Near-future quarterly financial projections

[EVNow]

The big question I haven’t been able to answer is why was tesla in such a rush to report earnings so early.

I'd not call it early. Afterall FB & MSFT were on the same day. May be by historical Tesla standards … not otherwise.

ps : May be one of the things the CFO has as a target is to do the ER last Wednesday of the month ? They did it in Q1 as well.

 

[tmoz]

How is Musk's liquidity? If they needed a billion or two in cash, couldn't he short term loan it? Or long term for that matter?

 

[jschwefel]

This is a really good question. Anyone have ideas?

Bad news doesn’t get better with age.

 

[anthonyj]

How is Musk's liquidity? If they needed a billion or two in cash, couldn't he short term loan it? Or long term for that matter?

Yes, but think, that looks horribly desperate. It’s better that he raises equity and he can be a part of it like 10-20% of the raise

 

[azaz]

Yes, but think, that looks horribly desperate. It’s better that he raises equity and he can be a part of it like 10-20% of the raise

yep, it's a break glass in case of emergency thing.

 

[Singer3000]

I think it happens sooner rather than later. I think Elon knows his stock is under attack. Also - the next decision on the sec vs Elon case was supposed to be Tuesday. That was pushed to Friday. Probably wanted that out of the way to aid in cap raise. It’s tough to raise money if u have that in the air.

The big question I haven’t been able to answer is why was tesla in such a rush to report earnings so early.

It would have been problematic to have raised equity before releasing the Q1 results, given how far away they were from guidance of "optimistically targeting a small profit". The FSD investor day felt to me like a pitch to some raise fresh money.

 

[SBenson]

@SBenson Actually I do agree that Tesla's cash situation was probably dire mid-quarter Q1. And probably will face a mid-quarter Q2 cash crunch as well.

I'm unclear though on why you think they'd be on the verge of declaring bankruptcy when if they really needed money, what's stopping them from raising capital?

note: btw, I do think they'll announce a cap raise next week.

That indeed is a very good question.

Let me flip that around and ask this: So why exactly did Tesla not raise capital in Q1 or even better in 2018?

Tesla raised capital every single year - except 2018!

Here is summary, including Equity and Debt, but NOT any secured debt or loans, for TSLA and SCTY combined (detailed table at the end):

So what happened in 2018? Why not raise in 2018 especially now that we know that the firm was 'single digit weeks' away from bankruptcy?

One theory is EM was just overly optimistic and he did not foresee the demand crash and cash crunch.

There are other theories that Tesla is somehow blocked from raising capital. The block could be any of
a) Lack of investor appetite from Buy side, especially bond market, developed a sour feeling given how Musk pumped/handled the last 1.8 bil raise
b) Lack of support from Sell side
c) Regulatory (SEC) block - or just mere lack of cooperation to approve deals

In my mind there were certainly attempts to raise capital, there were lots of loose data points. But the most notable is Semi/Roadster unveil. Musk could have easily said we need to raise capital to build the manufacturing capcity for these. But instead he was rallying the single piece Semi around for deposit chump change.

So if we don't know why Tesla didn't raise capital in Q1 or earlier. We still don't know what might (continue to) block it.

Finally now in Q1 10-Q doc we see the mention of "we may choose to seek alternative financing sources". This to me very much reads like the Silverlake deal that SCTY did, which basically marked the beginning of the end.

Having said all that. Liquidity or lack of only changes the timeline somewhat. Ultimately the unwinding, if at all, would happen fundamentally due to demand. Lots of people are getting carried away with "management guidance". Note that all of the guidance is contingent on the assumption that Tesla will sell through everything they intend to produce at current prices.

Full capital raise table:

 

[neroden]

Finally now in Q1 10-Q doc we see the mention of "we may choose to seek alternative financing sources". This to me very much reads like the Silverlake deal that SCTY did, which basically marked the beginning of the end.

Bad analogy, given that SolarCity was a bank, and Tesla, on the whole, isn't. (Apparently even Model 3 leasing is going to be strictly third-party leasing partners, if I read the 10-Q correctly.)

Having said all that. Liquidity or lack of only changes the timeline somewhat. Ultimately the unwinding, if at all, would happen fundamentally due to demand. Lots of people are getting carried away with "management guidance". Note that all of the guidance is contingent on the assumption that Tesla will sell through everything they intend to produce at current prices.

Not disagreeing with that. But anyone suggesting that demand is weak, or that demand will not increase, is not thinking clearly.

I remember the demand for Model S -- there was a seeming weak spot in early 2013, and then it just kept going up until it was higher than anyone had expected.

So far there has been no evidence at all of weak demand for Model 3. (Even the evidence of "weak" demand for Model S & X is pretty weak evidence.) There's been evidence of serious production problems (repeatedly), so I worry about that.

I do worry more about service, given that a bad service reputation *can* hurt demand, and probably is already hurting demand. But I do really think Tesla's working on fixing it and that they are starting to fix it.

