
Tesla to raise $1B - loourr
http://ir.tesla.com/secfiling.cfm?filingID=1193125-17-83703&CIK=1318605
======
Cookingboy
As an investor of Tesla who bought into Elon's vision I've been getting more
and more nervous about how the company is actually run at this point.

A modern car company is as much of a production and supply chain company as
it's a product and tech company. I get the feeling that due to Tesla being
cutting edge in the tech department it led to all the supply chain/production
problems being treated as if they are speed bumps on the way, when in reality
they are fundamental core competitive areas for an automotive company. Toyota
is not the world's premier automaker because they have cutting edge tech, they
are what they are because they build unbelievably number of reliable cars at
an unbelievable scale.

The bleeding of cash after so many promises of "not going to raise money
again" just shows that their vision is way ahead of their execution ability.
Decisions like the terribly executed Falcon Wing Doors on a SUV that delayed
production and increased cost and hurt reliability just further gave fuel to
all the doubters.

I also have a strong suspicion that Tesla has not been honest with their Auto
Pilot 2 and full self driving tech's progress. The current AP2 is an unsafe
joke and I have no idea how people are ok with paying $5-10k for a
_significant downgrade_ when compared to AP1 because of a non-binding promise
that it "might" get upgraded before their lease term is out. Any other
automakers would be laughed out of the room for suggesting this kind of sales
tactics.

I still believe in Tesla/Elon's end game vision, and I think what they
accomplished is nothing short of brilliant, but I think it's a very risky
investment at this point and the road ahead is bumpier than many like to
admit.

The upcoming Model 3 will be the acid test for Tesla. It will no doubt be a
good car, but at this point people should focus less on _what the car can do_
and on _how_ the car will be rolled out, sold and supported afterwards. A
wealthy Model S customer _may_ be ok with having the car in the shop after a
minor accident for 5 months due to lack of replacement parts, but for an
average Joe paying $500/month leasing a Model 3 that would just be the birth
of a new BMW customer.

~~~
corbett3000
You're concerned with a 23% YTD return on the stock and a 600% return over 5
years? The market has a way of signaling if a company is totally screwed up.
Looks like it isn't.

~~~
Cookingboy
Well the market can be terribly wrong on many companies in the long run, both
undervaluing great companies and overvaluing terrible companies. Tesla's
vision is for the next 20 years, not the last 5.

Historical performance is also not an indicator of future performance.
Everyday I'm holding onto the shares is the same as if I made the decision to
buy that many shares on that day. If anything the fantastic return would
encourage long term investors so far to partially cash out and diversify their
risk a bit.

~~~
ganonm
> Everyday I'm holding onto the shares is the same as if I made the decision
> to buy that many shares on that day

This is a great way to think about holding investments. I remember using this
argument to try and convince a family member that they should sell what I
considered to be a bad investment. I phrased it as 'If you were _forced_ to
sell your shares _right now_ would you use the money from the sale to
immediately buy back your shares?'. He responded that no, he wouldn't.
Obviously this ignores brokerage fees, but it is a useful thought experiment
nonetheless.

~~~
trevyn
Ignoring tax implications is a much, much bigger problem for your argument
than ignoring brokerage fees.

~~~
sokoloff
Indeed. Even execution slippage is greater than brokerage fees for a
reasonable sized round-trip trade at a discount broker.

~~~
floatrock
Sure, the real world inhabited by the pro's is complicated, but the point is
when we're first learning the fundamentals, we assume an idealized
frictionless plane.

------
kumarski
Uber as a ponzi scheme of ambition

1/ Basic premise was they keep highlighting their entry into larger and larger
markets and so investors keep ponying up $ for the ambition. 2/ First, it was
taxis

3/ Then, it was taxis + logistics

4/ Then taxis, logistics, vehicle ownership

5/ Then taxis, logistics, vehicle ownership, autonomous

6/ Then taxis, logistics, vehicle ownership, autonomous, trucking

7 / Then taxis, logistics, vehicle ownership, autonomous, trucking, drones

8/ I might have the order wrong but each spins Uber into addressing an even
larger Total Addressable Market

9/ While they never actually own even the first one (taxis) yet. But investors
love the ambition and keep ponying up.

