It is true that tesla has made all their payments under the doe loan agreement. But they were not in total compliance with said agreement. The agreement required that tesla keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked trhe government to change the terms. The government complied but wanted something in exchange. What they wanted was early repayment of their loans. That is why he is talking about early repayment. And that is probably one of the reasons why they raised extra money (although elon is unlikely to admit that).
So that is the full story. It is no big deal, i think tesla are very unlikely to default on the loan, but elon was definately not giving you all relevant info.
Yeah, there's some dodgy stuff, a lot of information about these cars, such as the reality about their batteries and how much energy they really use to go from A to B over time has high spin when I start looking into details. Was genuinely surprised.
Thanks for the details about what the financing is really about, that's very interesting info.
"We did suggest that holding nine months worth of principal payments in advance in a reserved account was a bit extreme and, moreover, was never part of our original loan agreement. The DOE agreed and reduced the advance payment reserve account to six months."
You saying
"keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked the government to change the terms"
...doesn't seem to add to or contradict his statements.
So unless you can clarify, your statement that "that is the full story ... elon was definitely not giving you all relevant info." seems inaccurate.
What?! FTA: we expect Tesla to become cash flow positive at the end of next month.
However, given that we do have a global supply chain and that floods, fires, hurricanes or earthquakes can cause supply chain interruptions and halt production, we thought it would make sense to raise capital to protect against such an event.
Translation: "So we expect to be cash-flow positive, we won't spend the money that we raised, but we'd thought we'd go ahead and dilute the shareholders, you know, just for insurance."
I believe actions not words. The actions are: He raised money and diluted. You don't do that when you are flush with cash.
How do you jump from "we're almost cash-flow positive" to "we're flush with cash"?
And isn't Tesla's situation a little too tenuous for them to be feeling sorry for diluting their shareholders? Making viable electric cars is their priority - not making their investors rich ASAP.
Otherwise, they would probably raise money later for a specific project requiring lots of capital (like a new vehicle, as mentioned).
From experience with 10-Ks and working on/seeing how financial documents are massaged, this felt very similar.
ninja Edit: grammar/language.
Still, I think it's amazing how much speaking with the voice of a person stands out in a positive way. It's similar to the impact that a Warren Buffet shareholder letter has. It's describing an enormous conglomerate/investment-fund/financial-institution/holding-company, but it's being described by a person and its being described for you.
We are so used to things that sound like they are written by institutions for other institutions, that when something sounds like it was written by a person for people, it stands out.
I often say things like that, and it never works to my benefit. I'm trying to cut it out. It indicates frustration with the audience, and it almost always comes across that way.
Having to justify a 500m loan to a pioneering technology company in one of the biggest recessions? That's a rounding error compared to the billions spent on rescuing failed banks or in researching fancy new ways to blow stuff up.
(Sorry, I, too, am frustrated.)
However, doing a quick bit of research earlier today, a search for "Tesla working environment" turned up more than a handful of reports by former and current employees that hint at an unpleasant company culture. Six to seven day workweeks, below average compensation, hyper-political management, management that is quick to fire, and a generally chaotic environment. These factors seemed to be reported even by folks who cited other benefits such as a high degree of autonomy and the opportunity to work with other highly passionate top level engineers on important emerging technologies. One additional oft-repeated concern was that the pace at which Tesla works its engineers is unsustainable, and will lead to burnout for lack of work-life balance.
Can anyone closer to the Valley than I am comment on whether these concerns ring true? And how does this compare to work at other highly innovative and passionate industrial startups?
Elon's explanation of the latest round of fundraising is welcome news, and personally I'm gunning for Tesla to become the Apple of the auto industry. (I plan on buying stock as soon as I'm able.) Is there anything we can infer from these employee reports about the health of Tesla's organizational core/DNA, and what effect that might have on the company's prospects for long term success? [Edited for clarity]
Here's hoping it calms down, and that the people who helped make the vision a reality are well rewarded.
In startup environments crunch time has a nasty tendency of becoming normal time, and you get nosediving morale, massively increased attrition, and lower overall productivity. It's lose-lose all around.
So sure, in a startup you'd expect some late nights. When late nights become the norm though, you are now officially in dysfunctional company territory - don't let naive founders with rainbows and unicorns in their eyes convince you otherwise. Very sick of this Valley attitude that you must push yourself to the very edge of death-by-exhaustion to achieve anything worthwhile.
It's a similar feeling I get from people I know who work at Apple.
http://www.glassdoor.com/Reviews/Tesla-Motors-Reviews-E43129...
