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TSLA running out of cash? CNBC article

TSLA running out of cash? CNBC article

vouteb | September 21, 2012

Hope he is wrong

MandL | September 21, 2012

I don't really understand this stuff but his assertions don't make sense to me. It's not like those deposits are being returned. Is he saying that they weren't discounted from revenue projections? As if the other analysts assumed $100K in new cash flowing into the company for every Signature delivered? Even if that were the case, which I doubt, the only sigs to be delivered this year are North American, right? So that's 1200 $40K deposits, not 2000.

David M. | September 21, 2012

Need to ignore this. It's just another John Peterson republished Tesla bashing article.

Mark.Brisbane | September 21, 2012

At the same time Tesla will be receiving the deposits on new sales as it delivers to current res holders.

Additionally, Tesla will be selling the EV credits to other manufacturers.

2010 they generated 13.8M selling credits to Honda. My guess is that is around $7k a car.

Don't let the facts get in the way of a good story. :-)

Whity Whiteman | September 21, 2012

David M.---thank You- exactly my opinion...just another basher who tries to make everyone nervous.
Everything is fine at Tesla and we looking out for next monday!!

Steve841 | September 21, 2012

Anything with "NBC" in it needs to be taken with a grain of salt.

Nicu.Mihalache | September 21, 2012

I'm not taking sides here. Just trying to explain his claim.

Tesla has used the previous deposits as working capital. Even if Tesla will have 25% gross margin on the first 1000-2000 cars (it won't, those margins kick in with higher volume and more streamlined production), on a signature we have: $100k revenue, $25k gross margin; but Tesla only receives this quarter or next the difference of $60k. So the net short term cash position declines by $15k = $75k cost of sales - $60k received from customer. So by delivering those 1200 sigs, Tesla decreases cash by at least $18M. Should there be some recalls / delays / manufacturing problems, the present cash cushion may not be adequate.

Now, my opinion. While his observation is technically correct (analysts made a mistake), he forgets to add the new reservations (we are at about 3k this quarter), which from July to December should add about $30M. We should add also the prepaid service that many will take (Tesla does not have to spend more than $1 for each in the short term - just the paper and the post stamp ;) ). If they manage to sell ZEV credits, Model S has more credits / car than the Roadster, as it has longer range and can carry 5 adults. It may not be correct (it sounds a bit too much anyway), but I have seen estimates up to $35k per Model S.

There is one more subtle argument here, that very few have noticed. Tesla has contracts with suppliers so that they pay with 45 days delay. But making a car, cashing the sale and delivering it takes much less time than that, at least when the line will get up to some reasonable speed. So the more cars they produce, the more short term cash they have, in complete opposition to dinosaur manufacturers that have to fill thousands of parking lots (dealerships) and wait sometimes for months to get payed for their investment.

The last thing I would like to note. The delays we have seen are a consequence of two things. Suppliers not getting their s*** together and Tesla's obsession with quality. The latter diminishes the probability of recalls to almost negligible quantities. In that very unlikely case, do you think Elon who used his last $ to save both Tesla and SpaceX in the middle of the strongest financial storm any of us saw in our lives, would shy away from $100M-$200M (borrowed for example against his equity in SpaceX which is thriving) direct investment in Tesla? Now that this baby is so close to learning to fly? I say no f****** way!!!

ManuVince | September 21, 2012

+1 Very good analysis.

jackhub | September 21, 2012

Petesonn's past articles have not demonstrated as much expertise or knowledge as they have bias for the ICE and an endemic fear of change.

TikiMan | September 21, 2012

Well, if I get me my car now, they will have an the rest of my payment in cash ASAP! (no financing to wait for) ;-)

Michael S | September 21, 2012

All I know is that once you get the car, all the "John Peterson's" of the world will disappear from your thoughts. Now that the car is real, in my garage and beyond anything that has ever come before, I KNOW there is really no stopping this thing. JP and big oil can kiss my lily white #$%.......

TikiMan | September 21, 2012

But seriously, I don't think the reporter is taking into account that the Model S is the iPhone 5 of vehicles! It won't be long before everyone HAS to have one, and more serious investment firms start poring billions into them, just so they can get in before their stock is at $250.00 a share!

