To build out the factories to meet the demand? Yes. That's just normal business. It's a great problem to have, and they should have no problem raising the capital.Referenced on the very page you cited... http://seekingalpha.com/article/3971866-tesla-o-tangled-web-weave-first-practice-deceive
It doesn't seem to matter what they make per vehicle sold...it seems Tesla is about to have to ask for a lot more money to keep operating...
But the concern is that despite making $20,000 profit per car, having share prices over $200 each, and receiving $400 million in donations, Tesla still needs more money.To build out the factories to meet the demand? Yes. That's just normal business. It's a great problem to have, and they should have no problem raising the capital.
Did you actually read the article?To build out the factories to meet the demand? Yes. That's just normal business. It's a great problem to have, and they should have no problem raising the capital.
You do understand that once the first model 3 comes off the assembly line with a lot more to follow quickly along with the first battery pack out of the Gigafactory that the expenditures will drop off considerably? With just an 80% conversion rate on the cheapest model 3 they are looking at 10.5 Billion in income. With most people opting for a couple pieces of trim above stock you are looking at 12.6 Billion in income. Now if everyone converts their reservations to orders which is unlikely but more people will order as production ramps up so with 400,000 current reservations Tesla will bring in 16.8 Billion in revenue just on the current orders for the model 3. This doesn't include the Model X or the S or the Batteries that the Gigafactory will sell.Did you actually read the article?
[one of two things is bound to happen here:
Tesla will issue equity, and $2 billion seems the bare minimum as TSLA is likely to burn as much within one year.
Tesla will face significant failure risk within one year if it doesn't issue that equity.
My main conclusion of this whole drama is that Tesla is a company on the verge of bankruptcy, whose only salvation is to issue a large slug of equity within the next 3-6 months. I predict Tesla is likely to issue equity within three months.
Moreover, this large slug will only be enough to keep Tesla afloat for 1-2 years more (depending on whether the equity raise is $2-4 billion). And this equity raise will do nothing to assure that the Model 3 will in any way be profitable. So in 1-2 years' time, Tesla is likely to be in the exact same spot as today even if it issues equity. I predict Tesla will issue at least $2 billion in equity, which is the bare minimum.
If Tesla does NOT issue a lot of equity, it will fail quickly (within one year).]
It could be a very interesting time ahead...
Especially since the above analyst is not alone in his thinking...
Most analysts expressed more concern than optimism in terms of the company’s brewing cash crunch, but Bank of America’s John Murphy may have summed up the opinions best:
“Given ongoing manufacturing issues and delayed ramp of the Model X, we question whether (i) this target is actually achievable, and (ii) can be done so without a significant capital raise in the near future…By our estimates, TSLA will burn roughly $(1.6)bn in cash in FY16 (includes Model 3 deposits), with no real relief in sight…TSLA has raised capital every year since 2010, and we believe if the company fails to turn the corner on free cash burn in the near term, which we view as unlikely, support for the stock may dissipate…[We] do not expect the company to be free cash positive on an annual basis in at least the next three years.”
The magic number is still unclear, but selling $2 billion worth of Tesla stock doesn’t seem like an out-of-line possibility. In fact, don’t be shocked if it’s even more than that, as the company tends to underestimate costs and the amount of time required to make production progress.
I liked the one analyst's statement...buy the car, not the stock...
This is not true. The automotive industry is about constant re-investment.You do understand that once the first model 3 comes off the assembly line with a lot more to follow quickly along with the first battery pack out of the Gigafactory that the expenditures will drop off considerably?
Exactly. I've mentioned before that Tesla should stay in the high end part of the business where people will pay high end prices. Tesla might have even priced a couple of models much higher than they did. The $30k and down market is going to be different. Production is a long way off, and they will be competing with other mfg dealers who have price cutting sales at end-of-month, end-of-quarter, end-of-year, endless rebates, etc., etc., and within acceptable performance stats, these buyers will be looking hard at prices not ludicrous 0 to 60 times.Of note the automotive companies that make the highest margins are the low volume higher end car makers. If Tesla is having trouble making ends meet with low volume high end cars. Then I have serious concerns about their future.
Stock prices have little to do with labor, capital, or profits.Uhm, to increase sales volume close to 10x!
GM's cost is not $145/kWh for the pack. It has a quoted $145/kWh price for the cells.So they are quoting a $190 per kWh. I'm curious how they hope to be price competitive with GM's offerings, if the Bolt battery pack is costing GM $145 per kWh.