Tesla Looks To Raise Further $1.5 Billion To Fund Model 3 Production

2 months ago by Mark Kane 113

Tesla Model 3 (wallpaper 2,560x)

Tesla has announced it intends to raise a further $1.5 billion of capital by issuing senior notes to “further strengthen its balance sheet during this period of rapid scaling with the launch of Model 3, and for general corporate purposes“.

Tesla Model 3

Tesla Model 3

Tesla says it currently has some 455,000 net reservations for the Model 3, and in the early days after the first delivery ceremony (details – Model 3 specs here), those reservations were growing by some 1,800 a day.

That demand seems to haven been procured even without advertising, and Tesla now needs only to secure insurance capital today for the ramp up of EV production to its 500,000/year target goal.

In the first half of this year, Tesla’s capital expenditures were $1.5 billion (including $959 million in Q2), which was lower than expected.

During its Q2 report (details), the company declared a cash balance of slightly over $3.0 billion, and had said that was enough for the Model 3:

“Cash balance of slightly over $3.0 billion at the end of Q2, plus expected cash generated from operations in the second half of 2017, provide sufficient liquidity to fund our capex projections, and provide flexibility through the Model 3 ramp.”
…but we suppose it’s better to have an additional $1.5 billion than not, as the expected capital expenditures should be about $2 billion during the second half of 2017.
“Capital expenditures should be about $2 billion during the second half of 2017, as we make milestone-based payments for Model 3 equipment, continue with Gigafactory 1 construction, and expand our Supercharger, store, delivery hub, and service networks.”

First 30 Tesla Model 3s were delivered on Friday, July 28th

Press blast:

Tesla Announces Proposed $1.5 Billion Offering of Senior Notes

PALO ALTO, Calif., Aug. 07, 2017 (GLOBE NEWSWIRE) — Tesla today announced that it intends to offer, subject to market and other conditions, $1.5 billion in aggregate principal amount of its senior notes due 2025 (the “Notes”). The Notes will be senior unsecured debt obligations of Tesla. The interest rate, redemption prices and other terms of the Notes are to be determined.

Tesla intends to use the net proceeds from this offering to further strengthen its balance sheet during this period of rapid scaling with the launch of Model 3, and for general corporate purposes.

The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and the rules promulgated thereunder. The Notes will be offered only to qualified institutional buyers in the United States pursuant to Rule 144A of the Securities Act and outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act.

This announcement does not constitute an offer to sell or a solicitation of an offer to buy any of the foregoing securities, nor shall there be any offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.

Tags: ,

113 responses to "Tesla Looks To Raise Further $1.5 Billion To Fund Model 3 Production"

  1. Alan says:

    Junk Bonds likely to have less effect on the share price.

  2. SparkEV says:

    Maybe to cover all the Tesla 3 reservation cancellations? Granted, 1.5B is 3X the entire reservation, but it’s better to have bit more as cushion.

    By the way, if you haven’t canceled, please do so soon so that others can get ahead in line. It may also ease the mental pressure on Musk going through production hell. We thank you for canceling.

    1. bro1999 says:

      Well, he just split from his girl friend, so that may be a huge stress relief for the poor guy. Or maybe the exact opposite.

      http://www.huffingtonpost.com/entry/amber-heard-and-elon-musk-reportedly-split_us_59889188e4b09a4d1ec69fd8

      1. scottf200 says:

        Re: Tesla says it currently has some 455,000 net reservations for the Model 3
        Remind us again of the demand of the Bolt? Predictions after a couple months of hitting all states (MT, WY, ID, you know big EV ones not like CA). At least that would mean you added something to the conversation instead of what you are doing.

        1. bro1999 says:

          Remind us again of why you drag the Bolt into the conversation about Tesla issuing junk bonds to raise more capital?

          1. Nick says:

            Hahahaha! Pot meet kettle.

            We’re all on the same team here. We want the Bolt and Model 3 to succeed.

            1. Mark.ca says:

              Who’s we? I’m not sure Bro is on board anymore…

              1. ModernMarvelFan says:

                He is only acting out because he is sick and tired of all the Tesla fan boy bashing of the Bolt.

                Seriously, many of those Volt/Bolt owners wouldn’t have been so defensive if the overall EV community would cut them some slacks. But no, every Bolt/Volt news would be filled with bashing while trying to use Tesla somehow as magic to justify how bad Volt/Bolt is.

                If we are “truly” on the same boat to hope all EVs succeed then we would have all jump on any partisan bashing.

                Of course, that would have made the EV boards “boring”. =)

                1. Pushmi-Pullyu says:

                  So, what you’re arguing is that two wrongs make a right.

                  Got it.

                  1. Spider-Dan says:

                    Instead of criticizing non-Tesla EV supporters for not simply turning the other cheek, why not criticize the people who are attacking every company that isn’t Tesla?

                    This kind of “you should be better than that” response isn’t very convincing when it’s only used to justify one side’s unwarranted attacks.