Remember, NO serious advertising has been done for this vehical! Compair that to ANY other product on this planet, to achieve what Tesla has done mostly via word of mouth / free press, and all others would have had to spend at least $50 million in hardcore advertising just to achieve what Tesla has done at this point for almost nothing.

As I have already said here many times, I still have to explain what the Model S is to almost 98% of most people that want to know why my cap says T E S L A, and what that means. When I explain it, few believe me, ALL want to see it when I get it, and 50% of them could afford to buy three of them in CASH right now!

Sudre_ | September 21, 2012

This forum is really starting the suck. Just lost a nice post that I don't feel like retyping.

In short . . . . .

I think Terslas margins of a Sig are more like 40-50%.
I think the margins for the base are 25% as Elon said.
They go up the more options you throw in except battery size.

That is when the factory is running at full speed.

David M. | September 21, 2012

@Nicu - Well stated explanation. If Tesla only had to spend cash on cars there wouldn't be much of an issue. However, there are so many new Tesla stores and service centers underway, I can only imagine how much cash is needed to keep those projects moving. Not to mention the cost associated with the new SuperCharger network. Staffing up, training new personnel, etc.

The next 60 days will be very interesting. After that, ramp up should be nearly complete and cash should be flowing in very nicely. But until then? Worst case scenario, some additional funding might be necessary in the short term.

vouteb | September 21, 2012

Musk is now quoted side stepping the 5000 cars for this year production target. Stock down.

CraigT | September 21, 2012

Actually John P. is the one with the mathematical error. I paid a $5K deposit for my signature model S not $40K and I suspect that lots of other people are in the same boat. There was no signature series originally so every reservation holder was charged $5K. When the sigs were announced every reservation holder was grandfathered. Only later orders for the sigs were charged a $40K deposit.

Tesla is a public company. Given the very positive PR and delivery of the first model S cars, it should be no problem doing a secondary offering of stock to raise more cash if required.

Alex K | September 21, 2012

@vouteb | SEPTEMBER 21, 2012: Musk is now quoted side stepping the 5000 cars for this year production target. Stock down.

Where was this quote from?

ArieK | September 21, 2012

@TikiMan - Please don't compare a Model S to an IPhone5, this is an insult to the Model S. The new IPhone is an evolutionary product at best which offers nothing truly new or features which a competitor isn't offering. The Model S on the other hand has plenty of those unique features.
If Apple keeps making products like this and IOS6 for that matter it will be the start of steady decline in stockvalue. If Tesla will keep making products like the Model S it will see a steady rise in value.

KevinR.co.us | September 21, 2012

David M +1
If it is John Peterson generated-- It is not worth the time to read it.

Nicu.Mihalache | September 21, 2012

@ Alex K
Here it is
http://www.bloomberg.com/video/tesla-s-model-s-goal-is-20-000-in-2013-mu...

@ ArieK
The iPhone was revolutionary in 2007 - so much that competitors thought Apple is lying about its functions and battery life. The largest industry by sales numbers has completely changed and the mighty dinosaurs form 5 years ago are gone or on the border of the abyss. At the 6th iteration, Model S could become the equivalent of the iPhone 5, but it has to completely change the industry so GM, Ford, Mercedes, Audi etc. should be forgotten jokes by then.

Brian H | September 21, 2012

OK, my caveats that E-W Superchargers are still well in the future is apparently wrong. "Anywhere in the country ... concerns about range will vanish". Over 100 stations. (How quickly they can be "landed" isn't yet revealed, but I guess he has firm assurances from the aliens!)

Brian H | September 21, 2012

Alex K;
He was actually sidestepping making ANY near-term statements not previously vetted for public disclosure, lest the SEC come after his family jewels with dull, rusty, scissors (but lots of muscles).

mrspaghetti | September 21, 2012

I'm glad the stock dropped a little today. Gave me a better price to buy in :)

TikiMan | September 21, 2012

ArieK,

I am not comparing a phone to a car, I am mearly saying once everyone knows what it can do, everyone will want to have it.

BTW... Last I checked, the new iPhone 5 is selling better than everything on this planet, and then some. If Tesla has that kind of success, they will soon trump OPEC! So, don't knock it, I highly doubt Elon would.

