Should Tesla make another public offering?

[Ludus]

The last public offering by Tesla (accompanied by a major buy announcement by Elon Musk) was spectacularly successful in that it didn't halt the upward trajectory of the stock and may have helped by eliminating major issues (the federal loan, debt overhang, the pace and scope of the supercharger rollout, capital requirements for the model X rollout).

Tesla still has significant critical uses for new capital like securing the funding for the gen III model and global deployment of superchargers and service facilities.

Another $1 billion round would dilute a lot less than when the stock was at $90. Since half of it wouldn't go to paying off debt, it would go a long way to securing Tesla's plans for the next several years.

Should Tesla take advantage of the market's enthusiasm for it's prospects by raising the new capital needed to fund it's near term global plans?

 

[austinEV]

The reason the first one went so well is that they had a very specific plan on what to do with the money: pay off the loan and capitalize the SC buildout, and have a cash cushion for operations. Almost immediately after the Q1 announcement TMC contributors wrote to beg TM to do a secondary. When stockholders beg you to dilute their shares its a special situation! Everyone understood the obvious and immediate positive affect of that new cash. It is not much of a stretch to suggest that Elon helped light the fuse on the short-sale powder-keg for the specific purpose of doing a secondary. During the Q1 earnings call he even said they would look at it opportunistically.

But since then, they have claimed they can afford the Model E from profits of ongoing operations. They have money for the SC buildout. The only reason to do a secondary now would be to fund a possible battery factory or joint venture. That may be necessary and even good, but they need to make it clear how the money would be sufficient and a good return on investment, and provide a plan for how they would succeed at it which is not easy.

After Q1 it was easy; just do it. This time I think they need to go to the investors and lay out the case very carefully.

 

[blakegallagher]

I agree with AustinEV. I would love to see them do another public offering that will be used to add a second line for model S production. Although they will need to be at 40k production before this so I don't think there is a current need. I think it is fairly safe to say the next two quarters will be positive for cash flow. If not positive than not very negative.


That being said if Elon had an idea for the money chances are good I would support another offering and buy into it (If I had the option)

 

[AlMc]

I would like to see them wait until ramp up to the 'E' car ( about 9-12 months) unless they feel that supply constraints (batteries) are the bottle neck for producing the 'X' model and the ramp up of 40K 'S' production projection for next year.

 

[Sunnyday]

I'd like to see them raise two or three billion to vertically integrate the manufacturing of some key components, like the LI batteries. They could build battery factories in the US, Europe, and Asia. There are over one billion ICE cars that need to be replaced by EVs in the next decade. That's a lot of battery.

 

[lolachampcar]

They need to get the 2X world capacity of cells for G3 somewhere so raising $s today so they have cell capacity in 2017 would seem to make a lot of sense. 500K G3s a year is going to take over 2B cells per year and that capacity simply does not exist today.

 

[Causalien]

No. The news is not good enough for the stock to withstand a public offering so it will fall. And they can't expand the facility fast enough with more money anyway. If they do another offering, it'll be to build both the battery facility and the Model E production line. I believe they are still in the phase of looking for the battery facility location and custom built the production line for Model E. These requires R&D + time, not massive cash injections.

I will wait for a full year of profitability when they announce an annual report of positive income. That's when fundamental investors and retails start saying: "Oh, this company is legit". Once they get GAAP earning solid, then bigger funds will get in. In the future, I believe there will be a time when hedge funds attack TSLA with the fungibility of their GAAP and non-GAAP earnings. Someone will find a way to say that TSLA earnings are fake because of how they play around with Stock compensation or how they do channel stuffing or a glitch in lease financing etc. Most tech companies have to go through this phase and withstand it (AMZN, NFLX, GRPN) after the initial first big run up. I am sure TSLA will have to as well.

 

[Norse]

They should rather just let us pre-order the Model E if they need Money. If they get 100 000 preorders at 5000$ they would have 500 million.

 

[Johan]

They should rather just let us pre-order the Model E if they need Money. If they get 100 000 preorders at 5000$ they would have 500 million.

I like the way you think. There would be a lot of bickering though if they delivered those out of sequence. "I got reservation number 28743 and now my neighbour, who had 45674 got his car delivered before me!"

 

[lolachampcar]

I'll take two.

 

[Norse]

I like the way you think. There would be a lot of bickering though if they delivered those out of sequence. "I got reservation number 28743 and now my neighbour, who had 45674 got his car delivered before me!"

The volume be hopefully abit higher with the Model E. So if theyre abit out of sequence, they will hopefully get the car at almost the same time. I`m gonna get my Whole Family to reserve one each for sure.

 

[Cattledog]

Absolutely do another offering to fund cap-ex for factories overseas to streamline production of Model E (actually really hope they call it that). Rather than diluting shareholder value, the market will read it as part of the growth story and it will fuel additional appreciation.

Then they have to deliver.

 

[TSLAopt]

Absolutely do another offering to fund cap-ex for factories overseas to streamline production of Model E (actually really hope they call it that). Rather than diluting shareholder value, the market will read it as part of the growth story and it will fuel additional appreciation.

I agree 100%
they need the capital to ramp up production and supply faster (especially batteries) and they maybe be able to sell as many as 100k cars next year if so

 

[Citizen-T]

Money is not a bottleneck right now. No point in diluting shareholders just to bank some cash, they have enough. I don't want them to try to grow too fast.