Tough to say what the stories were behind all of these, but I can see how they might feel the need to push people way harder than normal, because during yesterday's presidential debate Romney lumped Tesla in with a list of losers that the government has given money to. Plenty of people are expecting them to fail even though many of us are excited at their prospects. In such an environment, I can see how Elon Musk might push some workers beyond what they can handle. However, I'd expect many of them are still happy to be part of the team even though the work is hard, because a Tesla employee really is part of something more world-changing than an Electronic Arts coder is.
It's not that he created a bad culture, I think he just hired people who were willing to take a risk with Tesla, and they work hard to produce a successful company.
Many of us here are founders and we're in business to challenge status quo and possibly make a dent in the universe. That takes hard work from founders AND contributors.
If anyone thinks things should be different in startup business, they should take a step back and really evaluate how much hard work really goes into achieving these goals.
After that if they can't see no compelling reason to do it, they should just get a job in a more traditional business. I don't blame people for taking that route. This business isn't for anyone.
Getting out of work at 5pm kind of defeats the purpose of working at a company like Tesla.
We are past peak oil. Battery tech will reach oil parity within the decade. Solar PV will reach grid base line within the next 2 decades. Fusion will be introduced within the next 3 decades. Electric engines already run 92% efficiency (vs the combustion engines 15%) and global warming externalities are finally being priced.
The electric car is a no brainer (it wasn't a decade ago, and it'll be too late a decade from now) just like the electrification of trains were. This company will electrify suburbia and reduce costs while they are at it.
Timing + skill = Very nice stock returns (timing is about 10x more important).
Disclaimer: Goes without saying - I am long TSLA and will continue to be long for the foreseeable future.
Predictions are hard, but I'm going to go on the record (and am willing to wager) saying that the batteries in EVs produced in 2012 will have an energy density lower than 9MJ/L.
Ultimately that doesn't matter though. The ED in the Model S is already almost good enough, it's the cost that matters, and I think that will go down. If you end up having a car that is a bit bigger and a lot heavier than an equivalent ICE car would be, you can still sell it.
The Tesla Roadster was heavier than the Lotus car it was based on, but had quite respectable performance. That fact, combined with the electric car cachet was enough to sell it.
If they can keep putting the batteries in the floor, they could consistently wind up with a roomier and more versatile vehicle than the equivalent ICE car. Then again, what Ford is doing with Ecoboost is very impressive. I suspect there's a lot of untapped potential for different form factors with ICE technology.
Specifically their range - you must appease consumer's range anxiety otherwise you have a golf cart on your hands. Tesla does this.
Furthermore have you seen those cars? They are essentially undifferentiated from their ICE counterparts.
Romney then quipped that “One of my friends said, “You don’t pick the winners and losers. You pick the losers.”
--(1) They defaulted on a fed subsidized loan[#]; (2) They make $90k cars for rich people; (3) US deficit=$1Trillion, US Debt = $16.X Trillion. (4) Item (3) is spread pro-rata amongst the poor people who can't afford Teslas. Their pro-rata share of the debt is a nice chunk of their mortage payments (5) SV is flooded with cash. Tesla does not need US handouts, subsidized loans and other craptrap. If the biz/product is a winner it will do fine.
________
[#] Technical.
If that's truly your belief, let's carry it out across the board to be fair and complete. No more subsidies, exemptions or bailouts for banks, Wall Street, oil companies, mining companies or religions (via income tax exemptions). Oh that's right. Those are approved and supported by the Republican party. So those are perfectly ok.
But if it is about say solar, wind, tidal, or geothermal energy, or about science, education, helping the unemployed, the sick, disabled, elderly, retired -- those are what we should be spending less on as taxpayers and just let nature take its course. Let the "market" decide the winners and losers. If they can hack it on their own, the market will reward them with enough cash. Otherwise they die. There is absolutely no other long term consideration we should be taking into account, no strategic concerns, no follow-on effects, no externalities (those don't exist in a proper capitalist/rightwing/libertarian mindset, it seems), and certainly no moral considerations to be had. And there is no such thing as climate, ecosystems, or species other than humanity or the ones we pet or put on our plates -- that's liberal hippy talk. Science? A thinly-veiled conspiracy against my Bible. Also there's no need for any business or startup to ever do any R&D spending up front that doesn't have an immediate return via product revenue. That's just insane and asking for trouble. Any new idea must be profitable and able to stand on its own legs in year one, on day one -- nay literally within moments of conceiving of it. Period. No exceptions for ramp-up time, for execution risks, experimentation, taste shifts, refinement, pivoting, serendipity, or market events beyond one's control. That's all weak-minded liberal talk.