                2. Nix says:

                  This isn’t totally by mistake, or really much to do with the specific individuals posting on this site.

                  Do you remember the old Volt vs. Leaf sales stories, and all the associated Volt vs. Leaf debates? This is just the latest evolution of that, since the Bolt and Model 3 are the newest and latest.

                  The meme gets reinforced by green car websites with comparison stories, and even sites like Fortune who do the same.

                  But it isn’t even the press that starts these things. It goes back to the car makers themselves. The car makers go after the front-runner because that’s what you do when you aren’t the front-runner. Or when you are fighting to be the front-runner.

                  And it really doesn’t have anything to do with the automotive industry. Pepsi didn’t invent the Pepsi Challenge to go after Coke because they were number one in sales. They intentionally pit themselves against Coke to gain market share.

                  Tesla is in a weird position vs. the rest of the ICE car makers. They are certainly seen leading EV’s, but at the same time they are the little guys fighting for a tiny fraction of total car sales compared with all the ICE sales around the world. So they are at the same time going after BMW and Audi and MB to compete as the underdog against their ICE cars, Tesla is also fighting the same car companies that are chasing after Tesla’s EV sales leadership.

                  The end result is a ton of challenges and challengers. Tesla saying they aren’t just a great EV, but a superior car to top ICE cars. Every ICE car company saying for the last half decade that they are going to build a “Tesla killer”. Etc.

                  I’m afraid that the end result is contagious.

          2. Pushmi-Pullyu says:

            Remind us of why trolls like you come over to an EV forum to bash Tesla and call Tesla fund-raising “junk bonds”.

            Are you actually trying to persuade us that any bonds Tesla issues have very little chance of being repaid? Seriously, dude?

            That may have been a reasonable claim in 2008. In 2017, anybody still making that claim is either ignorant, or trolling.

            Given the frequency at which you post here, it seems pretty clear it’s the latter.

            1. Spider-Dan says:

              That isn’t exactly slander. This action is being called “junk bonds” pretty much across the internet:

              Reuters: “Tesla seeks $1.5 billion junk bond issue to fund Model 3 production”

              Business Insider: “Investors are reportedly eating up Tesla’s junk-bond sale”

              NY Times: “Forced to choose between issuing a bit more of Tesla’s turbocharged stock or tapping the overheated junk-bond market to finance the Model 3 ramp-up, Mr. Musk, the company’s founder, opted for the latter.”

              NASDAQ: “Tesla makes debut in red-hot junk bond market”

              etc.

            2. Mark.ca says:

              “junk bond”

              “a high-yield, high-risk security, typically issued by a company seeking to raise capital quickly.”

            3. ffbj says:

              Yeah, it was an unfortunate day when someone coined that term.

              1. Asak says:

                I do think it should be a little bit of a wake-up call for holders of the stock that the Tesla bonds are going to be rated single B–well into junk territory (and there’s no need to get defensive, that’s just another name for low rated bonds).

                I actually think based on the current stock price that the bonds would be a better alternative. You get 5% while also having a higher claim if Tesla should happen not to make it. At this point I think Tesla has enough brand value that even if it goes under someone will pay something to buy it.

                1. ffbj says:

                  Yeah, there is that point. I thought of that.

    2. Nix says:

      Here are the projects that Tesla has publicly talked about that they need to fund:

      1) Production ramp-up from 5K/wk to 10K/wk, including increased automation of the assembly line scheduled for mid-2018.

      2) Model Y development activity, in preparation for production.

      3) Heavy truck development activity, in preparation for production.

      The number of reservations that have cancelled is meaningless and doesn’t need replacing. With that said, they are currently increasing net reservations at a rate that will completely replace (and exceed) the number of lost reservations by the end of Q3.

      1. SparkEV says:

        “they are currently increasing net reservations at a rate”

        This is why I want people to cancel. If this keeps up, I might be dead of old age before I can get the 3.

        1. georgeS says:

          why are you out so far sparky? Did you make your rez late. I made mine when we were at around 280,000 but Tesla has me earmarked for a Feb delivery.

      2. georgeS says:

        Nix,
        I’m wondering how much is earmarked for the semi. That could be a fairly expensive proposition if Tesla jumps in whole hog and puts a special super charging network for the Semi’s.

        I did some napkin math and came up with a power pack for each station at around 1 million $ each.

        1. Nix says:

          Tesla doesn’t publicly earmark specific dollar amounts. Much like most public companies, the specific company budget numbers for future spending are considered trade secrets. Disclosures of spending are done retroactively in SEC reports, not ahead of spending.

  3. pjwood1 says:

    Those 144A’s will be gone in a “Scaramucci”. They aren’t your typical bonds. Since the last ones were convertibles, it is a wonder at what interest rate Tesla will borrow. 3%, give or take? Thoughts?

    1. Alan says:

      5.5% seems to be the consensus for these.

      1. ffbj says:

        I read 5%.

    2. Nix says:

      Demand will set the rate.

