that showed me that they could address a serious problem with a radical design change, abandoning something they had been seriously committed to when it just wasn't working. At that point, and with the revised Roadster selling and performing well, I became convinced, even though I was not ready to buy one yet.

Which suggests to me that we both see a core quality in Tesla, which is not just about one specific choice they made, but about their general approach. Even though on this forum many got critical about the interior design choices, whereas a poll actually gave good results, I think most of us would agree that there is this core-quality which makes us optimistic that Tesla will work through all those challenges.

 

[Norbert]

My limit order just kicked in @ 33. Here's to secretly hoping some of my cheaper limits kick in as well

Here is open hoping they won't. Sorry.

 

[Trnsl8r]

My limit order just kicked in @ 33. Here's to secretly hoping some of my cheaper limits kick in as well

So you're the one... I saw it dip to $33.00 exactly earlier in the morning, but my order didn't execute.

Obviously it has by now... and that leaves me with a decent position even though it kept dropping a little bit. Still, $33 seems like a good deal to me.

 

[JRP3]

I just picked up some more at $32.5886 Still hoping for some high $20's action but I'm less certain of seeing it at this point.

 

[daniel]

For a change of pace:

I'm expecting a secondary offering in Q3 or Q4. I expect Elon will announce that they are accelerating the BlueStar program and want to raise cash to help them get it to market in late 2014, but I don't think they will make the move until the Model S is out there. The've already asked the market for money twice on nothing but promises, I think this time they will want to have something to show before they ask again, but I do think it has to be this year. That's why I say Q3 or Q4.

Discuss.

Would they sell more shares, and if so, at what price, and what would that do to the value of existing shares?

Or would they float a bond issue, and if so, what sort of rating and coupon would it carry? (Obviously, I'm asking for opinions, since nobody can know.) I suppose the bonds would have a junk rating, since the company's future is uncertain in the eyes of the market. That means, what? 6%? 8%?

Or would they just seek to raise private capital, as opposed to a public offering?

I'd hate to see my shares devalued by the issue of more. I don't even know if they can legally do that. But if they issued bonds at an acceptable rate, I'd buy some.

Which suggests to me that we both see a core quality in Tesla, which is not just about one specific choice they made, but about their general approach.

Absolutely.

Even though on this forum many got critical about the interior design choices...

I think the interior design is pretty good, given the very limited space. My biggest complaint is that any loose change in my pockets WILL fall out, and WILL end up under the seat where it is impossible to remove.

Errrmm... maybe you weren't talking about the Roadster... I've never seen an S in real life.

 

[AnOutsider]

So you're the one... I saw it dip to $33.00 exactly earlier in the morning, but my order didn't execute.

Obviously it has by now... and that leaves me with a decent position even though it kept dropping a little bit. Still, $33 seems like a good deal to me.

Sowwwwy

Agreed though. I'm happy with this position. It may drop some more, but I'm already up buying under where I sold.

 

[Citizen-T]

Would they sell more shares, and if so, at what price, and what would that do to the value of existing shares?

Yes, they will likely sell more shares. Why? Because like you pointed out, they would probably have to pay a hefty interest rate since they are not exactly financially sound. Also, their stock has been on fire. The offering will likely be priced close to whatever the stock is trading at when they do the offering. So, if we are in the low 40's, that's roughly how much they could do a secondary at.

It will dilute the value of shares that you own.

I'd hate to see my shares devalued by the issue of more. I don't even know if they can legally do that. But if they issued bonds at an acceptable rate, I'd buy some.

They can legally do that, and in fact they have already done it once (last June I think?).

Nobody "likes" seeing their shares diluted by a secondary, but you have to think bigger. If the company borrowed money instead and took on more debt, that would also devalue your shares (investors would pay less because there are few profits since some is being used to service the debt). If they did a private placement, your shares would be devalued (exactly the same as a secondary except not just anyone can get in).

Remember, if your shares are diluted a bit, but because Tesla has a bunch more cash they can bring BlueStar to market before anyone else enters that market and makes a fortune, then your diluted shares shoot way up, and you win. If on the other hand they have to wait an extra year to do BlueStar because they didn't do a secondary for fear of diluting shareholders, then another company beats them to it and BlueStar loses first mover advantage, then what? Your shares aren't diluted, but they also aren't worth as much either.

Give me the diluted shares that are worth more. The bank doesn't ask me if my money came from selling diluted or non-diluted shares when I deposit it.

Besides, if you are worried about your investment being diluted, you can always participate in the offering. That's what Elon did: Tesla Shows How To Run A Secondary Offering, With Insider Buying (TSLA) - 24/7 Wall St.

 

[clmason]

Citizen-T, I hope this happens, I want me a gen 3 vehicle sooner than later. But as I posed in another thread, the issues with gen 3 and collapsing the time line may be a function of battery costs coming down/battery efficiency improvements. If they launch too soon there is no chance for for gen 3 hitting its price point as batteries may be too pricey. Just my speculation...

 

[gg_got_a_tesla]

Citizen-T, I hope this happens, I want me a gen 3 vehicle sooner than later. But as I posed in another thread, the issues with gen 3 and collapsing the time line may be a function of battery costs coming down/battery efficiency improvements. If they launch too soon there is no chance for for gen 3 hitting its price point as batteries may be too pricey. Just my speculation...

