Being a startup is like being a gladiator. Every day is another war. Every day other startups die. Every day of survival doesn't fill you with relief; you just think of tomorrow's doom.
The general public only sees the sausages that come out of the factory. They only see the glory of massively successful companies like Dropbox. They would be horrified if they saw inside. The blood dripping through the grated floor. The graveyard of bones ground up and spit out as meal for the next "lucky" founder.
This week the public has gotten a taste of how Tesla's sausage is made. Truth is; every day for Tesla has been like this. The truth is, every day in Tesla's life has been the closest it has ever come to death.
Those in HN who've built a company know this. But they also know _why_ they suffer this pain.
A mere two months ago SpaceX launched humanity's dreams into the outer reaches. Meanwhile Tesla is single-handedly altering the course of ground transportation.
Last weekend we took a trip to San Diego in a Tesla. An all electric trip, charged up using the solar panels at our home, with most of the travel time driven by autopilot. The future drove us there and back again. That's why Tesla does what it does.
I don't see the point in discussing Tesla's financials and their "impending" doom. Instead, I think the only appropriate thing to say is...
I mean, this attitude is alright for a dog-walker app. But when Uber (and possibly Tesla) kills a person, it kinda changes the whole conversation, don't you think?
Production is up a bit this week, according to Bloomberg.[1]
1076 units of the Model 3 last week. The plant is supposed to produce 5,000 units a week. Costs are at the level for 5,000 units, while revenue is a fifth of that. That's what's killing Tesla financially.
When Musk first announced the proposed Model 3 production schedule, his two top manufacturing executives quit. They knew that the shortcuts Musk wanted to take, like skipping debugging of the assembly automation at the supplier's factory, wouldn't work. They were right.
Except that Tesla is not failing. There is so much demand for their cars that they cannot make enough of them. A Tesla car fatality is breaking news but a Ford Focus crash is ignored. Any shred of bad news pertaining to Tesla is amplified by the media.
I fully agree that too many people believe in the "vision of Elon" but the thing is that I can get reliable fully electrical vehicles from Nissan, volkswagen or Hundai. And while it used to be that the only "cool" electrical cars you saw on the road were early adopter Teslas, that's just not the case anymore.
Tesla isn't failing because of lack of belief in the vision (Which in absolutely no way belongs to Elon btw). Tesla is failing because they took a huge bet on being able to set up a car manufacturer faster than the established market could adopt the technology.
Tesla still has a great brand to it, but it seems unlikely that they will be able to compete on price, so they might end up only having a high-end electric niche which cant justify their current inflated valuation.
If Tesla collapses then it would negatively affect the price of a lot of other SV stocks. I bet SoftBank or the Saudis would just throw them a billion dollars before they let that happen.
> Somehow I foresee the billionaire class of technical experts will step in and prevent the downfall of Tesla.
Billionaires don't get to be billionaires by throwing money at things with no reasonable expectation of return (well, except Trump, but that's a different story). If Tesla can't figure out how to make money, they're not going to come running. If they were, they'd already be snapping up Telsa's underpriced bonds and stock.
> If anything, this could be a good thing for Tesla
>Too many people believe in the vision of Elon to let this fall apart because of short term production issues.
Most people don't know throw billions of dollars around on infirm beliefs, they do it on an expectation of return. If Tesla is getting to the point where the finances no longer support the dream you shouldn't expect billionaires to behave much differently from the markets.
>If anything, this could be a good thing for Tesla as it might attract other owner/operator expertise to the firm.
Oh please, surely techies have seen this 'this is good for bitcoin' enough that they're not going to fall for the same dumb scam with Tesla.
> If anything, this could be a good thing for Tesla as it might attract other owner/operator expertise to the firm.
Would another owner/operator really be successful? Musk is probably the only person who could have received so much investment and goodwill over so many years without becoming profitable. And Tesla is going to need to continue to raise money for a while.