 

[gluu]

That indeed is a very good question.

Let me flip that around and ask this: So why exactly did Tesla not raise capital in Q1 or even better in 2018?

Tesla raised capital every single year - except 2018!

Here is summary, including Equity and Debt, but NOT any secured debt or loans, for TSLA and SCTY combined (detailed table at the end):

View attachment 402036

So what happened in 2018? Why not raise in 2018 especially now that we know that the firm was 'single digit weeks' away from bankruptcy?

One theory is EM was just overly optimistic and he did not foresee the demand crash and cash crunch.

There are other theories that Tesla is somehow blocked from raising capital. The block could be any of
a) Lack of investor appetite from Buy side, especially bond market, developed a sour feeling given how Musk pumped/handled the last 1.8 bil raise
b) Lack of support from Sell side
c) Regulatory (SEC) block - or just mere lack of cooperation to approve deals

In my mind there were certainly attempts to raise capital, there were lots of loose data points. But the most notable is Semi/Roadster unveil. Musk could have easily said we need to raise capital to build the manufacturing capcity for these. But instead he was rallying the single piece Semi around for deposit chump change.

So if we don't know why Tesla didn't raise capital in Q1 or earlier. We still don't know what might (continue to) block it.

Finally now in Q1 10-Q doc we see the mention of "we may choose to seek alternative financing sources". This to me very much reads like the Silverlake deal that SCTY did, which basically marked the beginning of the end.

Having said all that. Liquidity or lack of only changes the timeline somewhat. Ultimately the unwinding, if at all, would happen fundamentally due to demand. Lots of people are getting carried away with "management guidance". Note that all of the guidance is contingent on the assumption that Tesla will sell through everything they intend to produce at current prices.

Full capital raise table:


View attachment 402041

Deepak Ahuja explicitly stated in one of the recent earnings calls in 2018 that there were no blockers to raising capital. To me, he even seemed surprised people were asking this question. The obvious reason to not raise capital is to avoid dilution. Management also thinks they were not financially disciplined so raising capital would only exacerbate the issue. Living close to the edge allows management to push employees, who are shareholders, to work crazy hard and be financially disciplined.

 

[neroden]

So if we don't know why Tesla didn't raise capital in Q1 or earlier.

Actually, I believe we do know. Musk's said outright that they'd gotten to the point where throwing money at problems wasn't working. You might write that off as an excuse, but frankly I think there's a lot of evidence that it's true. Service communications, internal communications, sales communications, parts shortages, inconsistency of customer experience, all couldn't be solved by throwing money at it. Delivery problems couldn't be solved by throwing money at them, apart from the purchase of the small trucking company. Production problems... well, buying Grohmann and Perbix and Tesla Tool & Die was throwing money at the problem, but after that, throwing money at the problem didn't seem to be effective.

 

[DaveT]

That indeed is a very good question.

Let me flip that around and ask this: So why exactly did Tesla not raise capital in Q1 or even better in 2018?

Tesla raised capital every single year - except 2018!

Here is summary, including Equity and Debt, but NOT any secured debt or loans, for TSLA and SCTY combined (detailed table at the end):

View attachment 402036

So what happened in 2018? Why not raise in 2018 especially now that we know that the firm was 'single digit weeks' away from bankruptcy?

One theory is EM was just overly optimistic and he did not foresee the demand crash and cash crunch.

There are other theories that Tesla is somehow blocked from raising capital. The block could be any of
a) Lack of investor appetite from Buy side, especially bond market, developed a sour feeling given how Musk pumped/handled the last 1.8 bil raise
b) Lack of support from Sell side
c) Regulatory (SEC) block - or just mere lack of cooperation to approve deals

In my mind there were certainly attempts to raise capital, there were lots of loose data points. But the most notable is Semi/Roadster unveil. Musk could have easily said we need to raise capital to build the manufacturing capcity for these. But instead he was rallying the single piece Semi around for deposit chump change.

So if we don't know why Tesla didn't raise capital in Q1 or earlier. We still don't know what might (continue to) block it.

Finally now in Q1 10-Q doc we see the mention of "we may choose to seek alternative financing sources". This to me very much reads like the Silverlake deal that SCTY did, which basically marked the beginning of the end.

Having said all that. Liquidity or lack of only changes the timeline somewhat. Ultimately the unwinding, if at all, would happen fundamentally due to demand. Lots of people are getting carried away with "management guidance". Note that all of the guidance is contingent on the assumption that Tesla will sell through everything they intend to produce at current prices.

Full capital raise table:


View attachment 402041

@SBenson It kind of sounds like a conspiracy theory that there's something "blocking" Tesla from raising capital. I don't see any evidence of that. Can't they just raise money at practically any time by doing an equity raise?