Brian H | September 22, 2012

Petersen wrote that as a 'Contributor'. He's involved with a lead-acid venture. Doing his best to sink Tesla, it would seem!

tomas.hutters | September 22, 2012

John Petersen is a curious case, but it is a fact that he hates Tesla/TSLA and is willing to go very far (I did not say outright lie) to spread his gospel. Vested interests (shorting, lead technology) or whatever: he can never be trusted (and is practically always wrong), but it can sometimes be informative to try to understand where his arguments/manipulations/truth bending fail. Oh and btw: since he is actually being read, it does happen that his Gothic Tesla tales will cause TSLA to drop temporarily. Useful guy, actually ;-)

Brian H | September 22, 2012

Don't quite buy that elementary accounting error theory or "exposé". Treatment of deposits is that they are cash (debit) offset by liability (credit) (future commitment to deliver). On delivery the entry is a negation of the liability (debit entry) offset by sales revenue (credit entry), with no change in cash. Bookkeeping 102.

Brian H | September 22, 2012

But it's 3 a.m. and I haven't worked thru the detail. Some other time, maybe.

Soflauthor | September 22, 2012

tomas.hutters wrote: "John Petersen is a curious case, but it is a fact that he hates Tesla/TSLA and is willing to go very far (I did not say outright lie) to spread his gospel."

The interesting question is why he writes article after article (I think hundreds by this point) that are anti-Tesla. He professes to be a lawyer. It would be interesting to learn whether he has clients who are encouraging (paying for?) his many, many negative articles and just who those clients might be. What we need here is a good old crowd-sourced investigation. :)

Sudre_ | September 22, 2012

(speculation)

He probably bought a Roadster drove it out to his barn in the country and left it sit for half a year unplugged with no charge then was upset that the battery went bad and wasn't covered under warranty..... or has a friend who did just that.

When articles say, "At the time of publication, John Petersen held no positions in any of the stocks mentioned. "
That means he has no financial interest. He obviously has clear personal interest of some kind.

mrspaghetti | September 22, 2012

I'd never heard of his guy until now, and after reading the comments by readers and his responses at seeking alpha, it will be the last time I bother reading anything he writes.

mw | September 22, 2012

Someone mentioned Tesla using deposits for working capital... I really doubt that. They were refundable and anyone cancelling a reservation would get the money back. I originally thought the same thing, they would use the money, but when I asked was told that money was set aside. They could have lied but assuming they didn't. My guess is that the reservation money is not considered income until the order is fulfilled. Based on my limited knowledge of tax accounting. So in that case the basis for the article is wrong. I like how all these analysts try to pretend they know the answer... they don't know anymore than we do! Wait for the facts, don't jump to conclusions based on half truths and rumors!

tomas.hutters | September 22, 2012

@Soflauthor:

"The interesting question is why he writes article after article". Agreed, but I have promised myself not to spend to much time on it, though it really is, potentially, fascinating. The simplest would be if someone would just present conclusive evidence that he is on someone's (possibly John Petersen's) payroll - then we could put him to rest and stop speculating about his motivations.

Let's drop him for now, please :-)

Tiebreaker | September 22, 2012

Ignore everything John Petersen writes, which is much the same story recycled. He has a large interest in Axion Power (used to be the chairman). Axion makes lead-acid batteries for hybrids and start/stop ICE systems, therefore all BEV makers (that don't use lead-acid), all LiIon tech, and Tesla in particular (as a leader in both) are a thorn in his side.

As he doesn't mention Axion in the aricle, the disclosure statement is legally correct. It doesn't mean he has no interest in the subject.

Brian H | September 23, 2012

He's in Switzerland, btw.

Nicu.Mihalache | September 25, 2012

John Petersen has issued a cash warning a few months ago, and more recently he pointed out that if there are ramp up issues / delays or other problems (most of the time there are, especially when launching such a complex product with a completely new factory), the cash cushion is not deep enough.

Few listened. Today we find out Tesla is issuing 4-5M shares. Maybe he knows something after all. It pays to think about both sides of an argument.

By no means I claim Tesla is doomed or something, more like a bump in the road and a buying opportunity (beer cannot be diluted with whiskey, right?). I just don't like knee-jerk answers and labeling people, that's all.

