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Elon asked Google to buy Tesla for 6bil in 2013

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While CapOp makes a few good points, none of that shows anything factual in what this author is proposing. The very last time we saw Elon stressing about the company was when the production ramp wasn't progressing at the speed that Elon was counting on. That was around the September/October 2012 time frame. Production was about 80 to 100 cars a week and it needed to be 5 times as much. That was before the MTCOTY award was given out and Tesla hadn't even fulfilled all the Signature orders. Elon was interviewed and he looked exhausted and said candidly that if the company could not reach production goals then there was a possibility of Tesla failing. That was it. Money was very tight at that time. That was the last time Elon was negative about Tesla and where it was going.

Elon is candid about such things. Here is an article talking about the future from November of 2012:

Elon Musk: Tesla has made it through the Gigaom

It highlights the fears that Elon had in the months prior to this article and exudes the confidence he felt that the company had moved beyond the weak production era.

It was about a week prior to this article that Elon had his famous "Shorts are in for a tsunami of hurt. They should get out now." That is hardly the statement of someone wanting to unload the company.

CEO: Tsunami of Hurt Coming for Those Shorting Tesla| Latest News Videos | Fox Business
 
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CapOp, I appreciate your taking the time to write up your analysis and recollections.

Deferrals may have been putting more pressure on Tesla in the Spring of 2013 than I realized (fwiw, I'm not sure I understand what tipped this off to you from those links you shared, but I'm not sure it's necessary to go back into).

My BS flag is still way up on this author, as,

1) if there were a deferral situation, I find it unlikely the company was in a "death spiral," as he put it.
2) he attributed deferrals to the visor and door handle issues, without any mention of the Broder article (which was about shoddy journalism, not a Tesla misstep). I find his whole characterization of the early reception of the car very skewed.
3) he claims Tesla fired "senior executives" in this timeframe ("and promoted hungry junior employees"), I don't recall even one such firing in that time period. This is likely false, and just a way to suggest a desperate "death spiral" situation that never was.
4) I'm quite suspicious that the "the word of mouth on the car sucked" line he attributes to Musk, if Musk actually said this, was taken so grossly out of context as to completely change it's meaning. Word of mouth was certainly very strong on TMC.


Does any of this actually matter?

I think so. Today, already, Cory Johnson had the author on Bloomberg, and Cory was trying to portray this excerpt as revealing that Musk emphatically lies and hides the most critical information from investors. Bears will be buying this book and trying to do more of the same from a bookfull of stories. I think it's worth making it clear the extent the author's account is fiction.

Yeah, I had a very negative view of much of what was written. I started off wanting to call BS to everything he wrote, and I knew I was intensively tracking sales at the time, so I figured I'd do a debunking. Once I reminded myself of my concerns about April and my earlier concerns about deferrals (which was already becoming apparent in December) though I decided there was probably some kernals of truth.

My view is that he talked to a source with limited info (probably on the sales side) and a low degree of intestinal fortitude. And between them they puffed this up to a level that wasn't warranted. There were real issues, sales probably did tank for a couple of months after Broder, the factory did close at the beginning of April (for whatever reason) and April deliveries were very week. If you extrapolated that trend forward indefinitely you could end up with a grim outlook, so I could see Elon knocking heads to put things back on course.

But any rational view of the period should have seen it as a blip. It had such a minor effect on deliveries (literally we are talking about a few hundred deliveries that I was expecting didn't take place) that I was able to interpret it in a positive light in real time.

As to the negative media, I felt it was such a weak phenomenon that I personally decided I could change the narrative, and did so. Tesla had access to all of the data and was in a much stronger position to change it over any given weekend with a fact based tweet by Elon.

The fundamentals were still that Tesla was in possession of one of the best reviewed cars in history, and it only got better when Consumer Reports weighed in.

I believe it highly likely that Elon explored takeover possibilities. Folks here were cheering him on at times, and there were several credible rumors that have popped up.

But I think talk of any near term impending bankruptcy at any time in 2013 is just nonsense. There might've been contingency discussions in 2012 when the issue was much more in doubt, but by March 2013 all of the pieces were in place for a stellar Q1 announcement, and there was a clear path to success even in the face of negative press and reduced orders.