$500M loan to one particular solar company that folds? Travesty. Trillions spent on unnecessary wars in Iraq and Afghanistan started by the last Republican administration? Crickets chirping because apparently perfectly ok. Chance a few more blacks or elderly or college students might get to vote -- and not for the candidate I want? Tragedy. Billionaires now being able to spend effectively unlimited amounts of cash to flood media with dishonest ads backing their favored candidate? Perfectly ok. Because the market is always right. Government always eeeevil (eg. Social Security, teachers, firefighters, roads, libraries, schools, defense). Market always guuud (eg. Enron, Deepwater, Goldman Sachs, AIG).
Wasting money on Solyndra in this economy makes Obama vulnerable - using Telsa as a success story would go far to mitigate that, and news of accelerated loan payments is soundbite-y enough for that purpose.
I'm sure his time will come (already starting to). He's built and talked, but other than Paypal the world hasn't yet in a huge way reaped the benefits of his labor. With Tesla and SpaceX both (somewhat recently/soon) reaching a point of having products in heavy use, it'll come soon I'm sure.
Though maybe he should have some reward for attempting to tackle the big problems as well.
I'm off to go buy a ton more TSLA stock. And apply at an Elon company. Doesn't even matter which one.
$ whoami > nobody
And, while SpaceX's rockets are undoutably advanced and very safe, they aren't currently the cheapest cost per pound sent into LEO; that honor belongs to the Russians:
http://en.wikipedia.org/wiki/Comparison_of_orbital_launch_sy...
SpaceX has some cheaper launches "in development" but they've already revised their initial prices upwards of 100% of what they claimed early on for their operational launches, so you really can't trust what they claim for in development vehicles.
You think it's unnatural that heavy industries has fewer players than, say, fast food?
Given that their balance sheet is decreasing by an extraordinary $30M a month, that would have left only two months until the company was insolvent. No wonder the U.S. government wants their $465M paid back more quickly than planned.
The company has lost over $850 million since being founded in 2003.
Strictly speaking, the balancesheet is irrelevant to Tesla's solvency.
My tennis club owns a property worth $20m from which it operates. It has debt of only $1m and repayment obligations of $100,000. It generates net revenues of $90,000. It is insolvent, with net assets worth $19m.
My startup technology company has no assets other than goodwill and intellectual property. It has no revenues. It has a line of credit from a financier sufficient to cover all expenses. It is solvent, with $1m of net liabilities.
"Cash flow insolvency involves a lack of liquidity to pay debts as they fall due. Balance sheet insolvency involves having negative net assets—where liabilities exceed assets. Insolvency is not a synonym for bankruptcy."
I seem to recall that it takes the big 3 on the order of a billion dollars to bring a new automobile model to market. That includes the engineering, marketing, and the cost of tooling in the factories.
With that in mind, 850 million dollars doesn't strike me as being all that much capital for creating an entirely new automobile company.
Lost? Literally? Since it's been lost I'd love to be the guy that finds those money bags laying around somewhere. But seriously, I'd suggest rather it's been spent, and probably spent mostly on R&D, which is precisely what any reasonable observer would expect an innovative new electric car company to be doing. Musk said even today I believe that within a month they appear to be headed to cash-flow positive. That's a huge good milestone for a new company to achieve, even more so in a bleeding edge one as theirs. And they've already built, sold and shipped 2 models of new product already, in customer hands. That significantly de-risks them. Completely de-risks? Of course not. But if you look at accomplishments to date, their momentum, and the degree of talent on board, I think the smart bet to make on them is up/long.
Not sure why Elon and a lot of SV entrepreneurs feel this way. You take a loan; if it reduces your weighted average cost of capital, you roll it and/or pay it slowly. As a Tesla shareholder, I hope such cheap financing remains in place as long as possible to maximize shareholder return on equity by keeping cost of capital as low as possible -- and by improving Tesla's cash position (helping it to operationally succeed) to boot.
Another guy thinking about buying Tesla stock.
Right or wrong as a matter of managing your finances this is just not something a competent CFO would allow on his watch.
You accepted a loan, the loan originator had some terms and you are both in compliance and acceptance of those terms.
There is no rational or financial reason to make that choice.
I understand doing good, but there is a consistency in the choices firms which do good make. This is inconsistent.
It's well worth listening to.
Never in my wildest dreams did I expect that to become a reality. We truly live in amazing times.
I wonder how this will play out politically, especially if Tesla gets into trouble financially. That story is already being spun.