If a boring guy from an established car company had been in charge, investors would have run out of patience years ago.
. . . As a reality check, Tesla is worth twice as much as Ford* yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss.
Further, Ford has $12 billion in cash held for “a rainy day” while Tesla will likely run out of money in the next 3 months.
That dude is also shorting Tesla, of course, he's going to try to influence public opinion in this way. He'll make a shit ton of cash if Tesla goes southwards.
Other advertising companies made far more profit than Google, had more cash in the bank than Google, yet had lower valuations than Google.
On that evidence, many "experts" and "analysts" said Google was grossly overvalued.
Today it's easy to see that their analysis was dead wrong. If you can figure out why the conventional wisdom then was wrong, you'll understand why Tesla stock has value today.
I've never understood why Tesla raised debt. They should have been issuing equity and nothing else, capitalizing on the insane valuation its had for the past 3-4 years. Debt would have been fine if they executed well, but they haven't.
Yeah, clearly that $1.5 billion in capex equipment is worthless /s
Jim has been trying to make a profit short selling TSLA forever. I can’t take anything he says seriously, crying wolf and all that (although Tesla is going to have liquidity issues at the end of the year if they can’t get their debt refinanced).
TLDR Capital intensive business facing challenges in rising interest rate environment.
Jim is clearly wrong, and trying to sell you something. Even if Tesla as you know it today goes bankrupt, their assets are worth a lot more together then broken up and sold for parts. The worse case scenario is that tesla is sold off to private equity firm for a fraction of todays market cap, but to say 0 is to make up a story to get a price dip so he can make money on his short positions.
I don't want Tesla to fail because I like what Elon Musk is doing for the world.
However, the production timeline issues combined with the poor quality of Model 3 cars which have already been released is a big concern of mine, to the point where my confidence is lowered in the company. I really want to believe he'll find a way out of this but it's not hard to see why investors are worried.
I've never understood what long-term value people see in Tesla. There is no major technical advantage in their motor or battery technology. Autopilot is nowhere near full self-driving and Tesla is not any further ahead on that than other players in the market (they're just more willing to hype it and ship unfinished products). Their cars are nice, but not amazing compared to other manufacturers in the same price range (in fact, build quality is notably worse in many ways).
Yes, Tesla was a bit ahead of everyone else to market, but how are they going to compete when they're not the only one in the "luxury electric car" space?
when asked: "tesla is an infrastructure company" or "tesla is a battery company" (well no panasonic is...) or "tesla is an energy company" (slightly more realistic since they bailed out solarcity) or "tesla is a self driving car company" (which as you point out: they're not any further than anyone else).
Tesla wasn't just ahead of everyone else to market, they forced everybody else to market. If tesla gets everybody else to make great electric cars, that's a success to me, even if tesla itself implodes.
I think if not for tesla, other car companies would not be scrambling to make better Evs.
I agree with ironjunkie that Tesla is too hype to fail; Tesla has had production issues since the start of the Model S... 6 years is no longer 'short term'
SpaceX seems to have plenty of money on hand, but I really doubt that Elon would do that, no matter how bad things looked for Tesla. It seems like SpaceX is starting to move all of their resources into BFR development/production and wouldn’t want a car company with production issues eating into said resources.
I think Tesla going to Google or SoftBank or another group and asking for an infusion of money (and maybe a Waymo collaboration if it’s Google) would be much more likely.
They already pulled that trick with Solar City for which there were at least some plausible reasons. I see no such plausibility for any SpaceX / Tesla merger.
If Tesla can't make it SpaceX will not come to the rescue.
They should have taken this market bubble opportunity, pre recent drop, to pull the trigger on a $5 billion raise via equity dilution. Might have bought them into 2021. They had a solid 10-11 months at the recent ~$320 level to do it.
This market and their own situation combined, can easily be one of those cases where you wake up in May or June with 1/2 the market cap you had in January or February.