10/ Hence, the ponzi scheme of ambition

[https://twitter.com/asanwal/status/820365771834531841"](https://twitter.com/asanwal/status/820365771834531841")

It's hard to say whether Musk is doing something similar or not. Satellites,
boring company, mars mission, electrified grid, etc....Obviously, Kalanick is
much different than Musk, but I can't help but feel pattern recognition
creeping up on me.

~~~
flexie
In a ponzi scheme, nothing is created. Uber has created a service used by
millions and which tens of thousands of people make an income from.

Tesla has created products that hundreds of thousands of people use, millions
want, and hundreds of millions admire. Tens of thousands of people work in
their factories. To many of us, their products hold a promise of a better
future. SpaceX is reopening a chapter of human exploration that nation states
had closed. Literally the most powerful organisation in human history, the
United States, had all but given up on it. In my mind, landing a rocket is one
of the most astonishing technological feats by humanity in decades. And it was
done by a startup.

Now, I don't know what you spend your days doing, but I cannot compete with
Musk. And I am just talking about his achievements until now, not the
potential future ones.

I get that from an investor point of view, Tesla might have created little of
value if it bankrupts soon. Eventually, though, all companies bankrupt or
close in other ways, and so will Tesla. But the EV revolution that Tesla
started will not stop. The cars are still there, the ideas have been proven.
Is the comparison with ponzi schemes really a good one?

~~~
mtreis86
Enron employed thousands - that doesn't make it less of a Ponzi scheme.

------
salimmadjd
Tesla is basically taking on a loan in form of a convertible notes. probably
much smarter to distribute their lender among multiple entities than one giant
bank that would have leverage on them.

Also, it looks like Tesla would use a portion of the money to inflate their
share prices via a small buyback. The after market trading so far make this
strategy look successful.

So at the end of a day: Tesla is raising capital without diluting their
shareholders and reducing their share values and giving up much control. Also
the maturity date of 5 years is rather interesting. I wonder if it correlates
with their internal projections and their ability to pay that money back by
then.

~~~
jeffwass
You've contradicted yourself in the two quotes below.

"Tesla is basically taking on a loan in form of a convertible notes."

"So at the end of a day: Tesla is raising capital without diluting their
shareholders and reducing their share values"

Convertible debt is in fact dilutive. It's even specifically accounted for
when calculating Diluted Earnings per Share :
[http://www.investopedia.com/terms/d/dilutedeps.asp](http://www.investopedia.com/terms/d/dilutedeps.asp)

~~~
arzt
Sort of, but not really...the FASB has said you can treat the underlying
shares as non-dilutive if the stock price isn't above the conversion price
(this is called "net share settlement"). So basically, while outstanding, the
debt acts like debt for accounting purposes until the stock price is above the
conversion price. When it goes above the conversion price, the you treat those
incremental shares as dilutive. Additionally TSLA is putting what's called a
bond hedge (or call spread) on top of this, which limits dilution over and
above an even higher stock price.

Pretty sweet deal if your stock price doesn't go up and you only have to pay
minimal interest.

Here's an example that lays out a similar structure and accounting treatment:
[https://www.sec.gov/Archives/edgar/data/1084961/000119312513...](https://www.sec.gov/Archives/edgar/data/1084961/000119312513055339/d486089dex992.htm)

~~~
dilemma
>Pretty sweet deal if your stock price doesn't go up and you only have to pay
minimal interest.

So Tesla is shorting TSLA?

~~~
arzt
Lol, effectively. A convert is basically a forward stock sale, so if you're
TSLA you're basically saying "I get a pretty good cost of capital if my stock
stays where it is, but if it goes up a lot, my company is probably in better
shape than it was before I raised capital, so I'm more or less happy either
way."

------
patrickg_zill
If I were to make a computer analogy, I would probably say that Tesla in
having to deliver the Model 3, is right at the point IBM was when they were
finishing up the IBM 360 series: it will be a make or break product release
for them.

