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Can Tesla Raise More Than $1 Billion On Soaring Stock Price?

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Elon Musk signs new 2013 Tesla Model S at Tesla Store opening, Austin, Texas [photo: John Griswell]

Elon Musk signs new 2013 Tesla Model S at Tesla Store opening, Austin, Texas [photo: John Griswell]

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Investors in startup electric-car maker Tesla Motors [NSDQ:TSLA] have had quite the wild ride lately.

Following its first-ever profitable quarter, with its share price soaring above $80, Tesla announced last Wednesday that it would issue new stock and warrants.

Now, Tesla has quietly increased its offering, which could raise the company more than $1 billion if its stock price stays at current levels.

30 percent more

In a Bloomberg article late Friday, CEO Elon Musk said the offering would be increased by 30 percent over the level announced just two days previously.

On Wednesday, Tesla said it would offer 2.7 million to 3.1 million more shares of its common stock, as well as issuing up to $450 million in convertible debt.

At a closing price of $84.84 per share that day, total receipts to the company would have been $229 million to $263 million for the stock, for a total of $680 million to $710 million.

The expanded offering of up to 3.9 million shares could net the company as much as $1.08 billion.

Many analysts say the high price of Tesla stock is due to a "short squeeze," in which investors who felt the share price was too high sold Tesla shares they didn't own and now must buy the stock to cover their short positions.

To date, Tesla has sold approximately 10,000 cars globally. All but 2,500 of them are the company's all-electric Model S luxury sport sedan, which starts at $69,900.

Musk follows Iacocca?

The Bloomberg article compared Musk to Lee Iacocca, who ran Chrysler during and after its 1979 bankruptcy.

Under his leadership, Chrysler repaid its government bailout loans with interest in 1983, seven years ahead of the due date. Musk intends to do the same, nine years early.

2013 Tesla Model S

2013 Tesla Model S

Enlarge Photo

Most of Tesla's $465 million low-interest loan from the U.S. Department of Energy is still outstanding, although Tesla has made payments of $25.4 million to date.

But Wednesday's offering announcement included the pledge that Tesla would use much of the proceeds to pay off the loan entirely.

Taxpayers might see a profit of $12.8 million after the loan is paid back by the end of this month.

The company will have roughly $680 million in cash and cash equivalents afterward, up from $214 million at the end of March.

Ford, Nissan, Tesla vs. Fisker

The DoE loan was granted to Tesla in July 2009 as part of its advanced-technology vehiclemanufacturing program.

Much larger amounts went to both Ford ($5.9 billion) and Nissan ($1.6 billion, of which it drew down $1.4 billion), which are making payments on schedule.

The fourth large loan commitment was $529 million to Fisker Automotive, although the DoE froze disbursements after $192 million had been paid out.

Fisker is now in deep trouble, having laid off most of its employees and not built any cars since last July.

Meanwhile, Tesla stock closed Friday at $91.50, more than five times its June 2010 initial public offering price of $17.

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Comments (15)
  1. if he goes for the swappable battery concept, the share will eventually be worth five hundred. Because with unlimited mileage and no range anxiety, the gas car becomes obslete
     
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  2. tesla batteries are already swappable
     
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  3. @Scott: By whom? Certainly not by the owner. And there are no swap stations at the moment.
     
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  4. While true in theory, it's not absolute. An owner that works for acompany that has pallet jacks, say construction or retailers, or who knows someone that does, or is willing to rent one from a rental yard, could conceivably pull a battery quite easily.
     
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  5. Building cars is a very capital intensive business and Tesla is certainly flush with cash now, so its future looks that much brighter. Also the DOE loans are no longer a point of contention for Tesla's critics which is important, because surviving in this business is all about having enough political support.

    Special thanks is due of course to all those experts and analysts out there who were so sure that Tesla wouldn't amount to much and inspired so many investors to bet against Tesla by shorting it's stock. It's those believers in gloomy expert's opinions regarding Tesla that that are now in fact paying for an increasingly bright future for this company.

    Ah, the irony...
     
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  6. @Chris: The one additional note I'd add here is that in Q1, Tesla was not profitable at making and selling cars. The profitability came from a variety of other things: ZEV credit sales, powertrain manufacturing & sales, and an accounting entry.

    The execs are clearly aware that they will have to make that happen, and discussed further efforts to reduce parts costs and worker hours per car that will occur during Q2 and Q3.

