
Tesla Repays Department of Energy Loan Nine Years Early - weisser
http://www.teslamotors.com/about/press/releases/tesla-repays-department-energy-loan-nine-years-early
======
noname123
The reason why Tesla is able to pay the Dept of Energy loan early is because
of a secondary stock and bonds offering worth about >850+ million. In another
words, Tesla is raising funds by generating more debt (from bondholders) and
diluting share value (from shareholders), roughly about 3.5 mil out of 40 mil
float, and using that money to pay the US govt.

TSLA rose on the news despite diluting shareholders is because coupled with
the announcement, Elon Musk mentions that he will personally put an additional
100mil into the secondary offer; and general exuberance that TSLA will use the
cash for more infrastructure build-out, a la Google, Yahoo during their
heyday's. Make no mistake, this is as much a PR ploy by Tesla to pump up their
offering.

It's incredibly smart for Musk and company to raise money in a very favorable
environment as TSLA climbed from 45 to 90 after earnings. However, it remains
to be seen if they can be still profitable. Note that they are still selling
each car at a material loss; and only managed to show a profitable quarter by
trading green credits they gained from their manufacturing. To truly scale,
they need to either drive down the production cost of their cars down and
broaden their market as there are only so much supply of carbon-emission
credits on the market.

Disclosure: I trade TSLA options on volatility, without any directional bias.

~~~
ghshephard
It's these type of posts that make it to the top of a thread that make me not
want to check into HN.

Can't we celebrate a company, that was called out as a bad stimulus target
during the presidential debates actually paying back all their loans ahead of
time? If there was one place I hoped I could go to celebrate an innovative
company's success, it would be HN.

I take particular issue with, "Make no mistake, this is as much a PR ploy by
Tesla to pump up their offering."

Paying back $450mm in loans isn't just a "ploy" - it's actually raising the
money and sending it back to the taxpayers. And, at the same time, doing
something innovative and forward looking - building electric cars - which,
(look at Fisker) - is NOT a slam dunk, even with green credits.

I, for one, am applauding Tesla today. We can do that without saying that they
will be successful in everything, and in the future. But today they are.

~~~
BHSPitMonkey
> It's these type of posts that make it to the top of a thread that make me
> not want to check into HN.

Posts that provide insightful explanation about the story? Yes, less of that
and more unqualified positive gushing, please. There is nothing wrong with
offering an informed opinion, even if (especially if) it's not in full
alignment with the prevailing attitude of the hivemind.

~~~
ryguytilidie
Man, I'm really not sure that you could have missed his point any more. How
could you read what he wrote and POSSIBLY think he was arguing that we need
"more unqualified gushing"? You pretty much just made up a strawman and beat
the bejesus out of it for no reason...

I'll be the first to call out unqualified gushing, but if that's what we're
calling a factual account of a company paying back a loan I simply have to
disagree with you.

~~~
BHSPitMonkey
> It's these type of posts that make it to the top of a thread that make me
> not want to check into HN.

> Can't we celebrate a company, that was called out as a bad stimulus target
> during the presidential debates actually paying back all their loans ahead
> of time? If there was one place I hoped I could go to celebrate an
> innovative company's success, it would be HN.

It's right there in black in white: "I don't like that we have posts that
aren't strictly celebratory in nature" (at least about Tesla). For the record,
I'm most definitely a fan of Tesla and have utmost respect for the company,
but that didn't stop me from appreciating the critical view of this story that
was offered by noname123 (in which I learned some things I didn't know about).

~~~
dasil003
Wait a minute did you just make up a quote out of thin air and misattribute it
to someone else saying "it's right there in black [and] white"?

~~~
iancarroll
I don't see the quote anywhere, either.

------
Coko
I usually don't comment, but I'm surprised that I haven't seen anyone mention
what I think is the most important part of the story.

The DOE loan was an attractive low-interest loan. Why would they repay it
early? Because the DOE loan had restrictive agreements that prevented Tesla to
stay competitive.