[http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/system3...](http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/system360/words/)

quote from Thomas J Watson Jr.:

“The expense of the project was indeed staggering. We spent three quarters of
a billion dollars just on engineering. Then we invested another $4.5 billion
on factories, equipment and the rental machines themselves. It was the biggest
privately financed commercial project ever undertaken.”"

(note $5 Billion number was in 1964, inflation-adjusted, that is many billions
more)

~~~
tarlinian
Reading about the S/360 is insane...no one makes investments like that
anymore. This would be the equivalent of Intel or someone spending $40 billion
dollars on engineering the and the infrastructure needed to build a quantum
computer today. (What's interesting is that they would survive even if the
expense didn't pan out, but no large successful company would ever do this
today.)

~~~
adventured
Sure they do.

That's an immense spend by IBM, however lots of big companies spend in the 11
figures on projects.

Exxon is spending $20 billion in the next five years to expand its oil
refining and chemical operations along the gulf coast.

Las Vegas Sands is planning to spend at least $10 billion just to build its
Japanese operation.

Verizon spent $25 billion or so over 12 years trying to build out FiOS.

Wanda Group in China is spending $15 billion to build a Disney park
competitor.

Apple's total cost every time it builds a new iPhone is in the tens of
billions including its ahead-of-time purchasing commitments.

~~~
tarlinian
All of these aren't in defining a new product. There was no guarantee of a
customer base for the S/360\. There was already an established market for each
of these listed items. Maybe if Apple had spent that kind of money on making
the first iPhone you could make a similar comparison.

------
csours
Disclaimer up front: I work for a Tesla competitor.

If I were a Tesla investor I'd want to hear more about how Design for
Automation is going. If you plan to automate vehicle assembly in a cost
effective manner (as Musk has indicated), your components and your assembly
operations must be designed for that automation.

Tesla has had notable problems getting suppliers to understand and implement
their plans (BorgWarner? - original transmission for the Roadster; Mobile Eye
- self driving components; Falcon wing door component supplier).

Tesla regularly asks suppliers to do things that no other car company has
asked them to do (see list above). Design for Automation is a new requirement
for many components, so this may be a challenge for suppliers, and thus Tesla.

Tesla may win this gamble, or they may not. It will be interesting and
educational either way.

~~~
bflesch
Their agility in comparison to GM is communicated very well. At least they
tackle innovative moonshot projects, it motivates people to give their best.

In other companies the ones innovating are the minority and people dwell on
past successes.

I'd rather work at an innovative company than for GM.

~~~
bischofs
The bolt and the volt are well engineered products at a very reasonable price
point. I think GM is innovative with these platforms

~~~
csours
To bflesch's point, GM is making a different gamble: that the vast majority of
consumers will continue to prefer fossil fuel engines for the next few
engineering cycles (10-15 years).

GM has a side bet on electric cars in the form of a joint venture to build
electric cars with LG, and another side bet in the form of a joint venture to
build hydrogen fuel cells with Honda.

Tesla is making a VERY big bet that a vertically integrated, highly automated,
battery electric carmaker will be able to take an increasing amount of market
share.

To be clear, I'm extremely impressed with what Tesla has accomplished so far -
if Musk accomplishes what he plans, manufacturing will never be the same.

Like I said above, it will be educational to see what happens.

------
CptJamesCook
I just picked up my Model X after a week in the shop. They weren't able to
finish all of the work, because "we are busy this time of year." They told me
to bring it back in April.

In about a year of ownership, this is the 3rd time I've lost the car for about
a week. I probably should have brought it to the shop 3-4 other times, but I
let the issues build up.

They've had to replace all sorts of parts on my car, including the entire
driver's seat. Even basic stuff like my phone playing audio doesn't work half
the time. The driver's side wing mirror quit opening. I've had to reboot the
car 10+ times in order for the dashboard display to work. The gull wing door
opened into a ceiling and left a scratch. The hood opened into a ceiling and
left a scratch. My windows have quit going up three times. Most of the trim /
sealing / etc is coming off, misaligned, etc. I probably sit here and think of
10 more problems.