    3. georgeS says:

      Hey pj. What’s the rating on these bonds? I keep hearing people say they are junk.

      1. georgeS says:

        @pj never mind just read the Reuters article

      2. Pushmi-Pullyu says:

        From Google:

        junk bond
        noun

        a high-yield, high-risk security, typically issued by a company seeking to raise capital quickly in order to finance a takeover.

        * * * * *

        I’m sure all the Tesla bashers and short-sellers will be happy to “explain” to you why any bonds Tesla issues are “junk”.

        The rest of us informed industry watchers will judge that they have a very good chance of being repaid… in other words, pretty low risk, and thus very far from being “junk” bonds.

        1. unlucky says:

          Even junk bonds have a very high chance of being repaid. I’m not sure what you’re getting at here.

          These are junk bonds, high-risk bonds. No, not like 50% risk of course. But high risk for bonds.

          1. Pushmi-Pullyu says:

            I’m not a financial guy, but WOW! At least I have a clear understanding of what the term “high risk” means: It means there is a high risk you’ll lose most or all of your investment.

            If you know so very little about the subject, then you would be well advised to stop posting about it.

            “Better to remain silent and be thought a fool than speak and remove all doubt.” — attributed to Abraham Lincoln

            1. Spider-Dan says:

              Then I guess Reuters, NY Times, NASDAQ, and many others don’t understand what “high-risk” means, as they have all labeled this issue a “junk bond” sale.

            2. unlucky says:

              No, you’re clearly not a financial guy. And you are attacking me for knowing very little about the subject.

              These are high risk bonds. They are rated B by Moody’s and S&P. That makes them junk bonds. They are thus high-risk bonds and they are junk bonds.

              Your attempt to dice words to indicate these aren’t junk bonds or aren’t high risk bonds are not terribly useful. You’re uncomfortable with the terminology used by the debt finance industry. The fix for this is for you to get used to it, not for you to try to tell everyone else they can’t use a word because you wouldn’t use it in their stead.

              1. Phr≡d says:

                +5.5%

            3. ffbj says:

              You should have followed Abe’s advice, at least in this instance.

              1. ffbj says:

                Thank you staff fairies for fixing my mistake.

                In a D&D campaign. There was a sign by the river that said Ferry, with a box that said “To Cross deposit $1 Gold.”
                When you did a slot opened and some sugar spilled from the box onto the ground.
                Then some fairies flew in, ate the sugar, and carried you across the river.

            4. Asak says:

              With a bond the idea is you’re not going to lose any money. It’s not like a stock that might lose 5-10% in a day. If you lose 5-10% in a bond that’s a big loss. Sometimes with bonds you can lose even half or more if the company goes under, or sometimes even end up cleaned out, but those are fairly unusual circumstances and not normally what you’d hope for.

              For a bond rated B there is a decent chance something bad can happen. It’s not likely, and still much less than 50%, but the chance is not zero.

              Also the fact is Tesla is not in as strong a position as many seem to believe. They are burning through a lot of money and still need to spend more to ramp up production. If the capital markets freeze up or get closed off to them they would be in trouble in very short order.

              Say Trump attacks North Korea and an ICBM goes off in Hawaii or San Diego, the stock and bond markets go into a tail spin. Well, a company like GE or even GM would probably survive that. A company like Tesla might very well not.

        2. Nix says:

          Pushy — That definition is overly derogatory. Junk bond refers to any bond that is lower than investment grade with decades of proven bond payment history and stable business.

          Tesla isn’t that. They are very young in the business world, and they haven’t made it to the end of many bond payments yet to establish history.

          Junk bond is the correct term for their grade of bonds. The problem is in the term “Junk Bonds” having an overly loaded meaning when it really doesn’t literally mean “junk”. Unfortunately the press in the 1980’s super-hyped this term and made it into a boogeyman.

          Don’t worry about the term “junk bond”.

          1. ffbj says:

            It’s the terminology that trips people up. I usually use high yield corporate paper, but then people say, oh you mean junk.

            1. Asak says:

              Junk has more character. Also it’s probably to the benefit of the average investor that the term is used since it serves as at least some warning that you need to tread carefully.

              That being said, a lot of people probably don’t fully appreciate that a fair number of stocks in their S&P 500 index fund are rated in junk territory.

  4. Kosh says:

    Perhaps they can just take additional deposit amounts from current reservation holders? In return they get moved up in line? Let the line jumping competition begin!

    “To move up to October, please select $10,000”.

    1. Pushmi-Pullyu says:

      If Tesla wanted to generate ill will, that would be an excellent way to do it.

  5. CCIE says:

    I can’t imagine who would risk these for only 5-5.5% yield. You can get close to that with Vanguard’s High Yield Bond Fund, which has never had a holding default.

    The convertible bonds they issued were interesting because you had major upside if the stock did well. But, unless this new issue yields 6-8%, I can’t see the upside to balance the default risk.