From page 44 of their May 10th Quarterly Report SEC Filing:

"Our DOE Loan Facility documents contain customary covenants that include,
among others, a requirement that the project be conducted in accordance with
the business plan for such project, compliance with all requirements of the
ATVM Program, and limitations on our and our subsidiaries’ ability to incur
indebtedness, incur liens, make investments or loans, enter into mergers or
acquisitions, dispose of assets, pay dividends or make distributions on
capital stock, prepay indebtedness, pay management, advisory or similar fees
to affiliates, enter into certain affiliate transactions, enter into new lines
of business and enter into certain restrictive agreements. These restrictions
may limit our ability to operate our business and may cause us to take actions
or prevent us from taking actions we believe are necessary from a competitive
standpoint or that we otherwise believe are necessary to grow our business. In
addition, our DOE Loan Facility also contains a variety of customary financial
covenants, including covenants related to current ratio, leverage ratio,
interest coverage ratio and fixed charge coverage ratio. We modified certain
of these covenants in February 2012, September 2012, and again in March 2013."

~~~
damoncali
Not terribly surprising. I've seen HUD loans up close, and if DOE loans are
anything like HUD loans, they are a nightmare. Audits, escrows, and complexity
'til the cows come home.

Thanks for digging that up though, I was wondering why they refinanced it, as
I assume the interest rate was pretty good.

------
andrewtbham
I own Tesla stock and I'm glad to see this. Tesla has been a highly
politicized stock... largely because Mitt Romney and Sarah Palin called it a
"loser." My hope is that this will help get rid of that stigma and help them
with their image and political battle with dealerships in red states, like
North Carolina and Texas. This also removes some strings attached to the DOE
loan. For instance, Tesla could be acquired (although I find that unlikely).

~~~
twistedpair
Don't forget, we tried to make Tesla dealerships illegal first here in Mass.
NC was late on that one, so let's not make it a "Red State" matter.

~~~
veritas20
It's a preservation of money and industry matter.

~~~
twistedpair
Ever heard of the Tucker? It was the Tesla of its day. So Detroit sued them
out of existence.

------
snprbob86
The subtitle says: "ONLY AMERICAN CAR COMPANY TO HAVE PAID BACK GOVERNMENT"

Assuming that's true, I'm not sure whether I should be proud of Tesla, ashamed
of our Government, or angered at other car companies. Probably all three...

~~~
davidrudder
I'm not an economist, but this is how I understand it. GM paid back it's debt
in full, but it paid most of it back in stock. The US government has sold some
of it, so it's gotten about half of it's bailout back in cash. But, it still
has a ton of GM stock. It's selling the stock slowly to avoid disrupting the
market.

That being said, the government needs to sell at something like $75/share to
make their money back, but it's at $33 as I write this.

Source: [http://www.fool.com/investing/general/2013/05/09/when-
will-g...](http://www.fool.com/investing/general/2013/05/09/when-will-gm-pay-
back-its-bailout.aspx)

~~~
testing12341234
This announcement doesn't really have anything to do with GM (or even apply to
them) in anything but the "we gave them a loan" sense.

From the linked article:

"This program is often confused with the financial bailouts provided to the
then bankrupt GM and Chrysler, who were ineligible for the ATVM program,
because a requirement of that program was good financial health."

~~~
davidrudder
Yeah, I thought that was confusing. "We're the only", "but in some
circumstances we're not really talking about everyone". I thought it was worth
answering the question "did GM pay back it's loan" because GM is the largest
and most notorious recipient of US loan money.

Maybe Tesla really did mean "We're the only American company who received an
ATVM loan to pay it back." But, if so, they're being intentionally misleading.

------
codex
Tesla's early repayment of their DOE loan has prevented the U.S. government
from exercising three million warrants, which would have netted America around
$250 million at the current stock price. Smart move for Tesla, _almost_ a huge
boon for U.S. taxpayers.

~~~
Eliezer
Oh, they had stock warrants? That explains it. Trading the low-interest debt
for stock wouldn't make any sense otherwise.

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lanstein
"This program is often confused with the financial bailouts provided to the
then bankrupt GM and Chrysler, who were ineligible for the ATVM program,
because a requirement of that program was good financial health."

"ONLY AMERICAN CAR COMPANY TO HAVE PAID BACK GOVERNMENT"

I'm not so sure Elon isn't writing his own copy.

~~~
skore
Both can be true at the same time. The second statement you quote does not
specify the program which was paid back.

~~~
lanstein
I'm just referring to the tone :)

------
mrkmcknz
Didn't Tesla repay this loan back with another loan:

[http://www.reuters.com/article/2013/05/15/us-tesla-stock-
idU...](http://www.reuters.com/article/2013/05/15/us-tesla-stock-
idUSBRE94E18W20130515)

I'm not a market economics kind of guy but I don't see how this is any kind of
special achievement. Surely any other car manufacturer could have done
precisely this?

~~~
meterplech
The story is that they paid it back via the private market, meaning that the
financial community believes in the company enough that they no longer need
public support.

Incidentally, they did issue corporate debt (a form of a loan, sure), but also
issued more equity as well.