8% in this market? Wow. That's... that's pretty bad. Interest rates have been rising steadily, but a spike to 8% can only mean that bond investors have begun to lost faith in Tesla.
The market however, is reacting to Moody's credit rating. Moody's downgraded Tesla to B3 and Caa1 earlier this week, which is well into junk-bond status.
The TL;DR about it is that Telsa's Model 3 production isn't ramping up fast enough. Tesla's current debt deadlines are:
* $230 million due in November 2018
* $920 million due in March 2019
Tesla is running out of time, and the Model 3 isn't being made fast enough. There's plenty of demand. Tesla is most likely going to be forced to borrow money to pay off its last debts.
> If insolvency were a concern the stock would be much lower.
TSLA is down 28% this month. How much lower would it have to go before you were convinced that the market is "actually" worried about insolvency?
And frankly, even if it weren't down, your position would still make no sense. People trade bonds on the expectation of whether or not they'll be paid back. Are you trying to claim stock prices represent what the market really thinks, but bond prices are just posturing?
Credit rating agencies have defined rules and many institutions have policies on what mix of bonds they have. Investors do over-react to short term news.
If you can't defend the company on its own merits, instead of accusing journalists of wanting it to fail, then maybe you should consider that the journalists are correct and the company really does have some problems.
By the way, the stock is much lower. It's down over 15% since Monday. You can blame general stock market volatility for some of that, but even so it's a much larger drop than the overall market experienced.
You’re probably witnessing a prelude to a correction later this year.
Debt markets are tightening up and junk companies will not survive. They need to raise north a billion this year. It’s reasonable to be a bear, unfortunately.
If you like Tesla cars, the best investment in them is to see which automaker is best positioned to pick up what’s left.
Yields on bonds go up when when bond price goes down. You can think of it this way: Tesla bond would have to pay 8% for investors just to be on par (break even), given the current interest rate regime. Of course, bond pays the fixed rate agreed at the issuance, so if you are bondholder, your bond is now worth less, and - if you sell it now - you realize the loss. Put another way, if Tesla to issue new bonds, they have to issue them _at least_ with 8% coupon, because investors will demand premium for risk.
Bonds fall up, and rise downwards. Its a bit confusing if you aren't used to bonds, but that's the terminology.
Its because if you have $950 in bonds, and interest rates rise, then your $950 is worth less (maybe $930 now). Similarly, if interest rates fall, then your $950 is worth closer to $1000.
[+] [-] fpgaminer|8 years ago|reply
Being a startup is like being a gladiator. Every day is another war. Every day other startups die. Every day of survival doesn't fill you with relief; you just think of tomorrow's doom.
The general public only sees the sausages that come out of the factory. They only see the glory of massively successful companies like Dropbox. They would be horrified if they saw inside. The blood dripping through the grated floor. The graveyard of bones ground up and spit out as meal for the next "lucky" founder.
This week the public has gotten a taste of how Tesla's sausage is made. Truth is; every day for Tesla has been like this. The truth is, every day in Tesla's life has been the closest it has ever come to death.
Those in HN who've built a company know this. But they also know _why_ they suffer this pain.
A mere two months ago SpaceX launched humanity's dreams into the outer reaches. Meanwhile Tesla is single-handedly altering the course of ground transportation.
Last weekend we took a trip to San Diego in a Tesla. An all electric trip, charged up using the solar panels at our home, with most of the travel time driven by autopilot. The future drove us there and back again. That's why Tesla does what it does.
I don't see the point in discussing Tesla's financials and their "impending" doom. Instead, I think the only appropriate thing to say is...
Nos morituri te salutamus
[+] [-] Balgair|8 years ago|reply
[+] [-] Animats|8 years ago|reply
When Musk first announced the proposed Model 3 production schedule, his two top manufacturing executives quit. They knew that the shortcuts Musk wanted to take, like skipping debugging of the assembly automation at the supplier's factory, wouldn't work. They were right.
