
Tesla raises $1.8B - rising-sky
https://www.reuters.com/article/us-usa-bonds-tesla-idUSKBN1AR28M
======
11thEarlOfMar
Let's talk about Solar City.

Their product is intended to be a solar roof, indistinguishable from a typical
roof from street level. Costs look to be in the $50,000+ range. The marketing
is that homeowners will not only drive electric vehicles, but go completely
off grid by storing the energy collected into Tesla batteries.

In order for this to make financial sense, there needs to be an ROI for the
homeowner. So... how long will it take the homeowner to recoup that, say,
$75,000 investment?

I am currently spending about $125/month on electricity. That's $1,500 per
year. Two Tesla's would run through about $1,000 [0] of electricity in the
same year. That's $2,500 per year I'd spend on electricity to my grid
operator.

That's 30 years to break even.

I could probably buy an equivalent roof-mounted system for half that, and the
batteries, and see a return in 15 years. Is the aesthetic worth the longer
term payoff?

Or would Tesla see more uptake in new home construction where the cost of the
roof can be amortized into the construction cost?

I understand that Solar City has a different financing biz model, are they
going to continue with that.

[0] [http://www.greencarreports.com/news/1090685_life-with-
tesla-...](http://www.greencarreports.com/news/1090685_life-with-tesla-model-
s-one-year-and-15000-miles-later)

~~~
jerkstate
How much would it cost for a roof-mounted device that makes gasoline for you?

Add your local transportation bill to your electricity bill and now tell me
how many years it is.

~~~
scott_karana
You can use a Tesla on the grid, and potentially see quicker ROI, depending on
your local per-kW rate.

------
dopamean
It's interesting to me that in May of last year Snap, Inc raised about the
same amount of money. I've never understood how some companies need so much
money. To me it makes sense for Tesla. They are building actual cars and that
is expensive. What on earth did Snap need a 1.8 billion for?

~~~
mej10
Did you see how much Snap was/is paying on infrastructure? It is _insane_. $2
billion over 5 years.

The amount of waste that is obviously happening there is maddening.

~~~
angstrom
That's more than maddening. One company is working on the forefront of an
entire ecosystem transformation in a 100 year old entrenched customer base the
other...well, let's just say in another 100 years you'll be lucky to find
anyone that knows what snap was.

~~~
kuschku
Depends. If Snap fails, and Facebook gets a monopoly for centuries due to
network lock-in, we'll know Snap as the last competitor to Facebook.

~~~
toomuchtodo
"Competitor". Externally funded R&D for Facebook.

~~~
samstave
True - but can you ELI5 for everyone - even though we can infer based on being
in tech and can see this - but spell it out for others...

------
d_t_w
Is there a difference between 'raises' and 'borrows'?

I read this as Tesla took investment of $1.8B (presumably in return for
shares), but in this case they have issued $1.8B of bonds, so they've
effectively taken out a loan.

~~~
Aron
Yeah this was just a loan. The first time for them that it wasn't attached in
some way to shares.

~~~
lancewiggs
Not only that it is unsecured "junk" debt, and the interest rate is incredibly
low at 5.3%.

~~~
calafrax
5.3% is not incredibly low for a corporation borrowing 1.8 billion. it is
pretty high which is why investors are jumping on it.

This adds $95 million in interest expense per year which is pretty
substantial.

~~~
howinator
It is incredibly low for bonds in the "junk" trough. For companies with
Tesla's credit rating, you're typically looking at 6.5-7.8%. If you're GE,
you're of course going to pay a lot less, but GE has a much more robust credit
history.

------
Animats
_Tesla sold $1.8 billion of eight-year unsecured bonds at a yield of 5.30
percent._

That's considered junk bond level today. Historically, it's not a bad interest
rate. It's an OK deal for Tesla.

~~~
moxious
Yes, it's a testament to how strange the financial environment is that people
would lend such money speculatively at low interest.

Those are the prevailing rates but I think the bond holders are getting a
lousy deal considering tesla's actual risks

~~~
gozur88
It's hard to quantify those risks when you have a rock star CEO. As long as
Musk can keep the hype train going he'll be able to borrow money cheaply,
which will make _today 's_ investment less risky.

------
vit05
"Tesla aims to boost production to 500,000 cars next year, about six times its
2016 output."

What is the new goal to 2020? 2 years[0] ago they were expecting delivery
500,000 cars in 2020. If they will do that this year, maybe their new goal is
to finally put a foot in the top 20 group of world manufacturers[1]?

[0][http://www.businessinsider.com/everything-tesla-promises-
to-...](http://www.businessinsider.com/everything-tesla-promises-to-
accomplish-by-2020-2015-12/#create-500000-cars-per-year-by-2020-5)
[1][https://en.wikipedia.org/wiki/List_of_manufacturers_by_motor...](https://en.wikipedia.org/wiki/List_of_manufacturers_by_motor_vehicle_production)

~~~
gozur88
I wonder if they mean Tesla is going to actually produce a half million cars
next year, or if they're going to ramp up production to a half million cars
per year by the end of the year.

~~~
marvin
The latter.

------
mattnewton
It's heartening to see financial markets helping a company with such potential
for positive externalities. Sometimes maybe the system does work!

