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Tesla Financial Viability

Is anyone else concerned that the company will end the year with only 2.9 million in working capital? they have burned 221 million since October. I have put down my $5,000 deposit and am close to making decision to buy. Just a bit nervous company is not out of the woods on the risk side. If for some reason company folded, not sure how anyone could service such a unique "Awesome" car. Feels super risky to me at this point...But I want the car! What to do?

Thoughts?

Not concerned. I see a sound business model and consistent performance. Hope to see my car in about a week.

Disclaimer: Reservation holder, stock holder, drank the KoolAid 2 years ago.

I believe they turned cash flow positive a few weeks ago, so they're likely to end the fiscal year with substantially more than $3m in working capital. Moreover, they're taking in a ton of cash this quarter with both deliveries and reservations, so reserve and relax!

I am not worried. TM hasn't really started high-profile marketing the car, outside the Galleries. I think once the public starts to see more and more Model Ss on the road, Model S ads appear on TV, and the general public can simply walk into to a Gallery and readily take a test drive (which is available at some Galleries); then a snow-ball effect will result.

I actually think TM is smart to work within their current approach of what I term low-key marketing, which permits then to get manufacturing up to speed at which point they will be postured to handle the increasing demand. Too many great companies fail because they grow too fast, can't meet customer demand, and start to implode.

With full production running smoothly and so many Car of the Year Awards, Tesla is poised to hit the ground running once the high-profile marketing of the car happens. I think the future is bright, TM has a solid business plan, and they are smart.

You obviously read the article from our "best" friend John Petersen - see here: http://seekingalpha.com/article/1072761-the-true-genius-of-tesla?source=....

He takes every opportunity he gets to slam Tesla and EVs. He is a big time supporter of Oil and I am sure he shorted Tesla and is hoping (in vain) that it will crash. Don't listen to anything this man says.

If you're interested in some more doom and gloom, you can read the MarketWatch hatchet job commentary at http://www.marketwatch.com/story/tesla-will-need-more-loans-to-stay-aflo...

There are also many counterpoints to this article in the MarketWatch comments section

At this point the car will survive the company. If telsa folds and the Model S production lines comes to a halt, the value of the car should rise. It is not rocket science, the batteries used to assemble the packs are readily available on the market, electric motors may be serviced or replaced, the power electronics may be serviced or replaced, all other parts of the car can be serviced in a traditional manner. The car will survive the company and might be a better investment than the stock.

Don't believe everything you read on the Internet.

Let's think about this logically. If Tesla were to end the year (less than 2 weeks from now) with only $2.9 million in working capital they would be financially insolvent. If so, they should be in the process of either raising capital, laying off employees and cutting expenses, preparing a bankruptcy filing or all of the above.

Instead, we see them ramping production, building out more super charging stations along the East Coast, opening a European assembly and distribution facility, and delivering hundreds of vehicles throughout North America (first Canadian deliveries were today). These are not the actions of a company on the brink of insolvency.

I'm quite confident they will have more than $2.9 million in working capital when the clock strike midnight on New Year's Eve.

John Petersen is my personal friend and I can attest that, to the best of my knowledge, he's not involved (anymore) with oil companies / interests. But I can also attest that he has been consistently wrong about Tesla for at least two years and counting. In some sense he was right that any new car model and especially car company has inevitable growing pains. Anyone around here remembers that the fist Model S should have been delivered by the end of 2011? The story kept changing and the "real" deliveries started September / October of this year and to this day there are growing pains.

John is heavily invested in AXPW, a small R&D company which has developed a revolutionary lead-acid battery, which has many real world applications but EVs will never be one of them. He started a crusade against Li-ion companies few years ago and he was mostly right
http://seekingalpha.com/article/1064411-lithium-ion-batteries-were-a-bus...

But somehow he went too far, including Tesla in his list. I really think he is sincere in his belief that Tesla will fail in short order, but in the same time I think he is a bit blinded by his success in predicting Li-ion manufacturers' failures. He will discover with a big surprise that Tesla is mostly a product company, a bit like a fruit electronics & computing company. Consumer markets have almost no resemblance to OEM / corporate markets, where every penny matters.

He didn't actually provide a link to this report showing that Tesla will have only $2.9M in working capital. The last official filing was the 3Q 10Q (at http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-12-457610&CIK=1... ) which showed $85M in cash and equivalents at the end of September.

Also, producing cars involves buying a lot of materials and paying a lot of workers before you get paid, so I would not be surprised if ramping up production put a serious dent in their short-term cash flow.

What really put the whole article in perspective is one of the last sentences:

"What’s worse, it has a poor habit of failing to deliver to customers the cars it has promised them, while simultaneously raising the prices of those yet-undelivered cars."

Didn't mention that lots of cars now shipping and that the price increase does not apply to those "yet undelivered cars" for people with existing orders.

Simply misleading and wrong.

I read the article as well. I actually read every article on TSLA that I can find. JP looks like a hack job, but to my amazement he is actually pretty well qualified to be a commentator. There were some pretty glaring errors in the article, from some basic math errors to mistaken claims about how many Signature cars were sold. Sprinkle in some condescending attitude and "holier than thou" comments and you get the feeling this guy spends a lot of time alone, possibly kicking puppies. He even leads the article off with this: "I'm an occasional critic of Tesla...". I suppose that's true if dedicating one hit piece a week is considered occasional.

