Bloomberg: Elon Musk’s (Tesla's) creditors are suddenly having a serious bout of buyer’s remorse.
- Thread starter Velasco
- Start date
All stocks have been over valued for some time, but Tesla has consistently been questioned to their value. Stocks are also not 100% indicative of a company's health in terms of profits, esp when you factor my previous statement on Tesla. Tesla has been over valued and raising money on hype for a few years now.
I am just arm chair researching here, but those numbers just don't seem that concerning. The only immediate debt I can find in that article is the $1.2 billion due in 2019. So let's double it and round up, Tesla needs $3 billion within 12 months.
The avg cost of the car is $42k, they have 450k preorders, and it's estimated that their gross margin is 25%.
Bloomberg has their own Tesla output tracker. Where they predict Tesla will hit 2,000 cars per week within a month. That is short of Tesla goals, which are around 7,500 cars per week. Let's say production does increase, but never hits their goal output, something around 4,000 cars a week over the next year.
So 208,000 cars, which are already pre-ordered. This nets them $2.2 billion. This is only for their Model 3 line, and is a realistic number even when considering they are behind target. This amount is short of their debts, but it's close enough that investors will probably pick up the slack. More importantly, that would spell profitability for most of 2019 as they have 150k more pre-orders.
In a better case scenario where production average is 5,000/week and margins are 30% (as rumored). They reach the $3 billion.
Tesla is not a sure fire success. Their stock is a risky purchase. I don't think it's as gloomy as reported in this article though.
The avg cost of the car is $42k, they have 450k preorders, and it's estimated that their gross margin is 25%.
Bloomberg has their own Tesla output tracker. Where they predict Tesla will hit 2,000 cars per week within a month. That is short of Tesla goals, which are around 7,500 cars per week. Let's say production does increase, but never hits their goal output, something around 4,000 cars a week over the next year.
So 208,000 cars, which are already pre-ordered. This nets them $2.2 billion. This is only for their Model 3 line, and is a realistic number even when considering they are behind target. This amount is short of their debts, but it's close enough that investors will probably pick up the slack. More importantly, that would spell profitability for most of 2019 as they have 150k more pre-orders.
In a better case scenario where production average is 5,000/week and margins are 30% (as rumored). They reach the $3 billion.
Tesla is not a sure fire success. Their stock is a risky purchase. I don't think it's as gloomy as reported in this article though.
https://www.alibaba.com/product-detail/Unique-8-passenger-vintage-CE-approved_350012268.html
(Although CE is self certifying and not actually tested.)
It doesn't work like that. Selling cars at positive margins doesn't mean cash flow is positive given investment needs (not to mention the company has not actually had positive operating cash flow ever). The company is very seriously free cash flow negative and has been since inception. They have $230MM of converts coming due in November and $920MM coming due in March. Given their free cash flow and debt maturities (and their current cash position along with a level of minimum cash they need for operations-- let's say $500MM), we're looking at this:
1. Base of $500MM
2. Negative FCF of $2Bn in 2018
3. Debt maturities of $1.2Bn
Mix this all in and you're looking at the need for external capital in the area of $2Bn. They have annual capex of $3.4Bn and it is accelerating.
So the stock owners see that and go, "Great, more dilution," and the bondholders see that and go, "Shit, either higher leverage or default."
If they declared bankruptcy, the assets may be highly sought after but your stock would be cancelled to zero.
You're only looking at the sales of the cars and not factoring in:
Solar
Semis
Employees, offices and manufacturing plants
Gigafactory
That's such an interesting statement. When GM declared bankruptcy during the Great Recession, all the shares of the old GM were cancelled to zero. But you probably knew that. The attacks on Tesla are always the same and endlessly amusing with literally no basis in reality.
No kidding, I simplified to make a point. Tesla is getting closer to positive cash flow. If the FCF is approaching the sum of their debt maturities, operational costs, and capex then things start to look a bit brighter. If they stay operational it's likely the turning point is soon if it's going to happen.
That is not true. They are getting further away from positive free cash flow as they invest in capacity. Their last fiscal year was the most negative they've ever been at $(4.1Bn)! Even this year we're looking at another $2Bn needed just based on my envelope math.