    1. Nix says:

      Vanguard is exactly the type of purchaser who will end up buying these, for funds like this that include so-called “junk bonds” from corporations like Tesla:

      Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)

      Bond funds don’t magically exist without them buying underlying bonds from companies like Tesla.

      1. CCIE says:

        I could see them being in JNK or HYG. But, Vanguard is very conservative with that fund. Can’t see them risking Tesla bonds.

        Until/unless they manage to break even for a few quarters, anything bad, like Elon leaving for some reason, and they’re done.

        1. Nix says:

          CCIE — I suggest you read the prospectus, because here is how Vanguard describes this fund:

          “Vanguard High-Yield Corporate Fund invests in a diversified portfolio of medium- and lower-quality corporate bonds, often referred to as “junk bonds.” B rated shares are exactly what they invest in, with the vast majority of shares in the fund being B rated:

          Baa2 0.5%
          Baa3 2.1%
          Ba1 15.8%
          Ba2 12.8%
          Ba3 16.9%
          B1 14.3%
          B2 11.1%
          B3 12.6%

          They don’t describe the fund as conservative either, placing the risk as 3 out of 5.

          I’m beginning to think your posts are not based upon reality, but on what you think you can get away with before making a fool of yourself. You’ve failed on that account.

          1. CCIE says:

            I have read it, and I own the admiral class. The great thing about that fund is that they pick bonds that are barely junk and do enough company research to never have a default. Basically they pick bonds from stable, yet under rated, companies. Tesla is the exact opposite, so no way they touch those bonds.

            I know you’re in love with Tesla, but try to be somewhat neutral. They’re operating based on hype until they can achieve some flat quarters. I hope they do it, but it’s far from certain.

            1. ffbj says:

              Well Tesla meets their criteria, at least the never having defaulted part.
              I will grant though that it’s better to own the fund than the individual bonds, because it’s safer.

            2. Asak says:

              There’s still plenty of risk in that fund. The biggest risk right now isn’t that a bunch of bonds default, but rather that high yield spreads simply increase, resulting in the value of the bonds being marked down. Don’t delude yourself as to the safety of that fund. It may be less risky than other alternatives, but it’s still investing in high yield bonds (although at the moment it’s more like not-so high yield).

              1. CCIE says:

                The Fed can’t let rates rise too much, or we wouldn’t be able to service the national debt. Plus the average duration of the bonds Vanguard holds in that fund is only 4.3 years. So, not much more risky than a total bond market fund.

    2. ffbj says:

      I read it was half sold, already. People are just clamoring for a piece.

      1. CCIE says:

        Where is the upside for a buyer? There can’t be that many blond Tesla fanatics out there.

        1. CCIE says:

          I meant blind, though blond makes sense too!

        2. ffbj says:

          It’s not much upside, but people consider it a safe bet. I think it’s too much risk, and not enough reward.

        3. Nix says:

          The upside to buying bonds rated in this class is about 3 to 3.5%.

          If you want complete safety over a 7 year term, go get a 7 year US Treasury note that yields 2.07%

          If you want to build a portfolio of bonds that produce high yields, then you have to take higher risk. If you want no risk, you get 2% yields.

          I feel like it isn’t that you don’t understand, it is more like you don’t WANT to understand.

          1. CCIE says:

            If you want complete safety you put it in an Ally no-penalty CD at 1.5%.

            1. ffbj says:

              Or you could buy AT&T & get 4%.

              1. Asak says:

                If you’re talking about the stock, that’s far from no risk. You may get 4% dividend yield, but the shares can easily end up selling off much more than that. That’s not a substitute for a bond or CD.

                1. ffbj says:

                  Well in 3 years it’s hardly moved more than $10, $5 up or down.
                  Though it’s true you should have some bonds, there are stocks that are like bonds.

            2. Nix says:

              Not if you want to invest more than the FDIC insures…

              Banks go bankrupt. They more more risky than the US gov’t, because the FDIC insurance they provide for account holders is really just a guarantee that the Gov’t will pay.

              If the gov’t reached a point where they couldn’t pay treasury notes, they sure wouldn’t be paying FDIC either. And like I said, that only covers up to the minimum.

              I’m guessing you’ve never had to worry about stuff like that…..

        4. Pushmi-Pullyu says:

          “There can’t be that many [blink] Tesla fanatics out there.”

          You very clearly fail to grasp just how eager a great many investors are to throw huge wodges of cash at Tesla. For example, when was the last time that a new stock issuance by Tesla was not oversold?

          1. Pushmi-Pullyu says:

            ROTFL!! I created a typo in while trying to correct CCIE’s typo!
            😆 😳 😆

            That should read “There can’t be that many [blind] Tesla fanatics out there.”

            1. ffbj says:

              Personally, I’m more of a [bland] Tesla fanatic.
              Go Tesla, go…yawn.

    3. Asak says:

      Well if that’s your view of the bond, you must also have a similar view of the risks for the stock, which likely goes to zero in a default. Frankly given the nosebleed valuation of Tesla I’d say the bond is the better investment.