Anyway, I knew I was buying a v 0.1 car and I’m generally happy with it,
despite the problems. Their service has actually been amazing, but that's kind
of the point of my post:

If the Model 3 has anywhere near the same level of problems as my X, at 10x
the scale, Tesla is doomed. How could this possibly be even remotely cost
effective on a lower-margin Model 3?

~~~
mikeash
They really overdid it with the X. Lots of cool stuff, but kind of
impractical.

I have an S, which I think they got just about right. I actually just drove it
back from the service center, but the problems I've had have been fairly minor
and the sort of thing you might expect from any car.

I'm hoping that the strict cost target for the 3 will mean that it's simpler
and and more reliable. Certainly there won't be crazy-ass doors to go wrong. I
agree that the 3 must be a lot better for the company to survive.

By the way, when you say the hood opened into a ceiling, do you mean the
tailgate? The hood is still manually operated, unless I missed some news.

~~~
CptJamesCook
Sorry, I meant the tailgate.

------
bischofs
Tesla looks like they will lose that cool new thing vibe soon, the novelty of
an electric car will wear off - especially when porsche or benz come out with
an electric sedan or coupe. These companies will offer a much more compelling
product with the ownership value that people expect from a luxury car company.

I have shopped a model S and besides the electric drivetrain it is not really
that nice of a car compared to an E class or a porsche panamera - The interior
is weak as far as fit and finish. As soon as the the germans offer a similar
product on the high end ( and with GM already offering a full electric on the
low end ) tesla is done.

~~~
Tepix
You mean "Tesla is done" as in their mission objective has been reached, EV
are the future?

Whether or not Tesla survives is getting less and less important every day
(unless you are a shareholder).

~~~
officelineback
You make a great point, as I was thinking the exact same thing.

Sure, Tesla as a company may not take off as some people expect, but they have
already had a huge impact on the automotive industry and the American
Collective Consciousness.

------
defenestration
Link to press release:
[http://ir.tesla.com/releasedetail.cfm?ReleaseID=1017594](http://ir.tesla.com/releasedetail.cfm?ReleaseID=1017594)

~~~
sundvor
As an ex-Allaire stack dev, couldn't help but have a chuckle at the cfm. :)

~~~
sundvor
(Tesla - powered by ColdFusion)

------
Animats
The notes:

 _will rank senior in right of payment to any of our indebtedness that is
expressly subordinated in right of payment to the notes, (in other words, they
're not senior to anything no explicitly listed as junior, or any existing
debt)_

 _will rank equally in right of payment with any of our unsecured indebtedness
that is not so subordinated (including our Existing Convertible Notes),_

 _will be effectively junior in right of payment to any of our secured
indebtedness to the extent of the value of the assets securing such
indebtedness and will be structurally subordinated to all indebtedness and
other liabilities (including trade payables) of our subsidiaries..._

That's a rather junior senior note.

None of this matters unless they go bust, in which case it really matters.

------
dilemma
It's correct that if EVs take off, there is going to be a lot of new demand
for batteries.

It is also correct that as a car manufacturer, owning a battery producing
company and selling to the rest of the industry, is a competitive advantage.

It is not correct that building both of these companies from scratch, in
parallel, is the way to do it.

Focus on building cars an become the leader in that, then buy Panasonic or a
flailing manufacturer.

Or become the leader in battery technology, and buy a car company couldn't get
on the EV train fast enough and turn it around.

Tesla is spreading itself too thin, losing focus and eventually
competitiveness and then, control

~~~
pcurve
"It is also correct that as a car manufacturer, owning a battery producing
company and selling to the rest of the industry, is a competitive advantage."

You really don't get rich off of building commoditized foundational parts like
battery. Any competitive edge you have is going to be short lived.

~~~
rwallace
You say that, but in recent decades, Intel was more profitable than the
typical PC manufacturer that bought chips from them. Hard technology can be a
very lucrative competitive advantage.

