Ok, even though i am generally pro tesla and like musk, in order to prevent this from becoming a total worshipfest i will provide some facts that elon is not sharing.
It is true that tesla has made all their payments under the doe loan agreement. But they were not in total compliance with said agreement. The agreement required that tesla keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked trhe government to change the terms. The government complied but wanted something in exchange. What they wanted was early repayment of their loans. That is why he is talking about early repayment. And that is probably one of the reasons why they raised extra money (although elon is unlikely to admit that).
So that is the full story. It is no big deal, i think tesla are very unlikely to default on the loan, but elon was definately not giving you all relevant info.
Oh definitely so. But his statements have no sense of any of that, one would never suspect anything is being withheld, they come across perfectly sincere and warm and from him and not from some lawyer, it's masterful.
Yeah, there's some dodgy stuff, a lot of information about these cars, such as the reality about their batteries and how much energy they really use to go from A to B over time has high spin when I start looking into details. Was genuinely surprised.
Thanks for the details about what the financing is really about, that's very interesting info.
I feel it too. His statements are so nice and logical, the truth becomes secondary. That's one talented advocate. Let's instead condemn reality for lacking truth and beauty.
Well, he seems to address this directly where he states:
"We did suggest that holding nine months worth of principal payments in advance in a reserved account was a bit extreme and, moreover, was never part of our original loan agreement. The DOE agreed and reduced the advance payment reserve account to six months."
You saying
"keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked the government to change the terms"
...doesn't seem to add to or contradict his statements.
So unless you can clarify, your statement that "that is the full story ... elon was definitely not giving you all relevant info." seems inaccurate.
Financial ratios and/or debt covenants compared to a reserved cash account - two different things. Sure, the cash account can be a small part of a debt covenant but is usually just that - a very small part.
Which debt covenants were breached? Often times they put these checks in when they think something bad is going to happen. Then a couple of years down the line they mean absolutely nothing, are breached (usually because the company has forgotten about one of them and accidently breaches them) and need to be restructured with the lender asking for something in return.
What?! FTA: we expect Tesla to become cash flow positive at the end of next month.
However, given that we do have a global supply chain and that floods, fires, hurricanes or earthquakes can cause supply chain interruptions and halt production, we thought it would make sense to raise capital to protect against such an event.
Translation: "So we expect to be cash-flow positive, we won't spend the money that we raised, but we'd thought we'd go ahead and dilute the shareholders, you know, just for insurance."
I believe actions not words. The actions are: He raised money and diluted. You don't do that when you are flush with cash.
How do you jump from "we're almost cash-flow positive" to "we're flush with cash"?
And isn't Tesla's situation a little too tenuous for them to be feeling sorry for diluting their shareholders? Making viable electric cars is their priority - not making their investors rich ASAP.
It's insurance. What he's saying is that the company is fragile right now, and any blip could very seriously harm their growth. The fundraising is a direct response to that risk analysis.
Otherwise, they would probably raise money later for a specific project requiring lots of capital (like a new vehicle, as mentioned).
I get the impression that Tesla becoming cash flow positive is financial engineering. Do you have any idea how that would be done in the case of Tesla or in general?
There are a few comments here regarding disclosure & such.
Still, I think it's amazing how much speaking with the voice of a person stands out in a positive way. It's similar to the impact that a Warren Buffet shareholder letter has. It's describing an enormous conglomerate/investment-fund/financial-institution/holding-company, but it's being described by a person and its being described for you.
We are so used to things that sound like they are written by institutions for other institutions, that when something sounds like it was written by a person for people, it stands out.
The sentence "I don't know how to state this more clearly." is a minor mistake.
I often say things like that, and it never works to my benefit. I'm trying to cut it out. It indicates frustration with the audience, and it almost always comes across that way.
Well, he probably is frustrated. I'd be if I had to take time out of my work to respond to something that amounts to some bizarre political pissing contest.
Having to justify a 500m loan to a pioneering technology company in one of the biggest recessions? That's a rounding error compared to the billions spent on rescuing failed banks or in researching fancy new ways to blow stuff up.
Really? All of that wordsmithing is saying how he is technically defaulting on the loan from U.S. taxpayers. The loan is now "repay us someday, if you have the cash". Total spin.
It is true that tesla has made all their payments under the doe loan agreement. But they were not in total compliance with said agreement. The agreement required that tesla keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked trhe government to change the terms. The government complied but wanted something in exchange. What they wanted was early repayment of their loans. That is why he is talking about early repayment. And that is probably one of the reasons why they raised extra money (although elon is unlikely to admit that).
So that is the full story. It is no big deal, i think tesla are very unlikely to default on the loan, but elon was definately not giving you all relevant info.