      As for why accept the risk for 5%, that’s more reflective of the investment environment is in general. There’s basically a huge bubble in risk assets, so you are very poorly rewarded for taking risk. Cash is very possibly the best investment, but I’d take a 5% Tesla bond over shares of Tesla stock.

      1. CCIE says:

        Agreed. I’m just saying that there are much less risky ways to get a return close to 5%.

  6. tftf says:

    Reuters talks about “junk bonds”…

    https://www.reuters.com/article/us-tesla-offering-idUSKBN1AN13I

    I don’t what these A to C ratings mean. Neither should investors.

    Must be high-quality stuff, probably just a bad name for high-quality, high-yield bonds.

    Go Elon!

    1. pjwood1 says:

      At the end of the Reuters piece, is a momentary “bulls” of Tesla underwriting:

      “Goldman Sachs, Morgan Stanley, Barclays, Bank of America Merrill Lynch, Citigroup, Deutsche Bank and RBC are the book-runners…”

      If I remember “one car” lack of product diversification was central to S&P initiating coverage at ‘B-‘, a couple years ago. Tesla now have three models, yet they reaffirmed. Just having the same rating for Tesla, as you did years ago, in my opinion shows a fail on their part. The company needs monstrous capital, but is on more solid footing with the diesel crisis and pathetically slow competitive response.

      5.5%, assuming these are ~5 year max maturity, approaches +400bps (1.8% 5yr UST). Lots of ‘BBB’ debt prices at ~%3. This is risky, but +200-250bps more risky? Hmmm.

      1. Nix says:

        Normally a company like Tesla would go and solicit (and pay) to have their bonds rated. As part of the rating process, the rating agency is provided inside information by the company to help them with their ratings.

        A high bond rating then allows certain investors that have minimum rating requirements for their portfolio to consider investing in those bonds. For example, a manager of a retirement fund may have a risk target for a fund that would only allow A and higher rated bonds. Many companies get their bonds rated so that they can sell to these buyers, at a slightly lower yield. It is basically an advertising cost a company pays to sell their bonds to investors.

        However, Tesla has not solicited or paid to have any of their bond offerings rated. They decided they did not want to play that game. It is similar to how Tesla isn’t paying to advertise their cars either, and instead is relying upon word of mouth.

        When you see bond ratings for Tesla, realize that it is an UNSOLICITED rating and is done without the typical information that ratings are normally based on. The unsolicited rating represents unpaid work for the ratings agency that they would normally be paid for by Tesla, done purely for the benefit of the ratings agency at their expense.

        1. Phr≡d says:

          That is one viewpoint.

          An alternative viewpoint is that bonds are a conservative investment by nature, and that the money you are spending is for having a qualified and reputable firm view your books and determine the stability of your company, then publicly state their conclusion.

      2. Asak says:

        Tesla really should not be rated anywhere near investment grade. The aren’t on any sort of solid financial footing. I don’t expect them to fail, but nor would I put their chances of faliure at anywhere near zero.

        If you think that they have good prospects then there’s nothing stopping you from buying up some of these bonds. I’d say they’re at least a so-so investment.

  7. Someone out there says:

    It seems a bit desperate to me for a company that supposedly was fully funded not long ago. Didn’t Tesla also raise the credit limit with $500 million recently, “just in case”?

    1. bro1999 says:

      Less than a year ago (when Elon knew Tesla had at least 400k reservations), Musk stated that Tesla’s “current financial plan does not require any capital raise for Model 3 at all.”

      http://fortune.com/2016/10/27/elon-musk-tesla-money/

      Now fast forward to today and an additional 60k reservations tops, and all of a sudden Tesla now needs $1.5 BILLION dollars in capital? *raises eyebrow*

      1. bro1999 says:

        What changed was Tesla’s cash burn rate. When you’re blowing $1.6 billion a quarter, something’s gotta give. In this case, it is the investors. :p

        1. Alan says:

          $204 per second,

          They must have a big furnace !

        2. AlphaEdge says:

          Then there would be no demand for the notes. The low interest rate says otherwise.

          1. Asak says:

            That’s not really what the interest rate says. Interest rates are low across the board. 5% is actually pretty “high” right now, albeit possibly lower than some other B rated companies might be.

      2. Will says:

        Yeah it sounds fishy. Hopefully the are not running a ponzi scheme

        1. AlphaEdge says:

          You forgot the smiley.

      3. unlucky says:

        It was a lie at the time. A transparent one.

        Ramping up like this takes capital. And they didn’t dress up their books to produce a singular non-GAAP profit in 3Q 2016 in order to NOT float further capital offerings.

        It’s clear they were primed to raise more money all along. The only weird part about it is that Musk even bothers to say it isn’t so. It is transparently true.

        Maybe this offering is a little larger or a little junkier than expected. But that’s not a huge thing. It’s completely expected, it is what the company needs, it’s still a good enough deal on capital for them and they’re not really going to have any trouble selling it.