------
grandalf
This is the sort of thing that ought to terrify the makers of legacy
automotive technology, both for how Tesla might scale production, but also how
Tesla might become a lot more aggressive with its intellectual property
strategy.

~~~
dangrossman
Their ambitions for scaling production are meager: to start making Model 3's
at a rate of 5000/week by 2018, which wouldn't even match the rate at which
cars rolled out of that very same factory when GM/Toyota owned it. If they
kept up that rate for a whole year, that'd represent around 0.7% of US car
sales. Terrifying, or just one of many small car brands on the market?

By 2019 they want to double that rate to 10K/week... but that assumes there
are 10,000 people a week that want to buy an EV at (according to Mr. Musk) an
average price of $42,000 or more -- significantly higher than the average new
vehicle selling price.

Right now, less than 2500 people a week buy any type of electric or plug-in
hybrid car of any make or model in the entire country. So Tesla needs to
quadruple demand for electric vehicles and then capture all of it within ~21
months to meet their targets. By 2019 they'll also be up against a bevy of EVs
from those other auto makers, likely at lower price points. The 2018 Nissan
Leaf, with 200+ miles of range and ProPilot (limited) self-driving
capabilities might even beat the Model 3 to market, and will almost surely be
cheaper.

What valuable IP does Tesla have to license out that would terrify auto
makers?

There are plenty of other suppliers of EV motors, chargers, inverters, control
systems, battery cells, battery packs and battery management systems. LG
Chem's nearly reached price parity with Tesla/Panasonic (and has several
gigawatt-hour-per-year scale factories of its own, with more in construction).
BYD, Foxconn, Boston Power, Samsung SDI, SK Innovation, etc are bringing in
150+ GWh per year of EV battery production capacity by 2020.

Their "Autopilot" software is built on Intel Mobileye (V1) and Nvidia's DRIVE
PX2 (V2) platforms, which any other car company can license. The Supercharger
network doesn't seem to offer anything technology wise that isn't matched by
the Combined Charging System (CCS), which is rolling out 350 kW chargers
throughout 2017, with the US government's backing. So what do they have that
their competitors would value enough to license from them, knowing they're
funding the competition?

~~~
sien
The Chevrolet Bolt is available now in the US and has similar range to the
Tesla and has a dealer network to support it:

[https://en.m.wikipedia.org/wiki/Chevrolet_Bolt](https://en.m.wikipedia.org/wiki/Chevrolet_Bolt)

It doesn't have self-driving technology. But that will come to Chevrolet or
some other manufacturer.

Apple and Google were smart to stay out of the car making business. The
established players are experienced and the margins are low and it's tough to
compete. Partnering to make software and systems for the car industry is a
better place to be.

------
marricks
That went quickly from denying a capital raise to reality.

~~~
TaylorAlexander
Elon said in a recent earnings call that, while they would probably be fine
without a raise, they expected it would make investors more comfortable if
they did a raise and thus might do one.

~~~
refulgentis
"Elon said..." has started enough apologies for Tesla's poor judgement that
I've become numb to it. They're all of the form "while it may look like we're
weak, _actually_...(poorly reasoned explanation for the weakness)", and it has
been going on for years.