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CapOp, I appreciate your taking the time to write up your analysis and recollections.

Deferrals may have been putting more pressure on Tesla in the Spring of 2013 than I realized (fwiw, I'm not sure I understand what tipped this off to you from those links you shared, but I'm not sure it's necessary to go back into).

Those concerns began at the end of December 2012 when Tesla forced everyone to configure.

Going off memory I want to say either everyone on the list was forced, or was it just the first 5k initially?

Either way, my recollection is that in context it seemed odd that people with such high reservation numbers were being forced to commit, in many cases with relatively near term delivery dates. The alternative reasons besides possible deferrals and cancellations was the batching process, but I'm wanting to say that by February that was no longer credible.

By May it could no longer be denied that Tesla had ordered configurations on most of the 20k (ish?) reservations, maybe 10k cars had been delivered and there was no real waiting list of any type left in the U.S. (paint was the last one, which was done in April/May). Walk up customers were getting like 1-2 month turn arounds.

The only question seemed to be whether it was cancellations or deferrals, but the shareholder disclosures for the amount of deposit money that Tesla was holding pointed strongly to deferrals, and did for at least the rest of the year that I was trying to nail down what happened to those reservations.

(all of this going from memory, so take treat the numbers with some skepticism)
 
3) he claims Tesla fired "senior executives" in this timeframe ("and promoted hungry junior employees"), I don't recall even one such firing in that time period. This is likely false, and just a way to suggest a desperate "death spiral" situation that never was.

This is absolutely true. Happy to hold a private conversation about it, but not going to blast it out across the net. It was handled very discretely (obviously, since you don't recall it :) ).
 
Anyone want to take odds on George Blankenship being the source?

Whoever it was was bitter about power hungry underlings, and the whole slant seems to come from a source on the Sales side.

George didn't leave until November, and my impression was that it was because of the problems in Europe were finally clear at the top levels, but if there were sales issues in the U.S. as well that were only mitigated by a tiger team mining the deferral list that would explain a lot.

Deferrals were always huge issue in my mind, and the specific reference to that in the article, and that piece of info having the potential to explain other things is the best argument to me in favor of this article. It's so obscure and wonky, but it was a huge issue that in terms of modeling demand, and it was deeply mysterious why so many people would defer instead of canceling.

The bottom line is the number of actual deliveries, which were always satisfactory. But the implications of a deferral mining scenario implies weaker underlying demand, while also giving Tesla a way to nevertheless meet guidance.
 
If there was a shutdown in early April 2013, it is just as likely that it was simply to give the factory workers a rest after working OT in Q1 (just like they did in the first week of Q1 of 2015) and/or to upgrade the paint shop etc. I see no reason to think it was because they had no more customers to deliver cars to. Indeed, there is good evidence to support the opposite:

There were deferrals, but many for legitimate reasons: many wanted the MC red (which required the paint shop upgrade I believe) and others wanted coil instead of air suspension. Both caused a lot of deferrals. Also, the 40's had to wait for a long time. Many were delayed because P85's were prioritized. Some, like me, who ordered a P85 were surprised to be able to get their car as early as Jan when they were expecting July/Aug. Prioritizing the P85 over others caught my finances flat footed and I needed to delay ~6 weeks to raise cash for the purchase. But there was never any doubt about getting the car. Moreover, I felt bad about leapfrogging 85's, 60's and 40's who had been on the wait list longer than I had (but not enough to not get my car ASAP:tongue:). Thus, there were many many waiting eagerly for their cars after my March delivery (85's, 60's, 40's, MC red, coil suspension). IMHO, more than enough to fill the production in Q2 without significant new orders.

Overall, I think the final results speaks for itself: 2013 was a total success.
 
This is absolutely true. Happy to hold a private conversation about it, but not going to blast it out across the net. It was handled very discretely (obviously, since you don't recall it :) ).

I recall the axe being wielded in Europe (or China in a more recent example), and I the quiet way that GerogeB shuffled off the scene seemed like it was related, if only because of the time issue.

But your comment reminds me of other cuts too, some of which were blogged about and had an impact in the community.