~~~
ams6110
Positive externalities like 8-year-olds mining cobalt to make the batteries?

~~~
KGIII
Do you have any examples of eight year olds habitually employed mining cobalt?
Tougher, can you tie that in to Tesla with confidence?

Disclosure: I own quite a few shares in Tesla. They were only ~24.00 USD when
I bought them. I admit my bias.

~~~
Inconel
There was a discussion on HN a few days ago dealing with this issue.

[https://news.ycombinator.com/item?id=14964857](https://news.ycombinator.com/item?id=14964857)

~~~
KGIII
Thank you. I missed that one. I do notice it is specifically about cell
phones, though I suspect it is difficult to tell where else it is used.

I don't own enough shares to pressure them into ethical sourcing and,
honestly, hadn't even given it much thought until just now. I only have ~850
shares. Which, while a bunch, isn't going to influence much.

It does make me curious.

~~~
Inconel
Yes, that article isn't specifically about automotive batteries but I figured
it was still fresh in reader's minds. It wouldn't surprise me if ICE cars had
similar problems with conflict minerals, particularly in the catalytic
converters.

I'd love to see a really exhaustive study comparing the environmental effects
of ICE and EV cars when taking into account the entire product lifecycle from
mining, transport, manufacturing, power generation and distribution, refining,
etc. I've seen studies comparing a few of these things but nothing that goes
from the time some alloy is mined or oil is taken from the ground through the
entire life of an automobile.

~~~
KGIII
There are a lot of externalities but here's a recent one with a bunch of
information.

[http://www.adlittle.com/fileadmin/editorial_us/downloads/ADL...](http://www.adlittle.com/fileadmin/editorial_us/downloads/ADL_BEVs_vs_ICEVs_January_24_2017_USA.pdf)

This is a bit older and more about energy consumption.

[http://publications.lib.chalmers.se/records/fulltext/218621/...](http://publications.lib.chalmers.se/records/fulltext/218621/218621.pdf)

------
simonebrunozzi
A little imprecision in the article: "The company, founded by Musk in 2003" is
untrue. Musk joined the company after it was funded.

~~~
totalZero
[https://www.cnet.com/news/tesla-motors-founders-now-there-
ar...](https://www.cnet.com/news/tesla-motors-founders-now-there-are-five/)

'....a Tesla representative said that Eberhard and other principals in the
dispute have come to an agreement. The company did not reveal any details of
the resolution, except to say that there are now five, rather than two,
agreed-upon "founders" of Tesla.'

~~~
sandstrom
Just because he pays them to say he is a founder doesn't make him one (in the
technical sense of the word).

But also, it doesn't matter that much, few would disagree that JB and Elon has
done a tremendous amount for Tesla and that it wouldn't exist without them).

~~~
Tade0
Precisely. Tesla today is today's Tesla because of these two gentlemen.

I remember that there were quite a few EV startups back in the day - aside
from Tesla next none of them exist today.

------
ChuckMcM
5.3% counts as junk these days? Wow, I miss the 13 - 22% days :-). Certainly
shows a lot of confidence in Teslas ability to produce Model 3's. It also is
going to squeeze the short sellers a bit harder as the capital is going to
push out their 'dead by' dates. I feel no pity for them.

------
rmason
If there are any college student hackers interested in pushing boundaries
MHacks is going to allow you to hack a Tesla this September in Ann Arbor.

~~~
lawrenceyan
Are applications open?

~~~
rmason
Go to mhacks.org and create an account. According to the FAQ that will let you
then apply.

------
legulere
Maybe they can use it to pay their workers fair wages [0] or to improve work
conditions to be not twice as bad as in the rest of the industry [1]

[0]
[https://www.forbes.com/sites/alanohnsman/2017/02/09/unionizi...](https://www.forbes.com/sites/alanohnsman/2017/02/09/unionizing-
tesla-worker-says-uaw-help-sought-for-factory-pay-and-conditions/amp/) [1]
[https://amp.theguardian.com/technology/2017/may/24/tesla-
fac...](https://amp.theguardian.com/technology/2017/may/24/tesla-factory-
workers-injuries-higher-than-industry-average)

~~~
golergka
Do they have incentive to do that?

~~~
posguy
Not really, Tesla is very much like Apple in the sense that they expect their
employees to be 100% compliant and not "overshare", with overbearing corporate
security that'll handle you if you step out of line one iota. I don't see why
Tesla would change, apparently working conditions are terrible at their
factories: [http://www.thedailybeast.com/workers-say-tesla-is-trying-
to-...](http://www.thedailybeast.com/workers-say-tesla-is-trying-to-scare-
them-out-of-a-union)

On a vaguely related tangent, the sheer duplication of work I saw at Apple was
impressive, their corporate culture has secrecy so ingrained that large chunks
of the company are duplicating eachother's work needlessly, out of fear of
communicating effectively.

~~~
jacobush
Funny you should say that about Apple. I think about the saying about software
reflecting the organization in structure. Apples effectively static binaries
are a bit the same thing. (The ".app" folders.) They contain everything needed
to run the application, no libraries are shared between apps. Massive waste,
but at the same time, the system is more robust this way. Apps can be upgraded
and redone without caring about potential sharing and conflicts with other
applications.

This has benefits. I think it's the same with organisations. The secrecy and
keeping to yourself, also means you are free to do your thing and there is
less need to communicate, "build a shared view" and so on.