        It won’t be the last either.

        1. Pushmi-Pullyu says:

          unlucky posted outright FUD:

          “It was a lie at the time. A transparent one.”

          You know, dude, I may just have to change my opinion about whether or not you’re an anti-Tesla troll. Because I don’t see how you can honestly hold such an opinion.

          What part of the statement “[Tesla’s] current financial plan does not require any capital raise for Model 3 at all”, in the context of that October 2016 quarterly earnings call, do you not understand?

          Is it the “current” part you don’t understand? Do we actually need to cite the dictionary definition of “current”, or point out that his remarks concerned the next financial quarter?

          You know, it’s just insulting to our intelligence for you to try to spin this as if Elon was saying “…and we won’t need to raise money next year, either!”

          And your support of bro1999’s trolling here is downright disgusting.

          1. unlucky says:

            There is nothing in that statement I don’t understand. What I understand is that Tesla decided to lie about what “current plans” mean. There was no way to reasonably make a plan to produce Model 3 on this schedule without raising capital.

            Thus it was a lie then. The nicest thing I could say is that Tesla (Musk, IIRC) misspoke, substituting “current plans” for “immediate plan”.

            Saying you don’t plan to raise money in the immediate future is something that could have been true at the time. A statement that their current plan to produce Model 3 on this schedule didn’t include raising any capital can only mean two things. It can mean they had no viable plan. Or it can mean they
            had a viable plan didn’t tell the truth.

            I can’t be sure which is the case, but I expect at least someone at the company could do the simple math required to figure out how much money they would need to get the plant up to speed this quickly. So I expect it is the latter.

            There was no way Tesla had a viable (reasonably) plan to ramp up Model 3 to the production levels indicated in the planned timeframe without raising capital. You attacking me doesn’t change any of this.

            And again, as I said, it’s not a big deal to raise capital. It’s a capital-intensive business. There’s no reason to be ashamed of it or concerned about it. It’s baffling to me that Tesla even bothers to be cagey about it.

            1. Nix says:

              unlucky mumbled:

              “There is nothing in that statement I don’t understand. What I understand is that Tesla decided to lie about what “current plans” mean. There was no way to reasonably make a plan to produce Model 3 on this schedule without raising capital.”

              Well, the first thing you clearly don’t understand is that this quote was from 2016, and was made with regard to their plans to raise more funding IN Q4 2016!!!!!!

              What part of this not being Q4 2016 don’t you understand?

              Now because of your failure, you accuse Tesla of lying because nearly a year later you still think that comments about their plans in Q4 2016 somehow still apply in Q3 2017!!!

              Stop the nonsense.

              Your reply should simply read: “my mistake, I didn’t realize the context of that quote was Q4 2016. My comments were incorrect.”

              You can even cut and paste it. I won’t mind.

              1. unlucky says:

                I fully understand the timeframe. I fully understand the context.

                You need to move past the idea that I don’t understand.

                I explained it well before. Read it again. And without jumping to the escape hatch that I don’t understand the timeframe.

                If your plan to get to production in this timeframe involves raising money, just not in this quarter then you have no plans then you can truthfully can say you have no plans to raise money in the immediate future. You cannot truthfully say you have no plans to raise capital to get Model 3 to production.

                The only way you can truthfully say the latter is if you either believe you don’t need more capital or if you simply don’t have plans to get from here to there. Neither of these things can be true of Tesla.

                So saying you have no plans to raise capital for Model 3 production is a lie. Saying you have no plans to raise capital in the immediate future would be the truth. And that’s what they should have said.

      4. Nix says:

        bro1999, are you out to prove you can’t read for comprehension, or is this just yet another classic bro-fail you are famous for?

        1) Your source is from 2016, and it is SPECIFICALLY referring to “the fourth quarter” of 2016. Tesla indeed did NOT raise capital for the Model 3 in the 4th quarter. Sadly, you have repeatedly made the exact same mistake over and over posting this same link to pretend that a comment that was in the context of providing guidance on Q4 2106 activities somehow applies forever. It doesn’t.

        2) Elon further went on to talk about whether they would be REQUIRED to raise further funds in order to launch the Model 3. The answer was that it was not REQUIRED (please learn the definition of the word “required”), but that it might be a good idea to “have a larger buffer” and to “de-risk the business.” He was NOT and was NEVER saying that Tesla wouldn’t seek more funding, only that they were not REQUIRED to get more funding before the launch of the Model 3.

        In case you didn’t notice, the launch of the Model 3 happened last month. That point in time is past. Now they are doing ramp-up. They successfully made it to launch. They didn’t go out of business and have to close the doors before making it to launch, like the trolls claimed. They were wrong.

        1. bro1999 says:

          An increase of at most 60k reservations moves Tesla from “No need to raise capital at all” to “need to raise $1.5 billion dollars”. That’s some Elon/TSLA math for ya!

          1. Nix says:

            Clearly you aren’t paying attention. Tesla is not only funding the further automation of the Model 3 assembly line, they are also funding the Model Y and Tesla Semi.