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If there was a shutdown in early April 2013, it is just as likely that it was simply to give the factory workers a rest after working OT in Q1 (just like they did in the first week of Q1 of 2015) and/or to upgrade the paint shop etc. I see no reason to think it was because they had no more customers to deliver cars to. Indeed, there is good evidence to support the opposite:

There were deferrals, but many for legitimate reasons: many wanted the MC red (which required the paint shop upgrade I believe) and others wanted coil instead of air suspension. Both caused a lot of deferrals. Also, the 40's had to wait for a long time. Many were delayed because P85's were prioritized. Some, like me, who ordered a P85 were surprised to be able to get their car as early as Jan when they were expecting July/Aug. Prioritizing the P85 over others caught my finances flat footed and I needed to delay ~6 weeks to raise cash for the purchase. But there was never any doubt about getting the car. Moreover, I felt bad about leapfrogging 85's, 60's and 40's who had been on the wait list longer than I had (but not enough to not get my car ASAP:tongue:). Thus, there were many many waiting eagerly for their cars after my March delivery (85's, 60's, 40's, MC red, coil suspension). IMHO, more than enough to fill the production in Q2 without significant new orders.

Overall, I think the final results speaks for itself: 2013 was a total success.

The math pointed to many thousands of deferrals even moving into 2014. This was a huge, ongoing issue.

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Though I totally agree that 2013 was a huge success, and that has continued to the present day.

I'm mostly fascinated by this story because deferrals were my personal white whale.
 
One thing that really struck me was the supposed Musk quote about "word of mouth on the car sucked". I joined TMC in Feb 2013, but had been lurking/reading for 9 months before that and the overwhelming impression I got was that the car was awesome. There were some nitpicky things, but overall a wonderful car. Everyone was stoked and owners who took delivery were selling more Model S left and right. I remember lots of people deferring orders for MC Red, coil suspension and the 60kWh version. The article was very at odds with my recollection of events.

As to Broder and lost sales, I think Musk made some comment to the tune of $500 million in lost orders and market cap from that piece of fiction.
 
CNN picked it up:

Elon Musk considered selling Tesla to Google - report - Apr. 20, 2015

If it's not true, I'm sure we'll hear from Elon Musk. But I don't see any reason to doubt it and I fail to see what the big deal is. Asking for:

"Musk's proposal, according to Vance, included $6 billion for the company in addition to $5 billion to be spent on expanding Telsa's factories. Musk also demanded that Google keep him on as Tesla's CEO for eight years or until Tesla built a third-generation electric car that would be sold to mainstream car buyers. Google (GOOGL, Tech30) had to keep Tesla operational until that car hit the road, Vance reported."

Asking for $6B plus $5B in Tesla expansions, plus keeping him on for 8 years is hardly a fire sale over a failing venture. Then he apparently wanted even more, which caused the deal to fail. As they say, anything is for sale for the right price and if Google, Apple or whoever else announces tomorrow that they bought Tesla (or, more properly, its majority of shares) there should be no surprise.
 
Given what CapOp and Bonnie have written, I guess I was somewhat too strong in my earlier call. More of the data points he's going over apparently have some validity, but, some I still find to be gibberish or out of sequence (i.e. Tesla one most of it's biggest Car of the Year Awards in 2012, Motor Trend being the biggest, along with Automobile, and I believe Yahoo's, not the year after this alleged Spring 2013 near death experience).

While Mr. Vance is not making up all the facts, I think he's trying to push and pull them into a narrative that did not happen. I don't doubt that Tesla found itself in rougher water than they expected during this time in 2013, but not a "death spiral" miraculously pulled out of over the course of two weeks.

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CNN picked it up:

Elon Musk considered selling Tesla to Google - report - Apr. 20, 2015

If it's not true, I'm sure we'll hear from Elon Musk. But I don't see any reason to doubt it and I fail to see what the big deal is. Asking for:

"Musk's proposal, according to Vance, included $6 billion for the company in addition to $5 billion to be spent on expanding Telsa's factories. Musk also demanded that Google keep him on as Tesla's CEO for eight years or until Tesla built a third-generation electric car that would be sold to mainstream car buyers. Google (GOOGL, Tech30) had to keep Tesla operational until that car hit the road, Vance reported."