GoTeslaChicago | September 25, 2012

If John Peterson is right about Tesla needing a secondary offering, then so is Elon Musk, since he discussed the possibility in the 2nd quarter earnings conference call.

The difference is the apocalyptic manner in which John Petersen practically predicts the end of the world for Tesla if they should need a secondary.

See this quote from: http://seekingalpha.com/article/785981-knight-capital-group-an-object-le...

"Despite its abysmal financial condition, Tesla's market capitalization was $2.98 billion, or roughly 100 times its estimated book value, at yesterday's close.

I believe Tesla's management team has probably been seeking additional financing for several months because it's the only responsible thing to do. I also think they've probably received several term sheets with discounts that were far deeper than management could stomach. I'm convinced it's only a matter of time until there's simply no choice.

Reckoning day will not be pleasant for Tesla's existing stockholders."

Closing price August 2nd when the above was written: $26.10
Closing price September 25th after the secondary announcement: $27.66

vouteb | September 25, 2012

my worst fears

great product, but production/cash flow issues.

GoTeslaChicago | September 25, 2012

As of 9/14/2012 the short interest has risen to a new all time high of 30,079,911 shares.
This is an increase of almost 4 million shares sold short in 2 months time.

A secondary of about 5 million shares including the 10% over allotment will not help the shorts that much.

Obviously somebody, or a lot of somebodies has a big incentive to talk the stock down.

Not saying it is John Petersen, but maybe somebody he knows....

asblik | September 25, 2012

I'm not John Petersen fan, quite honestly the guy is an idiot, just read his research.. however fact is that TSLA is looking for cash.

Keep in mind
- Tesla built / busy expanding factory
- 3,000 top notch employees on California payroll (Could be about $20M/mo)
- Very little money is rolling in past 3 quarters
- They won't make 5,000 units in 2013 (more like 3,000)

All this and you're burning through cash at amazing rate... hence need to raise more capital, selling another 5,000,000 shares via Goldman announced today that would raise another $150M

Great company, but unless Model S ramps up to 400/week pretty quick it's be an uphill battle folks.

KevinR.co.us | September 25, 2012

h8tow8
I think you meant "2012" in the current production est. ?

GoTeslaChicago | September 25, 2012

h8tow8

Tesla is burning through a lot of cash, including the supercharger network, which are investments in the future. However, if they continue to experience problems in the ramp up and have to come back to the market a second time for more cash, things could get pretty dicey.

That said, once the ramp up achieves Elon's stated targets, Tesla could go from Cinderella to queen of the ball pretty darn fast, leaving the perpetual skeptics eating supercharger dust!

Brian H | September 25, 2012

The S/C network is pocket change for TM. A few hundred chargers, Solar City installs the panels and manages the network to make money off the FIT on the excess generated (on average, over the year). It's a high-return marketing gesture.

MB3 | September 25, 2012

@h8tow8

It is possible for JP to make a correct prediction with faulty analysis. I'll strongly agree with you that his analysis chops are severely lacking, but I don't give him any credit for recognizing a cash-flow problem. Elon has said as much, and even the analysis by MS that JP cited show the same problem. In fact one of them showed a worse problem than JP's analysis, but he latter edited the post to remove that part. Even in the face of the poor cash problems, MS gave them an overweight. The crux of the issue is simple. Demand is still not an issue. If they build it, they will come. So, the question is will Elon let Tesla go bust because it is 10s of millions short on working capital?

sergiyz | September 25, 2012

I don't think anybody can predict the future, it's still a gamble.
Too few cars have been on the road for too little to make any conclusions at this point.
They can easily go bust like Solyndra and Delorean, and Musk himself admits it.
Unlike GM they can't afford a single failure, every car they make today has to be successful.

Brian H | September 25, 2012

Solyndra went bust on exec extravagance and overcommitment to a narrow tech edge, which was never subjected to cost "trial by fire" before the bottom fell out. Deloreans had numerous shortcomings in areas Delorean was not expert in.

Elon's risks are different; no collapse of demand is (as far as can be seen) in the cards. But supply chain narrowness is still an unavoidable 'low volume' issue, and can't be addressed until the mass production stage is reached -- a bit of the 'chicken and egg' dilemma. Vertical integration only goes so far, so far.