Yes, the projected battery cost and efficiency improvements in the next 3-5 years would dictate BlueStar's impact and popularity. Tesla wouldn't want to compete with the LEAF-esque Infiniti LE and such but, would want to have a far more compelling (higher range, better performance) EV sedan for the masses.

I'd have to say moving the gen 3 timeline up too much without atleast 2 years of Model S production and the beginning of Model X production under the belt (so, roughly late 2013, early 2014) would come across as iffy to potential investors; consequently, a premature secondary offering - in Q3/Q4 2012 - may not fare well.

 

[vfx]

..., if you are worried about your investment being diluted, you can always participate in the offering. That's what Elon did: Tesla Shows How To Run A Secondary Offering, With Insider Buying (TSLA) - 24/7 Wall St.

Win Win for Elon there.

 

[Uncle Ron]

EDIT,,

 

[bonnie]

nice surprise ... had a buy order in at 32.50, didn't expect to see that execute anytime soon ... traveling today, just logged in & saw the price. I have a total number of shares I want to hold in my portfolio, almost there.

 

[Norbert]

Nobody "likes" seeing their shares diluted by a secondary, but you have to think bigger. If the company borrowed money instead and took on more debt, that would also devalue your shares (investors would pay less because there are few profits since some is being used to service the debt). If they did a private placement, your shares would be devalued (exactly the same as a secondary except not just anyone can get in).

With a government loan with good conditions, it would seem any devaluation would revert when the loan is paid back. And this would be as much in the original sense of the loan program as any other project I'm aware of.

 

[Robert.Boston]

I'm not totally convinced. I am not in the auto industry but I would guess that there is not that much of a difference between the Model S and X platform as compared to the Gen III Bluestar. If I remember correctly the frame platform is modeled on a new Lotus technology that promised ease of changes for different models. Unlike an ICE that would require a lot of re-engineering I'm thinking Tesla's motors may be a direct insert. And with the battery pack they would just cram in as many as would fit between the front and rear axles.

The assembly line was configured for extra shifts which I remember Elon once saying it was only a little bit of extra money so they did it upfront and not wait. Don't know if they could use the same line but if they can that would be the way to go. It would not surprise me if they already have the body stamps for Bluestar.

The GenIII/Bluestar will need to be built on a substantially smaller skateboard than the Model S/X platform. So, although I expect that there's a lot of learning that can inform GenIII, I doubt that there is a lot of common engineering.

The other big capital cost that Tesla will need to incur to bring the GenIII to market is a radical build-out of its stores and service centers. The current marketing apparatus can't support selling and servicing 100k vehicles/year. Given Tesla's chosen "own the network" approach, they have capital costs and running expenses that other manufacturers dole out to their dealer network.

 

[Uncle Ron]

EDIT,,

 

[Norbert]

I think they would roll out a few just like Model S / X and let market demand drive production. So if you can use one production line for Model S - X - Bluestar with multiple shifts then why bet the farm to start production at 100K?

Was already thinking along those lines, that Tesla could start producing Bluestar on (additional or existing) low-volume lines, if battery cost is still going down, and build higher-volume line(s) as cost goes down and sales build up.

 

[Steph]

Iamthecaliflower is not posting anymore...

Nervous breakdown?

 

[daniel]

Yes, they will likely sell more shares. [...] It will dilute the value of shares that you own. [...] They can legally do that, and in fact they have already done it once [...].

Nobody "likes" seeing their shares diluted by a secondary, but you have to think bigger. If the company borrowed money instead and took on more debt, that would also devalue your shares (investors would pay less because there are few profits since some is being used to service the debt). If they did a private placement, your shares would be devalued (exactly the same as a secondary except not just anyone can get in).

Remember, if your shares are diluted a bit, but because Tesla has a bunch more cash they can bring BlueStar to market before anyone else enters that market and makes a fortune, then your diluted shares shoot way up, and you win.

Yes, that all makes sense. Thanks for putting it in perspective. Not sure if I'd buy more, but I guess I'd think about it. As I've said before, I don't see the stock making money for me because I just like owning a bit of it, and I'd probably never sell my shares. My real investments are in much more boring stuff.

Iamthecaliflower is not posting anymore...

Nervous breakdown?

Maybe Cali took my advice and decided to let the shares sit and stop looking at the price. Wasn't really posting frequently, anyway.

 

[Citizen-T]

With a government loan with good conditions, it would seem any devaluation would revert when the loan is paid back. And this would be as much in the original sense of the loan program as any other project I'm aware of.

With a government loan comes a lot of media scrutiny and public dislike. I don't think the board would consider another government loan. Devaluation isn't completely undone when the loan is paid off. You've still lost all your interest expenses along the way. Creating shares out of thin air and selling them to raise money doesn't cost you interest.

I think when the board evaluates all the available options, they will go with the secondary. While it does dilute the current shareholders, it is the most effective way to grow the value of our shares. It's also the cheapest money available that doesn't come with a Government Motors stigma, and if there is a successful Model S launch, they will be in the perfect position to capitalize on the inevitable short squeeze.

They need the money now to fund R&D and start building out the stores. These things take years, if they want to start deliveries in late 2014, then they need to get started now. Q3 or Q4 just seems right.

Now, if something goes wrong with the S launch, that's a different story.