I hope they figure out car production by 2019.

~~~
TaylorAlexander
I am refuting the suggestion that Tesla wasn't planning a raise. Elon told
investors in an investor call that they would likely do a raise.

------
JumpCrisscross
Ah, convertible bonds. On the trading floor, a converts-trading colleague had
a Post-It note on his monitor:

"Interest rates up: converts down

Interest rates down: converts down

Volatility up: converts down

Volatility down: converts down

Apple strudels up: converts down

 _et cetera_ "

Converts are complicated. For one, nobody is fighting for you post-issuance.
You don't (yet) hold stock, so the Board doesn't think you're pretty. Yet your
bonds will be subordinated, making them swim like equity. This leads to all
kinds of fun [2] when markets fail to maintain monotonicity.

Monotonicity means if a line is going up it keeps going up; never down (and
vice versa) [3]. A graph for the Empire State Building with the floor number
on the X axis and the height of said floor on the Y axis would be
monotonically increasing. If I bent the building into a U shape, that graph
would not be.

If you graph pay-offs for people in your company as a function of the stock
price, you want it to be monotonic. That means interest are aligned. If your
CFO makes a million dollars when the stock tanks, he's going to want the stock
to tank.

Let's consider HappyCo. HappyCo has issued 10,000 shares of Common Stock. They
trade at $100 per share (a $1MM market capitalization [4]). HappyCo issues
1,000 convertible bonds that can be turned into one share of Common Stock in
exchange for $120 per share. To keep this easy for now, let's say HappyCo
issue these converts secretly, _i.e._ the market can't price them in before
exercise.

If the stock price is way above 130 everyone wins. If the stock price is below
130, converts lose. (Stockholders also lose.)

But what if the price is exactly 130? The market, thinking there are 10,000
shares outstanding, weighs the company in at a $1.31MM market cap. But then--
dun dun dun--everyone converts. Holy shit, 1,000 new shares! At what price
does this new share count (11,000) yield a $1.31MM market cap? 119.09 per
share. At 129 pre-conversion, the $1.29MM company trades at 129 per share
after accounting for the converts (nobody converts). At 130 pre-conversion it
trades at 118.18 post-conversion. It takes us until 141.90 pre-conversion to
get back to 129 post-conversion. The price goes monotonically up, but the
stockholders do okay, then worse, then better again. Monotonicity was broken.
An evil shareholder learning of the converts might _prefer_ a pre-conversion
price of 129 over 140.

This may seem silly. Nobody secretly issues stock [5]. The market would start
pricing the converts in as the stock price approached the conversion price.
How does it do that?

Options! A convert is a bond married to an option. (People once made a lot of
money arbitraging converts against the issuer's stock, bond and options
markets [6]). You get all the legal complexity of bonds [7] entangled with the
mathematical complexity of options [8]. As I said, fun [2].

But bankers would just price things properly at the outset to ensure they
maintain monotonicity, right? Well, they try to. But look at the variables in
a common option valuation equation [9]. Rates, volatility, dividends, _et
cetera_. Each of these changes the balance for converts holders. (For example,
if dividends go up one might want to convert sooner, _i.e._ at a lower price.
What if taxes go up at the same time? Who knows! Fun [2]!)

In a perfect world, each variable would iterate, one by one, like an Excel
spreadsheet that isn't complaining about circularity. Investors would, one by
one, plug new numbers into their models to get a clean answer. Unfortunately,
we inhabit a reality where more than two aspects of it can change
simultaneously.

Upshot: converts commonly ram through their boundaries all the time. When this
happens, everyone converts. Actually, not everyone since each investor has a
different break-even conversion price. An insurance company, with lower
borrowing costs, will convert differently than an individual investor on
margin. Similarly, an invest trading out of a tax-deferred IRA will convert
differently than one trading straight. Fun [2]!

TL; DR Converts a lots of fun [2] for financial theoreticians, fun for market
makers and hedge funds, a little less fun for bankers and an affordable source
of entertainment for all.

[2]
[http://dwarffortresswiki.org/index.php/DF2012:Losing](http://dwarffortresswiki.org/index.php/DF2012:Losing)

[3]
[https://en.wikipedia.org/wiki/Monotonic_function](https://en.wikipedia.org/wiki/Monotonic_function)

[4]
[http://www.investopedia.com/terms/m/marketcapitalization.asp](http://www.investopedia.com/terms/m/marketcapitalization.asp)

[5] [http://sharesleuth.com/investigations/2012/12/small-
companie...](http://sharesleuth.com/investigations/2012/12/small-companies-
big-questions-who-secretly-got-millions-of-shares-of-stock-in-chinese-reverse-
merger-companies)

[6] [http://www.institutionalinvestor.com/article/1027772/boy-
won...](http://www.institutionalinvestor.com/article/1027772/boy-wonder.html)

[7]
[http://www.treasurer.ca.gov/cdiac/debtpubs/handbook.pdf](http://www.treasurer.ca.gov/cdiac/debtpubs/handbook.pdf)

[8]
[https://en.wikipedia.org/wiki/Black–Scholes_model](https://en.wikipedia.org/wiki/Black–Scholes_model)

[9]
[https://en.wikipedia.org/wiki/Black–Scholes_model#Black.E2.8...](https://en.wikipedia.org/wiki/Black–Scholes_model#Black.E2.80.93Scholes_equation)

~~~
marviel
Thank you for this-really cool explanation.

