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CuriousSunbird: Tesla must raise capital

Jun 28, 2017
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The only one I've seen in any detail is Moody's. They are raising the possibility of Tesla not having enough money from operations to cover debt coming do and expenses, they are not saying that is a certain outcome. I would be surprised if the the other 3 do not say the same thing. I agree with any of them (probably all of them) that say it is a possibility but not a certainty. As you can see in my post above, I estimate that possibility at 15%.
I think the Q1 financials will help us in this regard. In particular the $900 million in convertible debt due in February will move to current liabilities and I think working capital may approach negative $2 billion. If it is anywhere close to that, it is difficult to see how they avoid raising funds.
 
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Jun 28, 2017
868
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Oregon
There are unfounded opinions here like "little chance of making a sustainable material profit" or "has no easy way of getting [capital]." In fact, Tesla has had very little difficulty attracting capital, and if you believe that is currently overvalued, that would just be proof of the point. Also fact is that Tesla has be growing revenue organically more than 50%/y as long as it has been public. A growth rate like that requires a lot of front loaded investment and spending. Once is slows revenue growth down, profitability is expected and quite doable. So the question is how sustainable is this high revenue growth rate? It is disingenuous to ignore this kind of organic growth and fixate on profitability.
"Unfounded" and "disingenuous" are not synonyms for "with which I disagree".

Revenue growth is certainly a positive for a company, provided that it can restrain cost growth to a lower rate. That has yet to be proven for Tesla.
 

trentbridge

Member
Feb 20, 2018
121
542
Nevada
The bull/bear arguments are too obsessed with the manufacturing of cars and don't see that Tesla is going to have two more profitable segments to their business...the energy storage business and the "dealership" business. There's also the possibility of the "supercharger" locations becoming profit-centers by franchising the locations for a convenience store operator..in my opinion.
I think that Tesla can make money in 2018 Q3 and beyond, selling used Tesla vehicles, servicing vehicles that are out of warranty, and doing repairs. The services division has been a money loser to date, ($200 million in 2017) but I think the business model is changing and the "Dealership" can become profitable..
In 2017 Services was a billion dollar business and I could see that increasing 50% in 2018 and generating 10% profits by Q4....$50 million profits.
As for the energy storage products - the fact that they have increased the price of the Powerwall 2 recently, is a sign that Tesla thinks it can benefit from demand for these types of products..
 

ggr

Expert in Dunning-Kruger Effect!
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Mar 24, 2011
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Their working capital at the end of last year was around positive $3B. You seriously think they burned $5B in one quarter, when they already said that most of the capital expenditure was finished for the time being? Also, negative working capital is a great way to be carted off to jail.
 
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Todd Burch

Voltage makes me tingle.
Nov 3, 2009
8,149
32,527
Smithfield, VA
Also, when Barclays, UBS, Moodys & Jeffries all say that Tesla will need at least $2 billion in extra cash over the next 12 months, what are you seeing that they are missing?

Refer to their price targets for TSLA over the last few years. Then ask yourself if you trust their judgement.

Also, need is different than want.
 

TradingInvest

Active Member
Mar 8, 2017
1,699
13,694
USA
I strongly suspect the bulk of shorts very much feel as if they want other people to believe those things, but, in fact, do not actually believe those things themselves. intellectually disingenuous. emotionally very honest... they feel as if they really really want people to believe this stuff- look at how hard they push it into media "coverage" of Tesla : )

I talked to many shorts privately. I feel most of them are intellectually challenged. They are fooled by the FUD from those disingenuous shorts. There is a group of shorts who want to actively destroy Tesla. Those who don't believe this is going on, carefully study the Ackman shorting Herbalife case. There is also a book described how shorts take position then actively destroy the targets (interestingly, Chanos was mentioned in that book). This is how the short game is played.
 
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Waiting4M3

Active Member
Apr 13, 2016
3,328
12,066
San Jose, California
Also, when Barclays, UBS, Moodys & Jeffries all say that Tesla will need at least $2 billion in extra cash over the next 12 months, what are you seeing that they are missing?
What they're missing is what Tesla will do with that $2b, if they choose to borrow that money. They think Elon will have a BBQ on the roof of GGF and burn it all. I think Tesla will make $20b in the next 5 years using that $2b.
 
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Jun 28, 2017
868
811
Oregon
Their working capital at the end of last year was around positive $3B. You seriously think they burned $5B in one quarter, when they already said that most of the capital expenditure was finished for the time being? Also, negative working capital is a great way to be carted off to jail.
You must be using a different definition of working capital. I am using Current Assets ($6.57 billion) less Current Liabilities ($7.67 billion).

Don't follow your jail reference.
 