 

[Cattledog]

Money is not a bottleneck to create Model X - similar platform 50%-60% similar parts, etc. But Elon said Gen 3 in 3-4 years and a similarly sized SUV, I'm pretty sure they better be at least on the drawing board for the Factory capacity. I also suspect that he mentioned Europe and Asia because they have some projection metrics about orders that give them great confidence that cleaning up distribution would be highly advantageous.

Gotta get while the getting's good. If they want to make 40,000 cars a year they're set. But they're not going to fund a design/engineering expansion, factory expansion, robot purchase, factory worker hiring/training, batteries, etc. for several hundred thousand cars /year making $10M/quarter. If they wait to time doing it when it seems right, they run the risk that an adverse event will diminish their ability to raise funds - recession driving down luxury purchases, accident when someone couldn't hear and S or driver was goofing with touchscreen, battery barbecue, anything that's not even their fault. Right now they are making 600 cars/week with 2 shifts, 5 days per week. The most they could do out of that line is essentially double it if they work 24/7.

I bet if you asked a lot of businesses if they wished they'd tried to raise money when they could, vs. when they needed it, they'd answer...well we know. Heck, you could argue they didn't NEED to do the last raise when they did - could of held the loan longer, still had a couple hundred million in cash, etc.

I think Elon does it shortly after the $161.88 mark holds for its 20 days out of 30.

But what do I know about running a car company?

 

[Ludus]

Great explanation of the case for another offering Cattledog. Get it while the gettin's good, or risk not gettin it when you need it.

i really like the idea of the reserve deposit to raise capital again, Norse. Tesla is in a much stronger position now than with the first announcement of the Model S and it worked well then. Tesla is much more proven and desirable. Model E could be the largest Kickstarter style campaign in history. Raising capital by pre-selling the product is inherently superior to debt or equity. It costs the company and investors less and potentially has huge marketing effects. Anyone willing to put down a deposit likely makes a commitment that turns them into an evangelist.

Tesla could look at successful kickstarter campaigns to enhance the presale creatively this time. What premiums do people get with their deposit? An invitation to Tesla events? A Tesla jacket? Product or service upgrades? I think you're right, they might well be able to raise 500M this way and 100k people with a deposit down would be awesome free marketing.

 

[austinEV]

They should rather just let us pre-order the Model E if they need Money. If they get 100 000 preorders at 5000$ they would have 500 million.

Yes, this. They could sell 100,000 pre-orders for $5000 each. They get you access to a few free trim options that will be extra options for everyone else and different badging. Make it clear that they will make the 100,000 orders first then switch to the mini SUV. THEN, you make the reservations fully transferable creating a supported sencondary market for reservations. (Heck do this with the 20k sigs too). They will sell the reservations out in a week.

 

[Norse]

Great explanation of the case for another offering Cattledog. Get it while the gettin's good, or risk not gettin it when you need it.

i really like the idea of the reserve deposit to raise capital again, Norse. Tesla is in a much stronger position now than with the first announcement of the Model S and it worked well then. Tesla is much more proven and desirable. Model E could be the largest Kickstarter style campaign in history. Raising capital by pre-selling the product is inherently superior to debt or equity. It costs the company and investors less and potentially has huge marketing effects. Anyone willing to put down a deposit likely makes a commitment that turns them into an evangelist.

Tesla could look at successful kickstarter campaigns to enhance the presale creatively this time. What premiums do people get with their deposit? An invitation to Tesla events? A Tesla jacket? Product or service upgrades? I think you're right, they might well be able to raise 500M this way and 100k people with a deposit down would be awesome free marketing.

I totally agree, and they have done so before

 

[Ludus]

It seems both the Model S design and Kickstarter came out about the same time in 2009, so it's hard to say at first glance if there was a connection with the ideas. With a lower priced higher volume Model E, Tesla could take a look a the range of benefits or premiums offered in Kickstarter campaigns and see if anything might apply. Since this is both a much better funded, proven and stable company than most Kickstarter start-ups, the risk to deposit money is not as great. It may also make sense like most Kickstarter campaigns to offer different levels of benefits at different levels of deposit.

A Tesla rewards credit card that applies earnings to the deposit? Perhaps with options to add automatic charges so you can gradually build up your deposit during the waiting period?

Tesla merch (Jackets, T-shirts, hats) as premiums? Invitations to Tesla events? A chance to win the use of a Model S for a week?

 

[kevin99]

Glad to find this thread.

I would like them to raise a round of capital of $1B+, even if not now.

Think about what message it will send. Elon has mentioned "the battery constraint will be worked out one way or the other". Knowing him how strongly he want to be in control, I see him go on take the driver seat if he none of the suppliers can step up and prove they can meet the demand of Gen III, or I should say Model E.

Even ME is 3 years away, it will take ramp-up time for assuring the battery supply. I am no expert, but I feel one way or the other, within the next 12 months, there has to be some degree of clarity in which way Elon is going, that gives about 2 years for the ME launch.

It is not about share dilution. When stock rises, who complains dilution? Nor is it about company survival. Tesla has passed that point beyond any doubt.

It is a statement that Tesla is squarely in direct control of how Elon's mission of "mass production of compelling and affordable Electric car" to come to reality. No other external factor can ever derail that.

I will go out on a limp to speculate, that Tesla will raise another round of $1B+ in the next 12 months, unless we see some certainty in solving the battery constraint before that.