~~~
ghaff
That's the general direction that things are headed more broadly with
containers. It's sort of amusing how this came about because containers are
really an outgrowth of OS virtualization work while app virtualization never
really went anywhere in a mainstream way--but os virt (containers) has really
developed into a way of encapsulating apps.

Storage is cheap. It's much more efficient overall to bundle apps with
essentially everything they need to run--modulo the kernel although there's
some debate about that last point.

------
mathattack
So much for their running out of money. Impressive that they can get it from
the bond markets. Highlights maturity as a company.

~~~
akvadrako
More likely it suggests they would have trouble selling that many new shares.
Even Musk has said their share price is higher than they deserve, so selling
shares makes more economic sense.

But this amount will only cover their loses for a few months and they probably
want to demonstrate their ability to make future profits before diluting their
stock significantly. If they sell equity too quickly, it'll look like the
stock is crashing and encourage even more selling.

This is how Solar City floundered at the end - under crushing debt from junk
bonds.

~~~
mathattack
Isn't debt harder to raise than equity? My impression is that the risk
tolerance for junk bond buyers is somewhere between high grade credit and
equity, perhaps closer to equity. Certainly more conservative than growth or
venture equity.

I'm the first to admit that I don't follow their specific financials to know
how much runway they need to be profitable.

~~~
akvadrako
Normally, I would say that's the case, but Tesla stock isn't normal. When they
sell debt, their stock price goes up.

Debt has one big advantage over equity too, which is that if the company goes
under, bond holders are repaid if possible. Equity holders only own whatever
is leftover.

------
ryanwaggoner
The "junk bond" rating and high debt load makes me a little nervous, but maybe
that's irrelevant and this is just them raising money as an accelerant because
they can get it at a good price?

~~~
skybrian
They need the money. From a few days ago:

"The company burned through $1.16 billion in cash in the second quarter [...]
a little more than $3 billion in cash on hand"

[https://www.bloomberg.com/news/articles/2017-08-02/tesla-
bur...](https://www.bloomberg.com/news/articles/2017-08-02/tesla-burns-
through-record-cash-as-musk-brings-model-3-to-market)

------
chisleu
Looking at the stock price, people seemed to know 5 days ago.

------
doener
"Tesla (TSLA) bonds were oversubscribed by $300 million, $1.8 billion raised
for Model 3 production"

[https://electrek.co/2017/08/11/tesla-tsla-bonds-
oversubscrib...](https://electrek.co/2017/08/11/tesla-tsla-bonds-
oversubscribed-model-3-production/)

------
nyxtom
I hope this works, otherwise we are all screwed when earth continues to catch
fire

------
erdle
How much of this is actually being used to pay down SolarCity debt?

~~~
JSONwebtoken
You can't pay debt with debt. They may be getting better interest rates on the
bond market to refinance their existing loans but total liabilities are going
up, not down.

~~~
koolba
Sure you can. That's the exact definition of "refinancing".

~~~
JSONwebtoken
You may be paying off the note and it shows up as a different line item on the
balance sheet, but it's not paying the debt.

~~~
0xffff2
I think I'm going to need a scanning electron microscope to see the hair
you're splitting.

------
throwaway81122
Tesla should just mint their own crypto. IF filecoin gets 200M for a white
paper, Tesla can get 20B.

~~~
ThrustVectoring
I would _not_ recommend committing securities fraud.

~~~
SubiculumCode
I'm curious. How is what was flippantly suggested related to securities fraud?

~~~
TheSpiceIsLife
Crytocurrencies serve one purpose very well: they're presently not being
prosecuted as Ponzi schemes.

Which they argueably _are_.

~~~
wavefunction
Ponzi?

~~~
TheSpiceIsLife
Yes, thank you. Fixed. Auto-incorrect strikes again.

------
mack1001
If tesla can get 500,000 cars out there, ICE cars are toast. Enough of legacy
cars and makers.

~~~
scott_karana
The Camry alone sells 400,000 a year in the US, where the market for new cars
was _17.55 million units_ last year.

If Tesla can pump out 500K globally, that's respectable, but hardly a death
knell to the 80 million unit industry.

[http://www.latimes.com/business/autos/la-fi-hy-auto-
sales-20...](http://www.latimes.com/business/autos/la-fi-hy-auto-
sales-20170104-story.html)

[https://www.statista.com/statistics/200002/international-
car...](https://www.statista.com/statistics/200002/international-car-sales-
since-1990/)

~~~
sxates
Watch the trends, not the current year.

------
Aron
The tension is building! They've got all this money, they've shown a few of
the cars, they've got half a million deposits, but the cars are just dribbling
out of the factory right now like pre-ejaculate.

~~~
sxates
They're coming soon.

~~~
Aron
I guess I'll just have to face it.