They are not going to go bankrupt, but they need to raise a lot of external capital. You are talking about cars and margins like cost of goods sold is Tesla's use of cash when it is not.
That is why the bonds are trading in the 80s.
Tesla bonds got downrated because they not can neither reach the predicted production numbers nor the gross margin anytime soon.
Based on what you have posted thus far, you don't actually work in the finance industry correct? Before you start countering statements from people who are outlining material issues with a business model you need to actually do work around how companies get financed and how FCF and WC work.
My only point is that it seems odd for you to 1) argue how bankruptcy can still be good for Tesla and 2) saying you will buy more stock in Tesla. You should be against bankruptcy in all situations unless you don't care about your Tesla stock.
I don't think you are following the thread of the conversation I was having. I wasn't arguing that at all. I was just mentioning that for some reason it's okay for the big 3 American automakers to declare bankruptcy whenever they feel like it and get bailed out by the US Government but Tesla possibly going bankrupt will result in everything they have ever done being put to the torch because it's all worthless so burn it. Which makes literally no sense.
People often attack Tesla/SpaceX because they don't like Musk, while all the other car makers have faceless CEOs behind them. It's dumb.
The big 3 were really pension bailouts to prevent millions of people from losing their retirement.
Tesla is just a company with none of that baggage. Much like Toys R Us.
Except Toys R Us is suffering from being unable to adapt to a changing retail market, while Tesla is still in the process of building their company, and making progress in doing that. Failure to adapt vs progressing more slowly than some investors would like are completely different scenarios.
Yes, neither company would require a bailout to save pensions, but the rationale for a potential bailout for Toys R Us would be radically different from the rationale for a Tesla buyout. Tesla is progressing down the road to success, while Toys R Us has little chance to turn things around even with a cash infusion.
No one is getting bailed out "whenever they feel like it." You can't paper over the fact that the automaker bailouts occurred as part of the broader financial crisis and Great Recession, because it is central to understanding why the bailouts were good policy. This was a period of exceptional conditions in the economy, where profits were heavily depressed and credit markets were very tight. The normal private sector remedies like raising debt, mergers, and acquisitions were not working at this time. And issues were not limited to a single company, but impacted the entire industry.
That is a totally different scenario from a hypothetical Tesla bankruptcy in the near future, in pretty much every important way. We are in a period where corporate profits are at record levels and credit markets have been very loose for years. Most economic indicators are very strong. There is no external shock comparable to the subprime mortgage crisis impacting Tesla's ability to do business. 2017 car sales were near record levels. Simply put, they have been given some of the most favorable conditions one can imagine to pull off their business plan. There is no reason for the government to step in.
And what sort of bizarre situation are you imagining where "everything they have ever done being put to the torch"? Even if Tesla is not acquired and goes out of business, other companies will buy their assets.
There is good reason to focus on Musk.
Whether it is his $2.6 billion pay package:
https://www.cnbc.com/2018/03/20/tes...sks-2-point-6-billion-dollar-pay-package.html
Or his use of Tesla shareholder money to bail out his failing solar company:
https://www.reuters.com/article/us-...t-solarcity-deal-set-to-proceed-idUSKBN1H43A3
Or the fact that he is the one who keeps announcing production milestones that the company fails to reach.
You do realize bad debt and little to no cash on hand killed TRU, and not the state of retail, right?
"Some investors"
Tesla is bleeding money like crazy, while being years behind reaching production and gross margin goals
Did anyone post this http://money.cnn.com/2018/03/29/technology/business/tesla-model-s-recall/index.html
How impactful is this to them?
How impactful is this to them?
I can agree with you that BMW is doing more than Tesla and more efficiently. Tesla existing, even to play a small part in getting us to a good place when it comes to car efficiency/automation, would be worth it.
So many people are sure of Tesla's demise. I hope ya'll are shorting the stock. You can make millions if you're right.
Funny how the author calls Tesla a Startup. They are a decade old and worth 40+ billion dollars lol.
Car sharing will not solve many problems. Without public transportation there will be always a need to have a very high amount of cars for peak demands.
The biggest ecological nightmare would be also empty autonomous cars driving to the next costumer.
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Have mini busses with many seats drive around by themselves, calculating the perfect route depending on where people want to go, pick people up that want to go to the same place etc. Micro managing "public transport" as a private company operated service. Once cars can drive on their own we will see crazy things happening, imo.