[1] https://www.bloomberg.com/graphics/2018-tesla-tracker/
[+] [-] godzillabrennus|8 years ago|reply
Too many people believe in the vision of Elon to let this fall apart because of short term production issues.
If anything, this could be a good thing for Tesla as it might attract other owner/operator expertise to the firm.
[+] [-] paulpauper|8 years ago|reply
[+] [-] jVinc|8 years ago|reply
Tesla isn't failing because of lack of belief in the vision (Which in absolutely no way belongs to Elon btw). Tesla is failing because they took a huge bet on being able to set up a car manufacturer faster than the established market could adopt the technology.
Tesla still has a great brand to it, but it seems unlikely that they will be able to compete on price, so they might end up only having a high-end electric niche which cant justify their current inflated valuation.
[+] [-] Alex3917|8 years ago|reply
[+] [-] Analemma_|8 years ago|reply
Billionaires don't get to be billionaires by throwing money at things with no reasonable expectation of return (well, except Trump, but that's a different story). If Tesla can't figure out how to make money, they're not going to come running. If they were, they'd already be snapping up Telsa's underpriced bonds and stock.
> If anything, this could be a good thing for Tesla
"This is actually good for Bitc^H^H^H^HTesla"
[+] [-] frgtpsswrdlame|8 years ago|reply
Most people don't know throw billions of dollars around on infirm beliefs, they do it on an expectation of return. If Tesla is getting to the point where the finances no longer support the dream you shouldn't expect billionaires to behave much differently from the markets.
>If anything, this could be a good thing for Tesla as it might attract other owner/operator expertise to the firm.
Oh please, surely techies have seen this 'this is good for bitcoin' enough that they're not going to fall for the same dumb scam with Tesla.
[+] [-] twblalock|8 years ago|reply
Would another owner/operator really be successful? Musk is probably the only person who could have received so much investment and goodwill over so many years without becoming profitable. And Tesla is going to need to continue to raise money for a while.
If a boring guy from an established car company had been in charge, investors would have run out of patience years ago.
[+] [-] stillsut|8 years ago|reply
If Lockheed really believes in their device, they ought to buy Tesla.
[+] [-] CatDevURandom|8 years ago|reply
https://www.cnbc.com/video/2017/12/12/social-capitals-chamat...
[+] [-] ironjunkie|8 years ago|reply
Tesla became too big to fail and Musk became too hype to fail.
[+] [-] fancyfacebook|8 years ago|reply
They need to raise some serious money in a new equity offering, guess we'll see if the market will tolerate that or not.
[+] [-] SQL2219|8 years ago|reply
. . . As a reality check, Tesla is worth twice as much as Ford* yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss.
Further, Ford has $12 billion in cash held for “a rainy day” while Tesla will likely run out of money in the next 3 months.
[+] [-] shafyy|8 years ago|reply
[+] [-] panarky|8 years ago|reply
Other advertising companies made far more profit than Google, had more cash in the bank than Google, yet had lower valuations than Google.
On that evidence, many "experts" and "analysts" said Google was grossly overvalued.
Today it's easy to see that their analysis was dead wrong. If you can figure out why the conventional wisdom then was wrong, you'll understand why Tesla stock has value today.
[+] [-] IBM|8 years ago|reply
I've never understood why Tesla raised debt. They should have been issuing equity and nothing else, capitalizing on the insane valuation its had for the past 3-4 years. Debt would have been fine if they executed well, but they haven't.
[1] https://www.cnbc.com/2017/12/14/jim-chanos-we-think-tesla-is...
[+] [-] toomuchtodo|8 years ago|reply
Jim has been trying to make a profit short selling TSLA forever. I can’t take anything he says seriously, crying wolf and all that (although Tesla is going to have liquidity issues at the end of the year if they can’t get their debt refinanced).
TLDR Capital intensive business facing challenges in rising interest rate environment.