    But at least some of the cash they bring in, assuming the offering goes as planned, may end up subsidizing that carmaking until the company reaches the point that it can make and sell Model Ses a profit by itself.

    For the record.
     
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  7. Car production itself had a gross margin of 5% on average during the first quarter so in fact it *doesn't* need to be subsidized and Tesla is working to further improve gross margin.

    It's true though that gross margin wasn't enough to cover all the expenses that weren't directly production related, but a lot of that is further investment and thanks to an army of misguided shorters Tesla can now afford the negative cashflow that comes with the continued need to invest, in fact it can speed up investment to build the foundations for a profitable future.

    Time will tell if things pan out that way of course but so far underestimating Musk has been a costly affair for those putting too much stock in the opinions of experts.
     
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  8. Thanks for the usual paranoia, bitterness and amazing ability to see the future. You know, because a whopping few months of low-volume production of a car that its customers have waited years far is clearly proof that Tesla will be successful over the next decade, right?

    As most rational people stated, the industry is a tough one and capital intensive and there are good odds that Tesla will end up becoming part of another OEM at some point down the road. The company itself still isn't profitable, nobody knows how well the Model S will sell once the long-term reservations pipeline dries up and making one low-volume cars is a far easier task, of course, than becoming a volume OEM, Musk's long-term goal.

    Tesla has done great, but it's early.
     
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  9. Please learn the words context and perspective, Chris. Six months of low-volume production don't guarantee anything in 5-10 years anywhere but in your mind. I certainly hope Tesla makes it on its own but claiming victory at this extremely early stage is a dumb mistake that you love to make. Luckily, Tesla and its employees are much smarter than you. They have responded to challenges with intelligence, not attacking those who are rational and acknowledge that even a great start doesn't guarantee success years down the road. Audi, Jaguar, Aston Martin, Land Rover, Ferrari... What do those brands have in common again?

    But again, thanks for telling all of us the future. Kind of like you predicting the LEAF would outsell the Volt easily, right?
     
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  10. Read to learn a comment. Nobody is claiming victory here. My point was that the general scepticism regarding Tesla's future has taken an unexpected turn; the shorters are actually contributing to a much better outlook for Tesla. Nobody denies that the road is long and success remains uncertain. It certainly helps to have a lot of cash along the way though.

    And the only one with a tendency for impolite, nasty, irrational and bitter comments here is you. Please let John Voelcker speak for himself, should he feel the need to. No need to spoil the discussion with your angry rants based on your total incapability to properly understand a comment.
     
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  11. Ah, yes, yet mor bitter, whiny comments masquerading as rational discourse, all the while filled with bile and anger, while accusing others of... using anger... Keep up the good work, Chris, perhaps some day you can get a lackey job with Tesla Motors, or... Dare to dream to ever even own one years after people like me are on our third or fourth EV or PHEV.

    And my comments are my own. What part of this is a public forum seems to be so difficult to grasp for you? If you want to take yet another cheap shot at me, expect it to be returned.

    "Special thanks is due of course to all those experts and analysts out there who were so sure that Tesla wouldn't amount to much."

    Learn to write, that's pretty much claiming victory.
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  12. Such bitter rants, all because you can't read a simple comment properly. Sad...
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  13. Now that Tesla has all this cash the next question is of course: how will they spend it?

    Some options come to mind:

    -moving forward the introduction of Model X and Bluestar, or maybe even introduce a close variant of Model S like a wagon or a coupe. Can't be a one trick pony for too long.
    -Expedite the roll out of the Supercharger network. That still has to start in Europe despite the fact that cars will begin shipping this quarter. No Superchargers = no super sales
    -Buy into promising battery tech developments. That's what GM and Toyota are doing and this game is all about the battery
    -Make campaign donations to dodgy politicians to counteract those made by dealer organisations so they will be more supportive of the Tesla store concept;)
     
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  14. Tesla has had a near flawless execution of the Model S. No recalls or other major stumbles. I think they should ramp up excitement with them showing investors what the Bluestar will be soon. That would really ramp up sales
     
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  15. Bring forward the X, the Bluestar the superchargers and begin advertising...Hi I'm Elon and I'd like to tell you something about the only car company in America that has no debt from the US government. Ya see, the the car dealers associations are trying to make illegal for us to even email our customers, imagine that...
     
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