Asking for $6B plus $5B in Tesla expansions, plus keeping him on for 8 years is hardly a fire sale over a failing venture. Then he apparently wanted even more, which caused the deal to fail. As they say, anything is for sale for the right price and if Google, Apple or whoever else announces tomorrow that they bought Tesla (or, more properly, its majority of shares) there should be no surprise.

Canuck, thanks for sharing the CNN link.

Musk and Page very well may have talked about a buyout, and even the outline of what one would be. I think what many of us are responding to is what appears a sensationalized description of the circumstances surrounding such talk or plans. Consider that the author uses the term "death spiral," and the CNN piece you linked opens with:

"Orders for Tesla Model S swooned in early 2013, as word of mouth spread that the electric cars were glitchy and not ready to compete with other luxury brands. Tesla(TSLA) had just two weeks worth of cash left, it had shut down its factory, and the company was in dire need of a bailout."

If you read through the thread, I believe you'll see that many of us consider several points in that brief paragraph to be grossly distorted.
 
CNN picked it up:

Elon Musk considered selling Tesla to Google - report - Apr. 20, 2015

If it's not true, I'm sure we'll hear from Elon Musk. But I don't see any reason to doubt it and I fail to see what the big deal is. Asking for:

"Musk's proposal, according to Vance, included $6 billion for the company in addition to $5 billion to be spent on expanding Telsa's factories. Musk also demanded that Google keep him on as Tesla's CEO for eight years or until Tesla built a third-generation electric car that would be sold to mainstream car buyers. Google (GOOGL, Tech30) had to keep Tesla operational until that car hit the road, Vance reported."

Asking for $6B plus $5B in Tesla expansions, plus keeping him on for 8 years is hardly a fire sale over a failing venture. Then he apparently wanted even more, which caused the deal to fail. As they say, anything is for sale for the right price and if Google, Apple or whoever else announces tomorrow that they bought Tesla (or, more properly, its majority of shares) there should be no surprise.

This. +100
 
Given what CapOp and Bonnie have written, I guess I was somewhat too strong in my earlier call. More of the data points he's going over apparently have some validity, but, some I still find to be gibberish or out of sequence (i.e. Tesla one most of it's biggest Car of the Year Awards in 2012, Motor Trend being the biggest, along with Automobile, and I believe Yahoo's, not the year after this alleged Spring 2013 near death experience).

While Mr. Vance is not making up all the facts, I think he's trying to push and pull them into a narrative that did not happen. I don't doubt that Tesla found itself in rougher water than they expected during this time in 2013, but not a "death spiral" miraculously pulled out of over the course of two weeks.

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Canuck, thanks for sharing the CNN link.

Musk and Page very well may have talked about a buyout, and even the outline of what one would be. I think what many of us are responding to is what appears a sensationalized description of the circumstances surrounding such talk or plans. Consider that the author uses the term "death spiral," and the CNN piece you linked opens with:

"Orders for Tesla Model S swooned in early 2013, as word of mouth spread that the electric cars were glitchy and not ready to compete with other luxury brands. Tesla(TSLA) had just two weeks worth of cash left, it had shut down its factory, and the company was in dire need of a bailout."

If you read through the thread, I believe you'll see that many of us consider several points in that brief paragraph to be grossly distorted.

So much this. If I'm Elon in March 2013 I'm feeling fairly confident about everything except my ability to build a Gigafactory and go do Model 3 on the timeline he wanted. The sums needed for expansion were (and are) so vast that even after the stock tripled (or whatever) in April we had major threads discussing the CapEx crisis and the delicate negotiations with Panasonic and Samsung.

But even assuming a weaker demand profile in the U.S. and the likely expectation that foreign demand would be less than we were thinking at the time, Tesla would still have been in a position to substantially beat the 20k/yr expectations of 2012. Those company models assumed something like 10k in the U.S. so I see no reason for an extreme reaction from Elon if maybe they were only pulling 12-14k new reservation rates in March unless they were down substantially from the 20k/yr (U.S.) rates that we were directly measuring via the reservation thread in late 2012.

