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What's happens if Tesla can't raise more money?

Discussion in 'TSLA Investor Discussions' started by kmcdds, May 20, 2019.

  1. kmcdds

    kmcdds Member

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    Location:
    Burlington, Ontario
    Let me say first of all that I am rooting for Tesla's success all the way. I've owned a Model 3 for almost a year and love driving it. I also have my reservation in for a Model Y.
    But Tesla can't continue to raise money indefinitely, can they? What happens if the money dries up before they can generate enough revenue? What's the most likely scenario in such a case?
    I don't have a finance background, so I'd be interested in hearing what would happen.
     
  2. Boomer19

    Boomer19 Supporting Member

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    Location:
    ny metro
    they don’t have to keep raising money and arbitrarily burn it. there’s a few ways to answer. a quick and general one...

    they invest the money into infrastructure and logistics, service, software, human capital, research and development, etc

    the invested money allows them to grow, produce, sell, distribute, and generate revenue. if they plan properly, execute, and run the business efficiently, the revenue covers r&d, product development cost, expenses, debt payoff, and excess is retained as profits.
    the profits can be used to streamline that phase of the company’s growth (think of the timeline - roadster, S, X, 3,etc) until the next major hurdle, at which point they can again raise capital as needed.

    it sounds simple, but it’s not, especially in a competitive environment. it’s even harder when you’re taking on some of the most entrenched and politically protected industries in the history of the world, or at least since the industrial revolution.
     
  3. Tam

    Tam Well-Known Member

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    #3 Tam, May 20, 2019
    Last edited: May 20, 2019
    You know the answer: If a company cannot pay its bills, debtors will demand payment and the company will go bankrupt. It'll be auctioned off to pay up the debts.

    However, bankruptcy doesn't mean the end of a company like GM, Chrysler and most recently, Pacific Gas and Electric in California.

    Yes, it can as long as there are investors who are willing to supply cash to Tesla.

    Tesla just got another infusion of cash, $2.35 billion when it asked for it this month.

    It's not easy to get cash just by asking. GM couldn't. Chrysler couldn't. Tesla's EV competitors still hardly can:

    In 2015, Faraday Future seemed to do well in LA Autoshow and followed with 2016 when it even started to construct its factory. But it ran out of money and it's now 2019, it's still waiting for you to give it a few bucks to restart the program.

    Same with Lucid Motors who announced in 2016 that it would build its factory but like others, it's still waiting for you to give it a few bucks to restart the program.

    But let's get back to Tesla: It broke ground for Gigafactory 3 in January 2019. And now, just 5 months later, it's main building is pretty much done with walls and roof:


    upload_2019-5-20_19-51-14.png


    Investors have been willing to supply cash to Tesla because Tesla has proven its worthiness. It could survive in bad times as well as good time. It is well disciplined. When it emphasizes in growth, burning cash is expected. However, whenever it wanted to, it has demonstrated repeatedly that it could slow down the spending and produce profits.

    So, for short thesis: Tesla could be so inept that it could lose its investors' faith and it would run out of cash and have no where to turn to.

    However, for the past 16 years since 2003, Tesla has been proven that it has been solid and has never lost its investors' faith and Tesla's future has been as bright as ever.
     
    • Informative x 1
  4. TiggerTime

    TiggerTime Member

    Joined:
    Feb 12, 2019
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    Location:
    Gainesville
    I love how everyone harping on Tesla but they are not the only company having issue. This announced today ...

    Ford announces job cuts as part of its workforce redesign
    15 Hours Ago

    Ford Motor said Monday that it is laying off about 7,000 workers, about 10% of its global workforce, as part of a restructuring plan designed to save the number 2 automaker $600 million annually. CNBC's Phil LeBeau reports the details.

    So when Telsa did this it was major news for weeks and how could he Tesla must be failing ... yada yada yada. Ford has been around a lot longer and this isn't the 1st time they have gone down this road.
     

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