~~~
mrkmcknz
I guess it probably made sense financially in that the private market believed
in Tesla enough to provide a better rate than the original loan.

------
VandyILL
Does anyone know if the DOE is able to recycle the funds back into loans for
other electric vehicle manufacturers? If so, this may have been an extra smart
move on Tesla's part because it could help competitors access capital and
start investing in some of the shared technology behind electric cars and help
bring the whole industry to scale.

~~~
wmf
IIRC the DOE still has billions of electric vehicle loan money that they
haven't awarded because there are no companies worthy of receiving it. They're
also gun-shy about another Solyndra.

------
Fuxy
Finally a company with a sense of integrity and responsibility.

Regardless of how they raised the money the had a debt that they needed to pay
and they did which is more then i can say about most companies. "Tesla will be
the only American car company to have fully repaid the government."

All other companies only care about their stock and how to make more money the
last thing on their mind is paying back their debts and the government lets
them get away with it because their "too big to fail".

Let me tell you something ...there's no such thing that is the result of their
bad decisions and if they don't fail they will repeat the same mistakes again
and again because they can.

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matt_brushlabs
I don't know if Elon should be so quick to thumb his nose at the other auto
manufacturers. For one, he's facing a pretty substantial uphill climb WRT
dealership laws in a lot of states, and rattling the snake cage won't win any
friends.

On the other hand, when brand value (save Ford) for the domestics is
strikingly low, maybe he's throwing punches exactly when he needs to.

~~~
preinheimer
He's not fighting car makers, he's fighting the (generally very independent)
dealers in those states. Playing nice isn't going to have them withdrawing
their complaints.

At this point better PR, and a mention on the six o'clock news seems worth it.

~~~
matt_brushlabs
I'd agree with you, on the most part -- but I've worked with folks at the Big
Three on their dealership strategies, and trust me: they're strange
bedfellows.

Look no further than how TrueCar had to pivot their business model in a short
period of time in order to comply with the cold backhand of dealers. It's a
juggernaut, sadly.

I'm rooting for Elon to turn it on edge.

------
MarkMc
Mitt Romney must hate Tesla - it is a textbook example of why governments
should sometimes mess with free markets.

If the government had not provided this loan Tesla would have gone bankrupt
and the US would have lost a significant high-tech asset. 99% of the time the
market is more efficient than government, but that other 1% counts for a lot.

~~~
JunkDNA
The right wing argument against government meddling isn't that it doesn't work
sometimes (broken clocks being right twice a day and all that). The complaint
is that, in aggregate, for every Tesla there are countless Solyndras.
Governments aren't good at picking investments for the exact same reason
individual _people_ are not good at picking investments: predicting the future
is hard. It's doubly hard when governments do it because of the distorting
influence of constituents and politics. Let the private sector keep that money
and if Elon convinces enough people to lend him cash, he can move forward. I
have no doubt he could have done everything he has without a loan from Uncle
Sam.

~~~
josefresco
"The complaint is that, in aggregate, for every Tesla there are countless
Solyndras"

The problem with that argument or complaint is the evidence against it...

"The Energy Department has said that losses in the $34 billion loan portfolio
amount to about 2% of the total."

 _This_ program might be a success so far, I cannot speak to past government
investments which might back the "right wing" view better.

------
kumarski
What about Lee Iaccoca? and Sergio Marchionne?

I thought they fully repaid the government too. Maybe I'm confused?

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gailees
like a BOSS

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cdugg
I don't remember getting a check from tesla nor was I asked permission to loan
them money . The whole absurdity of "greater common good"

~~~
nathan_long
What's absurd about it? If pollution has bad and expensive effects (asthma,
flooding, crop loss), those creating it should pay to help deal with it. It's
like paying to have your own trash picked up instead of dumping it in your
neighbor's yard.

If you doubt that pollution is bad, that's another story, but you're in the
minority and outvoted.

~~~
twoodfin
And you really think the best way to do that is to subsidize toys for rich
folks?

~~~
epicureanideal
As far as I know, the subsidy is the same regardless of the price of the
vehicle, so it doesn't apply only to "toys for rich folks". Also, I wouldn't
say that a Tesla is a toy for rich folks. Many reasonably successful software
engineers could afford one if they didn't want to spend their disposable
income on other forms of entertainment.

~~~
josefresco
"Entertainment for the upper middle class" there fixed it for you.