[+] [-] dkhenry|8 years ago|reply
[+] [-] gfo|8 years ago|reply
However, the production timeline issues combined with the poor quality of Model 3 cars which have already been released is a big concern of mine, to the point where my confidence is lowered in the company. I really want to believe he'll find a way out of this but it's not hard to see why investors are worried.
[+] [-] avalys|8 years ago|reply
Yes, Tesla was a bit ahead of everyone else to market, but how are they going to compete when they're not the only one in the "luxury electric car" space?
[+] [-] Avshalom|8 years ago|reply
[+] [-] eugmill|8 years ago|reply
I think if not for tesla, other car companies would not be scrambling to make better Evs.
[+] [-] Avshalom|8 years ago|reply
I agree with ironjunkie that Tesla is too hype to fail; Tesla has had production issues since the start of the Model S... 6 years is no longer 'short term'
[+] [-] abledon|8 years ago|reply
[+] [-] sq_|8 years ago|reply
I think Tesla going to Google or SoftBank or another group and asking for an infusion of money (and maybe a Waymo collaboration if it’s Google) would be much more likely.
[+] [-] jacquesm|8 years ago|reply
If Tesla can't make it SpaceX will not come to the rescue.
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] CatDevURandom|8 years ago|reply
https://youtu.be/HxkbUrNYvmY
[+] [-] adventured|8 years ago|reply
This market and their own situation combined, can easily be one of those cases where you wake up in May or June with 1/2 the market cap you had in January or February.
[+] [-] dragontamer|8 years ago|reply
The market however, is reacting to Moody's credit rating. Moody's downgraded Tesla to B3 and Caa1 earlier this week, which is well into junk-bond status.
The TL;DR about it is that Telsa's Model 3 production isn't ramping up fast enough. Tesla's current debt deadlines are:
* $230 million due in November 2018
* $920 million due in March 2019
Tesla is running out of time, and the Model 3 isn't being made fast enough. There's plenty of demand. Tesla is most likely going to be forced to borrow money to pay off its last debts.
[+] [-] paulpauper|8 years ago|reply
[+] [-] Analemma_|8 years ago|reply
TSLA is down 28% this month. How much lower would it have to go before you were convinced that the market is "actually" worried about insolvency?
And frankly, even if it weren't down, your position would still make no sense. People trade bonds on the expectation of whether or not they'll be paid back. Are you trying to claim stock prices represent what the market really thinks, but bond prices are just posturing?
[+] [-] anilshanbhag|8 years ago|reply
Credit rating agencies have defined rules and many institutions have policies on what mix of bonds they have. Investors do over-react to short term news.
[+] [-] twblalock|8 years ago|reply
By the way, the stock is much lower. It's down over 15% since Monday. You can blame general stock market volatility for some of that, but even so it's a much larger drop than the overall market experienced.
[+] [-] Spooky23|8 years ago|reply
Debt markets are tightening up and junk companies will not survive. They need to raise north a billion this year. It’s reasonable to be a bear, unfortunately.
If you like Tesla cars, the best investment in them is to see which automaker is best positioned to pick up what’s left.
[+] [-] jonknee|8 years ago|reply
[+] [-] make3|8 years ago|reply
[+] [-] viburnum|8 years ago|reply
[+] [-] mynegation|8 years ago|reply
[+] [-] fancyfacebook|8 years ago|reply
The bond price/yield chart appears to be going parabolic in the past few days.
[+] [-] dragontamer|8 years ago|reply
Its because if you have $950 in bonds, and interest rates rise, then your $950 is worth less (maybe $930 now). Similarly, if interest rates fall, then your $950 is worth closer to $1000.
[+] [-] jonknee|8 years ago|reply
[+] [-] transfire|8 years ago|reply
[+] [-] nairboon|8 years ago|reply
[+] [-] Analemma_|8 years ago|reply
[+] [-] duncan_bayne|8 years ago|reply
[+] [-] CharlesMerriam2|8 years ago|reply