            This is how industry operates. Investors invest money up front so that new products are built and sold. I’m sorry you don’t understand how how companies operate.

            As far as your whining about Tesla’s massive backlog of reservations, please go ahead and show me how worse Tesla is doing compared to other car companies of similar volume or higher with THEIR reservations…..

            Whining about Tesla’s first time in history record breaking reservations just makes you look small and childish.

          2. Pushmi-Pullyu says:

            bro1999 desperately doubled down on his anti-Tesla trolling:

            “An increase of at most 60k reservations moves Tesla from ‘No need to raise capital at all’ ”

            Dude, stop. Just stop. Everyone can see you’re lying.

            Anyone capable of being mislead by your lies has already been mislead; you’re not going to accomplish anything by continuing to beat this dead horse.

            Now you’ve deliberately left out the “currently” qualifier that, in the context of a quarterly earnings call, clearly indicated Elon was talking about the next financial quarter… and not Tesla’s (at the time) future plans for this year.

      5. Pushmi-Pullyu says:

        “Less than a year ago (when Elon knew Tesla had at least 400k reservations), Musk stated that Tesla’s “current financial plan does not require any capital raise for Model 3 at all.”

        “Now fast forward to today and an additional 60k reservations tops, and all of a sudden Tesla now needs $1.5 BILLION dollars in capital? *raises eyebrow*”

        Good grief, the endless stream of crap issuing from your keyboard never ends, does it? Talk about verbal diarrhea!

        Perhaps you should read the dictionary definition of “current”. In the context of discussing the then-current financial situation at the end of that fiscal quarter, or even that fiscal year, Elon’s remarks were perfectly true.

        And anyone with half a brain would understand that when Tesla actually did start serious ramping up production of the TM3, that they would need enormous capital expenditures. So why pretend that we didn’t see this coming? Because you’re only interested in bashing Tesla. You’re not interested in Truth at all.

        Now crawl back into the fetid outhouse where you live, troll. And this time, stay there!

        1. unlucky says:

          Current plan means plan at the time. It doesn’t mean what you are doing in the current moment. It includes everything you plan to do under the current plan.

          Tesla indicated their plans at the time indicated they wouldn’t raise capital for Model 3 production. That’s either foolish or wrong. There is no way to think Tesla had a reasonable plan that included them ramping up in the timeframe given without raising capital.

          The nicer thing to say is it is wrong. That the quote given was false because of a poor choice of words.

          The nastier thing would be to indicate you think Tesla was so foolish that they had a plan that would allow them to get to those levels of production in this timeframe without needing more capital. That would be to indicate they are so naive or incompetent that they shouldn’t even be running a business. I can’t see how that is a reasonable conclusion to make. It has to be the other.

  8. Four Electrics says:

    Tesla has taken another hit from the cash-pipe a tiny bit earlier than I predicted. Look for another (over?)dose in 2018. By my count, this is the second raise since the claimed they wouldn’t need any more money to bring the 3 to market.

    1. Nix says:

      Tesla successfully launched the Model 3 last month, bringing it to market on-time, and ahead of broad expectations, meeting all of Tesla’s guidance.

      So no, it isn’t happening before their guidance of when they would bring the Model 3 to market.

      And no, Tesla absolutely NEVER said they would not raise any more capital before they brought the Model 3 to market. They said they would not be REQUIRED to raise more capital in order to make it to market with the Model 3. They also provided guidance that they certainly could raise funds even though it wasn’t required in order to: “have a larger buffer” and to “de-risk the business.”

      Which is exactly what they did. They did exactly what they said they would. Why are you complaining about that?

      Oh, right, because you don’t actually understand what they are saying, and you have a selective memory that is based upon one or two sentences taken out of context without bothering to read the full context and or listen to the full call.

      1. CCIE says:

        No, they delivered (not sold) a handful of cars to employees for testing and because they needed to placate investors. That’s not a launch. When regular people can buy it, with an EPA sticker on it, then it’s launched.

  9. TM says:

    Cash is king. It takes a lot of water to prime a firehose this large. Everyone is a finance genius here. I’ll put my bets on Musk.

    1. ffbj says:

      Yes, we all know that Musk’s excrement is not odiferous. In less graphic terms, it’s the ‘Halo Effect.’

      1. Nix says:

        A powerful fertilizer that promotes growth?

        *grin*

  10. Nix says:

    The way a new product is typically planned is to look at sales over the lifetime of the product, and calculate if the investment is worth the sales potential.

    For just the first 5 years of full Model 3 sales, at the publicly projected average sales price and sales rate this represents in excess of $100 Billion in sales. So of course we have a bunch of folks whining like crazy over an amount that represents a rounding error on just the first 5 years of Model 3 sales…..

    1. Someone out there says:

      Yeah because those projections can’t be horribly overestimated? Tesla is not going to sell $100 billions worth in the next 5 years, there is no market for that.

