Tesla is currently trading at around $47 per share with over 32 million shares short at the last filing. With only 115 million shares outstanding, TSLA could issue 10 million shares plus a small over allotment and raise enough money at say $45 per share to extinguish its entire DOE debt while only diluting the current shareholders by 9%. The 10 million shares could only satiate a third of the short position while freeing the company of any meaningful debt overhang.
Many shorts pontificate about the lack of current cash flow to repay debt despite managements statements that they foresee sufficient cash flow to meet all current obligations. Given TSLA's current stage of its development cycle, a debt free balance sheet would offer numerous possibilities.
I do not believe it is necessary for them to issue new equity to repay debt and give the shorts an out at this price, but the possibility to achieve such an event without incurring an appreciable amount of dilution is a comforting thought for a current investor. Meanwhile, with every point increase in the price of TSLA the shorts are suffering an ever higher negative cash flow and open-ended potential losses.
Disruptive technology is an exciting business, especially when it is being executed in such an impressive manner as numerous industry awards and accolades will attest. Wherever the stock price goes it will be almost as exciting as driving a Model S from 0 to 100.
To date, the longs are the windshield and the shorts are the bugs!
It is entirely possible for Toyota or Mercedes to buy 20%, or more, of Tesla. These large companies usually don't want to take the risks of developing new technologies but they will not hesitate to participate soon as they see future of it. What they will see in Tesla technology is not necessarily EV but the way to make the best car that can one up their competitors.
" The 10 million shares could only satiate a third of the short position while freeing the company of any meaningful debt overhang."
I agree with Easy. There are probably better uses for the money.
Also I agree with Coach. If Elon thought it was that easy, it would already have been tried.
(With the assumption that Musk thinks it is necessary.)
Elon has proven he can make the cars he said he could.
The reliability etc. will still be in question for 10 or more years.
But that is not a concern unless they start failing and people start talking.
Two present problems remain.
Can Tesla make money on building the cars. This is without Credits, one time events, pulling cars forward, accounting tricks, etc.
So far, the answer has been no.
Can he cut production costs enough?
Can he raise the price enough?
The other question is demand.
Again we'll see.
According to someone on the TMC board a week and a half ago they were down to one month wait.
This I believe, was before the red ones began. I expect the wait is longer now.
04-13-2013, 09:38 AM post #40
The one month lead time was there as late as this Tuesday, last time that I've checked it.
There seem that some pricing changes were made as well. The Performance Plus package now does not includes 21" wheels, but "requires" them. When selected from the Ordering Page, the Performance Plus Package ($6,500) automatically adds 21" wheels option ($3,500) on top of it.
Looks to me like the ASP should be revised up due to both of these changes.
The site now says:
The current time between order and delivery for a Model S is as follows: 3 months for 60 kWh and 85 kWh; 2 months for Performance 85 kWh.
And it appears the prices are moving up as well.
The one thing totally out of his control is demand.
I expect that is why the X is delayed, he doesn't want to cannibalize the MS.
In case you don't know I am a trader. Sometimes long sometimes short right now, neither.
The current cost of capital on the existing loans are extremely low. As with many other companies, TSLA can sustain the current debt/equity ratio. Looking forward, what do they need cash for?
- SC network for the US and Canada consisting of 200 locations with 6 chargers average at cost of $50M
- SC network for the EU would also cost $50M
- MX tooling involving new stamping presses, dies, welding and assembly line $500M. Finance inventory with AR.
I do think the existing operations are cash flow positive. The SC networks will drive further demand as well as future higher capacity batteries. MX manufacturing is a challenge, but it could generate significant revenues and profits, but the cost of the car has to be at a reasonable $60-80k. Needs higher capacity batteries, but less performance.
TSLA is on the way to achieve huge economies of scale, with falling costs and increasing margins. Looking at the past is a fallacy for the shorts. At the very least, Elon Musk has the capital and access to capital to outlast the shorts.
Cgodman, I once thought that would be a good PR move to show Tesla repaid the loan, but it was pointed out to me on this board that thr loan is very low interest. They already moved the payoff from 10 years to 5 so the consensus on this board a month ago was any offering would be best spent on expanding the supercharged Network and production rates. The idea was this could drive demand outside CA, but I have to admit the shear PR once the loan is gone could really help Tesla.
If they move 4800 units in Q1 + ev credits they should break $500m in Rev. easily. Although expenses are up, I think theY will be ok. They are NOT going to say they turn a profit a month before the announcement and then miss. They may make small blunders here and there (as all new companies do), but not one that big. Their Cost controls will be interesting to see, im feeling better about demand personally so im counting on money being ok and any offering used to expand.
Stay long and hedge just to be safe.
Cgodman, you're a putz. Tesla had an offering before and raised approximately $230 million. Why 10 million @ $45? Why not 40 million @$80? The raise could probably absolve the debt of say, Zimbabwe?
Really, you honestly think another offering would come WITHOUT significant handcuffs for Musk? Get serious! Plus, you actually think Tesla could raise $450 million, which would be larger than the original offering?
HaHa Ballcoach you are so generous. You call him a putz and nothing but? Yes I understand that there are restrictions on the board as to what you can say but really. Putz. Is that all? There is the F, the C, the B, the SFC, the A, the FnA,... the list goes on, that you could have used. Bravo for your restraint in dealing with the codger. My rhetorical question is simply - where do they keep coming from? And why do they always seem like elementary school dropouts? Or maybe that's what having 100 shares of TSLA does. Or is it that you have to be like that to buy a 100 shares? Which comes first? That is one of the unsolved mysteries of the world.
Once again you prove the only thing greater than your arrogance is your ignorance & stupidity. I used a $45 price example because it is a modest discount from the closing price today. Neither of us has a definitive answer where an offering would price if it were held. But referencing the original offering when the company had not yet produced a car or received consumer acceptance is an asine comparison. That is why my topic is a supposition and not a declaratory statement.
By your own post, you proved that you have little or no knowledge about investment banking or corporate finance. You add nothing to the discourse other than insulting remarks that I heard on the playground in elementary school.
For more than a year, people who have followed your often repeated but rarely correct advice have lost a lot of money.
What a turkey, $450 million in these circles is a pocket change. Besides, what will someone pay for a 500% grower (AKA, TSLA) in a WORLD market that exceeded 84 MILLION units in 2012. I know, you can only count on your fingers and toes. LOL :-)
You SHORT folks are, AND HAVE ALWAYS been hosed. You just don't get it. Oh we'll, it's only YOUR money.