I no longer own the stock but do have some January calls near the money.

For a number of years my company designed and manufactured automatic assembly machinery. One of my field trouble shooters when asked how the project goes would answer, "The faster we go the behinder we get." That answer was more true than given credit. Start-up is always a money loosing effort. Paul White of Ford Motors was in our assembly shop one day, and to another customer from IBM said it best: "Sometimes these machines take a lot of time and training to be productive, but when they get them up and running, boy are they money-makers." When Elon gets all the training done and the bugs out, these machines are going to be real money-makers.

JP's attitude toward Tesla is ridiculous. Look, I am driving my Tesla model S and I feel this is the best car in the world. It performs way ahead of my expectations. He does not take that into consideration. The product is fantastic. Even people who knew I was waiting years for the car and that thought they "knew" about the car (even going to the Tesla website)but when they saw the car their reaction was "I didn't think it would look like that, I didn't know the acceleration was like that", etc...

@Tesla303

Just buy the car. You have nothing to worry about. I plan on paying the car off with the stock I purchased. Hows that, the company that makes the car pays for it also by doing such a great job that their stock keeps going up. Remember this is disruptive technology - get in early!

BYW -- I'm long on a lot of Tesla.

Tesla is a start-up and startups are inherently risky. I'm in because of Elon Musk. If you want the scoop on him, check out the current issue of "Smithsonian." Musk is included in their list of American Ingenuity Awards, starting on page 46. They have more credibility than most analysts who market their pundrity by "analyzing" earnings statements and balance sheets.

I'll just point out that Peterson's article is all based on a report issued by JP Morgan. This report had a target price of $37 for TSLA, so I'd say the authors reached a different conclusion than Peterson.

Mallymb,
+1
Elon did not become a billionare by accident, and it was in the area of finance!
He knows what he is doing IMHO.

There seem to be a lot of articles out there that are picked up by web streams by people who are either reporting old data or just plain made up stuff that they heard. Tesla must be doing something right to provoke such animosity.

^ Excellent point DT: if there is that much animosity, you know people are paying attention. I have testified a lot in court as an expert witness. Typically when the other side has little ammo to neutralize my testimony, they start picking on the numbers in my engineering reports. My clients tell me the other is desperately grasping at straws.

EDIT: ^ ...the other "side" is grasping at straws" (is an EDIT feature really that hard to include here?)

Edit is on the far top left of the page...

Putting aside my enthusiasm for Tesla and its products, there is pretty strong evidence for massive positive change in Tesla Motor's financials in the next two quarters... Counting in 2.5K deliveries for 4thQ12, having paid reservations for more than half of next year's production...

During the delays of 1Q and 2Q 2012 I would have VERY serious doubts, but deliveries combined with growing numbers of paid reservations talk...

Elon has done it, Tesla will clearly be around in late 2013. And likely in a very strong position.

I bet that even after Tesla posts a quarterly profit JP will still put out a piece the next day explaining how the company is going to fail and the numbers aren't real.

When ever I see his name attached to anything I just skip it. The guy has lost the ability to understand how things work. He really wants his lead acid battery company to succeed so anything lithium must fail in his eyes.

If only he at least had good data and not a mixed mash of fact followed by made up stuff.

Great feedback all...nice to know Tesla owners are also so smart and well educated! Time to start picking options on my new P85

The article has too many math problems and many statements are simply untrue

The skewed news that intends to spook people shows up routinely whenever big stock option shorters are coming up on a settlement date or when there has been a nice run up with the stock. There are many factions and groups that truly want Tesla to fail. Sad but true.

As you get a feel for what the real facts are regarding Tesla you will become far more confident about the company and be able to vet out the phoney news sources quickly.

there were a couple of very negative 'blog' articles today. after reading them a few times i believe they are inaccurate and biased, driven by the options expiry of dec 22. basically they are the losers if the stock does not drop tomorrow. lets say tesla hits 3500 S sales for this year at an avg of 90k, thats over 300mm in revenue on the S and lets say they do 30k next year at avg of 75k per, that over 2BB in revenue. the demand is there, the product is awesome, they have yet to advertise. they have a product that they cannot make fast enough with a 25% margin and just started being cash flow positive. i suspect they don't catch up to the demand until well into 2014 or beyond (with the X coming out it could be past 2014 ) and there is considerable upside in the EU market. I am long on telsa.

The 3Q financial statement of cash reserves did not include the follow-on offering that raise about 300M (I think). Tesla has plenty of cash on hand and should be cash flow positive at the moment. The picture is looking better every day because the number of new reservations is growing. Tesla is starting to produce in other countries as well. Demand is not a problem and with production now apparently well over 400/week, either is production.

@noel.smyth +1
You hit the nail on the head. A lot of these negative articles are written by the "shorts" ---who are starting to get desperate. Sprinkle in a few big oil guys, and a few biased individuals who conveniently leave out important facts, and you get several articles that collectively are not worth the time of day.
The good news is that if large funds believe these guys, it will drive the stock price down temporarily and we can purchase more stock at a reduced price!


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