      1. Nix says:

        Someone way out there —

        Do the math yourself if you don’t believe mine. Go find out what the average sales price of what the Model 3 is predicted to be. Go read what the latest sales targets are.

        What you will find is that I’m actually LOW by as much as 50 Billion dollars with my numbers.

        But whether I’m off by 10 Billion, or 20 Billion, or even 50 Billion, 1.5 Billion is still peanuts in comparison.

        Sorry you clearly missed the point, and have instead chosen to bicker over a number you haven’t even bothered to calculate for yourself.

        1. Someone out there says:

          Look, Tesla is not going to sell a million cars/year at $49k each. There is just no market for that. Elon can tweet whatever fantasy number he wants, it won’t happen.

    2. Asak says:

      The gross value of the sales is pretty irrelevant. What is more important is how profitable selling the car is. That still remains to be seen.

  11. ffbj says:

    I think their original conception changed somewhat in that since no real competition has appeared, despite oodles of articles claiming Tesla will be overtaken and surpassed.

    In fact their lead has increased and they have to push the ev revolution forward, since the mantle is not being picked up by other companies, of which, many may fall.

    Tesla as Moby Dick, a force of nature:
    https://www.youtube.com/watch?v=o5r3g5zhKIM

    1. Pushmi-Pullyu says:

      Don’t see the analogy, sorry. Tesla has no Captain Ahab madly pursuing it. Would that it did!

      Instead, Tesla has a lot of wannabe competitors languidly watching while Tesla rushes to secure a growing fraction of the growing plug-in EV market. The other auto makers, to date, have done little more than give lip service to building compelling plug-in EVs and producing them in large numbers… and let’s be clear here, when I say “large numbers” I mean numbers to challenge sales of at least one average gasmobile model from one of the major manufacturers. Just one!

      (Aside: I should give Nissan and GM credit for at least initially trying to sell a plug-in EV in large numbers, with the Leaf and the Volt 1.0. But neither auto maker tried to expand the market after sales of their plug-in EV proved to be disappointing.)

      Where are the GM fanboys claiming GM would ramp up production of the Bolt EV to 50,000 or even 100,000 per year? Strangely enough, they’ve fallen silent… almost like they have finally faced the reality that GM has no intention of ramping up production past the projected 30,000-32,000 cars per year.

  12. Terawatt says:

    Another billion and a half. I hope, and actually believe, that they can raise it easily.

    I’m sure some will interpret this as a sign Tesla now thinks, or at a minimum fears, the ramp up will cost more than projected. But I don’t see why it can’t just as well be interpreted as Tesla planning to accelerate their plans again. More gigafactories, the semi, pushing Model Y forward… there’s no shortage of things Tesla could spend the extra cash on.

    1. Nix says:

      Yes, Elon was very clear in the latest earnings call that Tesla would be announcing the locations of the next Gigafactories (plural) before the end of 2017. He was clear that the capex on these new factories would be low to non-existent in H2 2017, but that they were indeed coming and would impact future capex spending in 2018.

      They are spending heavily on growth and expansion. Which is indeed a good thing to do when your goal is to grow and expand…

      (source: Q2 2017 earnings call)

  13. ModernMarvelFan says:

    I think they are trying to lock in some “low cost” cash before the rates going up or the “high risks” bond market dries up later this year…

    1. Nix says:

      It is actually a sign of them maturing and normalizing business. Previously they had to offer the potential for equity in order to sell bonds. Now they don’t have to offer a bet on equity anymore, they can simply offer straight up interest returns like other car companies who have been around for decades offer when they issue bonds.

      Corporations offering bonds isn’t something unusual or something with an automatic hidden agenda. It is business as usual in the corporate world.

    2. Mark.ca says:

      Yes, Elon is playing the market. If the cycle turns credit will dry up so why not get the cheap money now and not have to worry to much in case of a down turn. everyone on the market does it…it’s called hedging your bet.

      1. Asak says:

        In the case of Tesla I’d say it’s more of a prudent business move. They have a high cash burn rate and high capital needs. If they can raise the money now then they should as it takes a major risk off the table​. If they found out they needed to raise money later and something had changed and they couldn’t or couldn’t do it cheaply then they could end up in big trouble.

        People need to realize that Tesla isn’t established enough yet to simply be hedging it’s bets. They need to act defensively and also deliver on their production plans if they’re going to survive.

  14. (⌐■_■) Trollnonymous says:

    Better to raise funds this way than have the heads of the company fly their corp jets to the US gooberment and ask for BK bailouts.

  15. Another Euro point of view says:

    Why didn’t they just issued more stocks ? Those 5% interest will be making an even deeper hole in their P&L, did they really need that ?

  16. Nix says:

    And after all the above whining, Tesla OVERSOLD the bond offering, with $1.8 Billion in sales, and they paid LESS to borrow that money than the 5.5% that is the going price for the same grade of debt. It came in at 5.25%

    There are a lot of folks who really got it wrong….

Leave a Reply