 

[EVNow]

There are other theories that Tesla is somehow blocked from raising capital. The block could be any of
a) Lack of investor appetite from Buy side, especially bond market, developed a sour feeling given how Musk pumped/handled the last 1.8 bil raise
b) Lack of support from Sell side
c) Regulatory (SEC) block - or just mere lack of cooperation to approve deals

Given that all the analysts have continued to clamor for Tesla raising money, I doubt there is no appetite. Not sure what you mean by (b) … why would bears need to support a cap raise ? While during the "take private" tweet, SEC may have tried to block it, there was no problem before that. The best time would have been right after Q3 ER, I guess.

Now I think they should wait for Q3 again and they can raise money cheaper after a profitable quarter.

 

[StarFoxisDown!]

Given that all the analysts have continued to clamor for Tesla raising money, I doubt there is no appetite. Not sure what you mean by (b) … why would bears need to support a cap raise ? While during the "take private" tweet, SEC may have tried to block it, there was no problem before that. The best time would have been right after Q3 ER, I guess.

Now I think they should wait for Q3 again and they can raise money cheaper after a profitable quarter.

That's a scenario that I could support. Wait until Q3 earnings which would time up well with Giga 3 becoming operational, TE ramping up volume and margin, announce Giga 4(Euro) as well as announce Semi, Roadster, and Y are starting initial trial production runs. Say the reason for the cap raise is to fund Giga 4, volume production ramps of Semi/Roadster/Y

 

[neroden]

@SBenson It kind of sounds like a conspiracy theory that there's something "blocking" Tesla from raising capital. I don't see any evidence of that. Can't they just raise money at practically any time by doing an equity raise?

In fact, as we just discovered in the 10-Q, Tesla can just ask to expand its Line of Credit, and banks will hand it an extra $600 million in credit without blinking.

 

[neroden]

That's a scenario that I could support. Wait until Q3 earnings which would time up well with Giga 3 becoming operational, TE ramping up volume and margin, announce Giga 4(Euro) as well as announce Semi, Roadster, and Y are starting initial trial production runs. Say the reason for the cap raise is to fund Giga 4, volume production ramps of Semi/Roadster/Y

If Tesla does an equity raise later in the year, the stated reason will be to deleverage the balance sheet. At the moment, they seem to have absolutely no problem doing debt raises, and actually did two in Q1 (China and increasing the main line of credit)

 

[EVNow]

That's a scenario that I could support. Wait until Q3 earnings which would time up well with Giga 3 becoming operational, TE ramping up volume and margin, announce Giga 4(Euro) as well as announce Semi, Roadster, and Y are starting initial trial production runs. Say the reason for the cap raise is to fund Giga 4, volume production ramps of Semi/Roadster/Y

And show some major improvements in FSD. May be get $5 Billion in capital. If and when they actually get robotaxi working, they can do another to fund the car inventory.

 

[schonelucht]

@SBenson It kind of sounds like a conspiracy theory that there's something "blocking" Tesla from raising capital. I don't see any evidence of that. Can't they just raise money at practically any time by doing an equity raise?

The theory goes that SEC investigation blocked shelf registration due to TSLA not being a well known issuer in good standing anymore. I know way too little about regulation to even know if that is plausible, possible or likely. But it sure gets repeated a lot on TSLAQ. And while does guys are super biased against Tesla, they generally do dig up TSLA stuff up way before the long side on here or /r/teslamotors does (see the 4000 page insurance registration, was circulating in TSLAQ twitter days before it got posted here)

 

[DaveT]

The theory goes that SEC investigation blocked shelf registration due to TSLA not being a well known issuer in good standing anymore. I know way too little about regulation to even know if that is plausible, possible or likely. But it sure gets repeated a lot on TSLAQ. And while does guys are super biased against Tesla, they generally do dig up TSLA stuff up way before the long side on here or /r/teslamotors does (see the 4000 page insurance registration, was circulating in TSLAQ twitter days before it got posted here)

Is there any evidence that SEC "blocked shelf registration" for TSLA?

 

[SBenson]

@SBenson It kind of sounds like a conspiracy theory that there's something "blocking" Tesla from raising capital. I don't see any evidence of that. Can't they just raise money at practically any time by doing an equity raise?

Well I go back to the same question.

You yourself has said “Tesla's cash situation was probably dire mid-quarter Q1”.

We have seen all sorts of couch shaking to know that was true. Backing out from end of qtr numbers also show that mid quarter things were “dire”.

SO, why did Tesla not raise capital if it were so easy?

Why sell EAP/FSD for half price on previously purchased cars? A terrible financial move as well as it angered the earlier purchasers. This is just one example.

Why not just raise capital instead of all that chaos?

TSLAQ has its theories. I don’t know if any of it is true... However I do know that Tesla has NOT acted as if it had access to capital.

 

[EVNow]

Why sell EAP/FSD for half price on previously purchased cars?

Reduce loss ?

They did increase their working capital loans. Probably all the needed to do. I don't think EM wants to raise money when the SP is depressed. That is leaving money on the table.