------
slagfart
Does anyone know the % interest rate on these? It seems to be blanked out.

How can financial markets function efficiently when such basic information is
suppressed?

~~~
nemanja-mit
Key terms are interest rate (coupon) and conversion premium. These are not
printed on preliminary prospectus and will be printed on the final once the
pricing is determined. They way this works is that underwriters (big banks
listed on the first page) go to the market (long only and hedge fund
investors) with a range for coupon and conversion premium. Investors will
express interest somewhere in the range and the instrument will be priced
tomorrow at close to get the right investors and best pricing for Tesla. We'll
see the final terms once the convert is priced tomorrow after close, but
qualified investors already have offering ranges.

Generally, converts have much lower interest than straight debt because they
offer equity upside to investors once the stock goes above the conversion
price. Tesla is high volatility stock, so the convert pricing will be
attractive for the company (low coupon / high conversion premium) because that
embedded option is valuable to convert investors.

------
tmsldd
Nothing wrong with Tesla raising money, after all they basically burn it to
sustain the company.. The curios part is that it looks so few.. 1 B isn't a
really much.

~~~
elmar
I agree with you they will have to raise more, model 3 unit economics will
probably be horrible and they will need much more cash.

------
ww520
Why does the after hour market going up for the news?

~~~
marvin
Market probably expected just a stock issue instead of convertible notes, and
this delays dilution for a bit.

------
thewhitetulip
I think the time is ripe for TESLA to launch into India, a manufacturing
plant. Modi govt is keen to ratify the Paris accord and raise the clean energy
initiatives. On another side, it would help TESLA brand if they first launch a
high end car in India and later market the mass market car as a better luxury
car, they'll earn an awfully large income on this.

------
cbhl
I'm surprised that this bond issue specifically calls out launching the Model
3 (as opposed to being used for e.g. further SolarCity installs).

------
exabrial
My big question is, why? It seems they are selling vehicles. Are they in
trouble or is this just to expand business?

~~~
marricks
Well, they plan to sell 500k vehicles a year soon which takes a huge ramp up
form current production.

Sure, they could increase production with current profits form sales but it
would slow them down.

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mikeash
Just to quantify this a bit more: they plan to hit a rate of 500,000/year by
the end of 2018, and so far the company has sold something like 200,000 cars
total, ever, since it started.

(I don't know how likely they are to hit that goal by the end of 2018, but
they're trying.)

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exabrial
That's a very lofty goal indeed. They will definitely have to come down in
price

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mikeash
The Model 3 is supposed to start at $35,000. Demand doesn't seem to be a
problem, as they have hundreds of thousands of reservations and pretty much
stopped trying to solicit more while they work through the backlog. The major
challenge for now is actually getting production up to capacity.

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antoniuschan99
Why does Tesla need this? What is the money going to be used for?

Is this like Solar Bonds that SCTY used?

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unstatusthequo
$750M, not billion

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powera
The $750M is the amount of convertible debt; there's a separate $250M of new
common stock being issued.

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eternalban
Fuel cells are the future, not batteries.

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onmobiletemp
No, they arent

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eternalban
We'll see.

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onmobiletemp
The one thing we can agree on! Im sure that all fuels will have some limited
role for as long as there are vehicles operating in adverse or unusual
conditions. Hydrogen systems depend and will always depend on being adjacent
to substantial batteries in the cars powertrain. This is because fuel cells
can contain lots of energy but are much more limited in the rate at which they
can offer that energy. In the mirai, the fuel cell keeps a battery topped off.
When the car needs to accelerate quickly it draws charge from the battery.

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4SomeReason
Dude's user name is 'losers'. Lol