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Jun 28, 2017
868
811
Oregon
I talked to many shorts privately. I feel most of them are intellectually challenged. They are fooled by the FUD from those disingenuous shorts. There is a group of shorts who want to actively destroy Tesla. Those who don't believe this is going on, carefully study the Ackman shorting Herbalife case. There is also a book described how shorts take position then actively destroy the targets (interestingly, Chanos was mentioned in that book). This is how the short game is played.
I don't think most of us are as emotionally invested as you think. Of course I want the share prices of all the companies where I am short to go down (ideally to $0), just as I was the share prices of all the companies where I am long to go up (ideally to $gazillions). But if I cease to believe in a position, I just cut it.
 
Jun 28, 2017
868
811
Oregon
The bull/bear arguments are too obsessed with the manufacturing of cars and don't see that Tesla is going to have two more profitable segments to their business...the energy storage business and the "dealership" business. There's also the possibility of the "supercharger" locations becoming profit-centers by franchising the locations for a convenience store operator..in my opinion.
I think that Tesla can make money in 2018 Q3 and beyond, selling used Tesla vehicles, servicing vehicles that are out of warranty, and doing repairs. The services division has been a money loser to date, ($200 million in 2017) but I think the business model is changing and the "Dealership" can become profitable..
In 2017 Services was a billion dollar business and I could see that increasing 50% in 2018 and generating 10% profits by Q4....$50 million profits.
As for the energy storage products - the fact that they have increased the price of the Powerwall 2 recently, is a sign that Tesla thinks it can benefit from demand for these types of products..
I don't think 'too big to fail' covers it, exactly. I agree that Uncle Sam would be unlikely to come directly to the rescue were Tesla to actually approach bankwuptcy. But Tesla also is not GM or TRU in another, more important IMO metric: customer interest. Neither GM nor TRU had by-a-wide-margin record-setting $1k down deposits for a sight-unseen vehicle. Neither GM nor TRU are upending a massive established industry. Neither GM nor TRU are considered in nearly the same light in terms of consumer fervor as Tesla.

So my view is that if Tesla were to come close to failing, someone like Google or Apple, or Tencent, etc, would scoop them up and largely continue with the plan. We know this was essentially lined up in 2013 with Google but never actually executed as Tesla recovered.
I think BYD is the more likely acquirer.
 

elasalle

driVIN(188xx) it !!
Jan 26, 2016
4,515
25,736
VA
Also, when Barclays, UBS, Moodys & Jeffries all say that Tesla will need at least $2 billion in extra cash over the next 12 months, what are you seeing that they are missing?

Why? Why does Tesla need the money? Do they need the 2B for maintaining the 2K/week S+X and achieving the 5K/week M3 goals - OR do they need it to fund new product lines - 10K M3/week, Semi, Roadster, Model Y . Why?
 
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SteveG3

Supporting Member
Supporting Member
Sep 21, 2012
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early in the discussion, I gave my thoughts on the "bankrupt" narrative that led to the discussion that was moved here from one of the main threads. my post was not moved, and I wanted it to be part of this discussion, so, I'm adding it here for anyone who finds their way to this thread.

"sideshow stuff.

the discussion of bankruptcy in general is a sideshow, the fact that it is not effectively challenged, let alone readily and thoroughly debunked by the financial media is quite informative about the quality of media "coverage" of Tesla.

Tesla bankruptcy in the next year or so? My rough estimate, under 1 in 25 million.

1) Odds that Tesla needs funds before finishing ramp to 5K/week and generating funds to take care of debt? 15%

2) If 1), odds that Tesla could not raise such funds via a cap raise or debt offering if needed? 1%

3) If 2) odds that Elon Musk could not and would not use a small fraction of his over $10 billion in SpaceX holdings to pay finance Tesla's viability (something with far more extreme precedent)? under 0.05%

That is one in over a million right there.

4) if 3) odds that Tesla would not be bought out for at least $20 billion? 20%

So, less than one in 5 million that about $125 isn't something of a floor. I'd put the odds that all these events happen and no suitor comes other than a government bailout at less than one in 25 million. Odds of a Tesla bankruptcy in the next year or so under 1 in 25 million.

Again, the fact that "Tesla bankruptcy" chatter is not debunked by the financial media, and the confidence of those making such absurd claims is not called into question by the media are both quite informative about the quality of media "coverage" of Tesla."
 

Drax7

Active Member
May 18, 2013
2,114
4,937
Florida
Talk of bankruptcy is dangerous, it may scare of creditors and suppliers and become
Self fulfilling. It’s important to immediately squash them.
 
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Jun 28, 2017
868
811
Oregon
Why? Why does Tesla need the money? Do they need the 2B for maintaining the 2K/week S+X and achieving the 5K/week M3 goals - OR do they need it to fund new product lines - 10K M3/week, Semi, Roadster, Model Y . Why?
Convertible debt of about $1.2 billion maturing between now and February. Expected $2 billion operating cash burn. Expected minimum cash hold requirement $500 million.