Yup, "smart-scheduling" will become a thing when vehicular automation becomes mainstream to make the process as efficient as possible.
Bounce to ~300 then down to 200 looks likely I'd say.
There was plenty of support in the 300 range previously. That will have changed to resistance now the price has broken down below that level. So the stock is likely to see plenty of sell orders in that region when the price gets back there again.
With the stock trading sideways/down for the last year it's difficult to see it gaining enough momentum to break and close above that overhead 300 resistance for a while. We'll probably see a downwards trending channel to 200 before the stock gets anywhere near its previous highs.
There was plenty of support in the 300 range previously. That will have changed to resistance now the price has broken down below that level. So the stock is likely to see plenty of sell orders in that region when the price gets back there again.
With the stock trading sideways/down for the last year it's difficult to see it gaining enough momentum to break and close above that overhead 300 resistance for a while. We'll probably see a downwards trending channel to 200 before the stock gets anywhere near its previous highs.
That sounds like one of those dead born start up ideas, which will only lead to inefficient messes compared to a fixed bus stop system.
Not sure if it will. The algos are going to have a field day when the market opens which has been what's kept that price up. Bad news on top of bad news is likely going to keep pushing this down a bit.
This thing is going to see intense pressure on the downside under the expectation that there will be an incredibly dilutive equity raise to hit the hurdle on cash. Putting giga up as collateral may try to stem off the equity need but any new money will be obscenely expensive and accelerate th burn.
Tesla needs to pull a rabbit out of a hat and somehow stop burning cash before their trade creditors start changing terms and demanding immediate payment or stop supplying. Lenders get to decide on a cap raise whether or not they want to fund. Suppliers get to decide each time they provide something. With the bond yields spreading and cash potentially running dry a smart move from a trade creditor is to stop supplying until paid. Tesla has already been stretching hard on their terms to generate cash. As one of those trade creditors you are focusEd on future ability to pay and seeing the cash crunch and bond yields spiking means that the cash to pay you becomes more and more remote.
One potential fear with the "it's coming" scenario is it can further prolong infrastructure fixes by getting people to think "eh, it'll come". More cars on the road isn't the solution for high density metro areas
Toys R Us demise was due to a bad debt deal when they got bought a few years back. The interest rates were astronomical resulting ~$6bn in just INTEREST payments over 5 years.
That's the biggest problem of the entire e-car and AI hype. It's the believe that just replace gas with electricity would be enough to solve all problems from climate change to infrastructure. It's a delusion, which will just lead to the fact that the USA will always produce more CO2 and waste than any other industry nation.
Wrap it up, folks. It's over. My shares are going to zero. The future of electric cars is grim. Long live the gasoline engine! Long live global warming! Humanity will become extinct when the Earth warms up until it can no longer sustain our species. There is no hope. None!
Where will you build your doomsday shelter? I'm thinking somewhere far inland, near the Earth's poles. Antarctica might be nice, just got to avoid building it near that weird pyramid that Weyland guy found. Or maybe on top of Mount Everest. Did anyone else ever see Waterworld? You know, that movie with Kevin Costner.
Another thing about self-driven vehicles is that the interiors could be interchangeable easily. So for example, the food trucks. You could move in your stuff in the morning, go to location A, be dropped at the location, call the vehicle back to go elsewhere later, and so on. The same vehicle could be used to transport machinery or all sorts of other things. It could carry bikes, multiple passengers, green collar workers, police officers. People keep thinking about the car model, but we'll start seeing some really different types of vehicles and usage. It's going to be a real revolution.
What's amazing about that picture is I saw that and I was like....Elon has a shirt with his name on it?
Then I found out that there really is an Elon University
Then I found out that there really is an Elon University
This post literally makes no sense and what pisses people off about Tesla fans.
"Elon is a winner because even if he loses he wins"
Is that April Fools' tweet the most honest Tesla's ever been?
In other news: https://www.wsj.com/articles/ntsb-unhappy-with-tesla-over-crash-disclosures-1522628551
In other news: https://www.wsj.com/articles/ntsb-unhappy-with-tesla-over-crash-disclosures-1522628551
The magical PR spin by Elon & Tesla for this crash has been disgusting.
OP
OP