Yes, it was clear that a substantial fraction of the older reservations weren't being exercised, but they also weren't being canceled. We could basically infer that even from the outside by Q2, so it certainly must have been clear to Elon. It seems most likely to me that Elon was putting the hammer down to correct for lost momentum rather than because of an assumption of fundamental weakness. That lost momentum was thanks to well defined issues (service, winter performance/Broder, QA issues, concerns about warranty, resale value, or any of the many other mini-dramas that everyone was talking about in the threads that winter).

But I don't see how we get from that drama and the apparent hit to new sales which is inferred from my data and was specifically reported by Elon, to imminent doom in March. That is where I feel the timeline got smudged around and issues and thoughts that were from months and years earlier were kinda grouped together to make that down tick look like an existential crisis.

It could not have been. Tesla was successful in obtaining financing on favorable terms in order to wipe out their government loan after Q4, and they were about to be in a great position to raise enough capital to carry them through any likely crisis they would face in 2013. What they weren't in a position to do was to execute the massive expansion that was Tesla's raison d'etre, and that is almost certainly where Google comes in. That kind of white knight investor was the subject of years of rumors, so this just seems to be confirmation of that combined with some fabulism and some real, if temporary, issues.
 
My view is that he talked to a source with limited info (probably on the sales side) and a low degree of intestinal fortitude. And between them they puffed this up to a level that wasn't warranted.

Wow, if he based that info off of talking to a Tesla employee that is one massive critical fault. We all know how bad tesla employees are at communication. Depending on who you talk to you'll get a completely different story. If the source is any other employee other than Elon himself well then the entire book is probably based on erroneous information.
 
I don't in any way believe that Tesla was close to a bankruptcy in early 2013.

If you're that close to bankruptcy, selling the company for 6 billion while the market cap is at 4 billion isn't a viable possibility.

But I can certainly see the possibility that Elon really really wanted those 5 billion dollars for the Gigafactory, even if it meant handing the company over to Google.
 
I don't in any way believe that Tesla was close to a bankruptcy in early 2013.

If you're that close to bankruptcy, selling the company for 6 billion while the market cap is at 4 billion isn't a viable possibility.

But I can certainly see the possibility that Elon really really wanted those 5 billion dollars for the Gigafactory, even if it meant handing the company over to Google.
I could believe that Tesla was running out of cash in the bank if the rate of new deposits was down and there were significant deferrals. That said, Tesla had (and has) numerous ways of increasing its available cash quickly.

To my (bullish) mind, the bottom line of this story is very positive for Tesla: there is real interest in buying the company. That fact puts a floor under the stock price.
 
I could believe that Tesla was running out of cash in the bank if the rate of new deposits was down and there were significant deferrals. That said, Tesla had (and has) numerous ways of increasing its available cash quickly.

To my (bullish) mind, the bottom line of this story is very positive for Tesla: there is real interest in buying the company. That fact puts a floor under the stock price.

That was my reaction to the blurb, too.
 
I could believe that Tesla was running out of cash in the bank if the rate of new deposits was down and there were significant deferrals.

Many successful businesses go bankrupt because they grow too fast. Fast growth is dangerous for the finances of a company. The delta between the fast increase in spending and the precise moment the cash from customers arrives in the bank can grow very dangerously very quickly. Many entrepreneurs do not see this because they are blinded by the growing number of enthusiastic customers waiting in line to buy a great product. The reality is rosy. But finance is ruthless. Any glitch, like a negative article in the most powerful newspaper in the country (read by rich people = potential customers, people with a reservation), and those deferrals (that is two big glitches), and after a few months the bank can take possession of the company because all of a sudden the cash came in slower than anticipated while spending did not slow, or not as much. It can happen very fast, even to very intelligent people. One quarter you are a very successful businessman, the next you have lost everything.
 
It can happen very fast, even to very intelligent people. One quarter you are a very successful businessman, the next you have lost everything.
How true - look at my old friend Eike Batista. At the beginning of the year he was the world's 8th wealthiest person; by year's end I was worth about $1 billion more than he.
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Full disclosure: because he claims his net worth is a negative $1bn....