New product lines would be extra.
 

Yggdrasill

Active Member
Feb 29, 2012
4,107
7,107
Kongsberg, Norway
Convertible debt of about $1.2 billion maturing between now and February. Expected $2 billion operating cash burn. Expected minimum cash hold requirement $500 million.

New product lines would be extra.
If you assume the operating cash burn is closer to zero over the next 12 months, things look rosier. Means they can spend a billion+ on capex and still be fine.
 

Reciprocity

Active Member
Feb 27, 2017
4,160
10,905
Chicagoland
Also, when Barclays, UBS, Moodys & Jeffries all say that Tesla will need at least $2 billion in extra cash over the next 12 months, what are you seeing that they are missing?

What have those companies projected Model 3 deliveries to be. You might have your answer if you can find that out.

Those organizations do not know anymore then you or I about what bills are coming due and what suppliers are extending what terms. They are just guessing. Elon knows. Elon says they wont need to raise any money. Period. But you want a reason why, Elon is able to be cash flow positive with 5k/w model 3 deliveries. All the massive Capex for Model 3 will have been paid for as of the end of Q2 and Q2 itself will be the smallest portion. Many are making estimates based on Capex that never goes down. It could very well go down significantly over the next 2 quarters, though I expect Tesla to start duplicating the parts of the model 3 lines required to go to 10k/w before years end. Whats nice about that is that they will not have any Capex due on that until those robots are running and certified to be free of issues. Then they will have some terms to pay for those robots, probably 15-30 days at a minimum. The difference between going from 5k - 10k is that there is almost nothing that will need to be proven. Some parts of the line will just be sped up and there could be issues there, but for the new equipment, it will be able to contribute right away as it will be duplicates of existing processes. Known entities where its just a matter of turning it on and validating that it works. Certainly nothing is that easy, but this is as easy as something this complex gets. The risks are much lower and the total capex to go from 5-10k has been quoted to be as low as 50% of the original 5k. This will be based on part on how fast the non duplicated parts can go. We should have more color on this during the CC. They ask the question every call.

This could cause the short squeeze everyone has been waiting for. With this much short interest and what could be announced on the call, I would be afraid if I was short. Elon hates those people with a passion. They made him cry his own tears on TV! No one makes Elon cry his own Tears! I would not put it past him to have set this all up to crush those fools. Think about it.. its great for the employees. The moral will be at an all time high after a short squeeze and the UAW can go eat a stick. No employee is trading options for union dues.
 

Irishjugg

Member
May 15, 2015
707
1,756
Chicago, IL
Also, when Barclays, UBS, Moodys & Jeffries all say that Tesla will need at least $2 billion in extra cash over the next 12 months, what are you seeing that they are missing?
Well, they have said that before and then been shocked by cash balance and liquidity increasing.

In general they seem to be doing simple linear extrapolation. I think what they are missing is that their model is *sugar*.
 
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Jun 28, 2017
868
811
Oregon
If you assume the operating cash burn is closer to zero over the next 12 months, things look rosier. Means they can spend a billion+ on capex and still be fine.
That's very true. And if we assume a share price of $375 and a 30% gross margin on all the cars, pretty much the whole problem goes away.
 

ggr

Expert in Dunning-Kruger Effect!
Supporting Member
Mar 24, 2011
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That's very true. And if we assume a share price of $375 and a 30% gross margin on all the cars, pretty much the whole problem goes away.
What does the share price have to do with it? If they don't need to raise more capital the share price is completely irrelevant, since Tesla doesn't get any of the money from stock trading. And you don't need to assume 30% gross margin either. The numbers are easy to crunch, and others have done so already, but you choose to ignore them.
 

MattEnth

Bear and short
Mar 27, 2018
82
-71
San Francisco, CA
Well, they have said that before and then been shocked by cash balance and liquidity increasing.

No, actually.

In 2012, Musk said they would be profitable that year and wouldn't need to raise capital.

In 2014, Musk said they'd be profitable by Q3 2015.

In Q1 2015, Musk said they'd be profitable by Q4.

In Q4 2015, Musk said they'd be profitable by Q1 2016.

In 2016, Musk said they'd achieve full-year profitability and would not need to raise capital.

In 2017, Musk said they would be cash flow positive by Q4. Q4 posted a record loss.

At every single point, Wall Street disagreed with him. And at every single point, Wall Street was right.




Musk said they'd be profitable by Q3 and would not need to raise money. Wall Street is disagreeing. Who will you believe?

Short of the stars aligning, Tesla will absolutely have to raise money this year to stay afloat. And since when have the stars ever aligned for Tesla? Have they hit any targets ever? They just missed 2.5k/week by Q1. All signs indicate they're missing the 5k/week by Q2.

Tesla will raise money this year. It's not a question of if, but how and when.

(Credit this article)
 
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