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In recent days, Tesla Motors stock (TSLA) has been climbing and climbing, hitting a high of $58.18 earlier today before closing at a respectable $53.99. The rise comes amid a string of headline-making events – higher-than-expected sales, franchise dealer fights and a new warranty program, to name just three – but under all of the good news lies a potential problem. The Wall Street Journal revealed today that Tesla was served subpoenas from US federal prosecutors over details on the company’s trading plan for executives. There has been no hint of wrongdoing, the feds just want information, Reuters reports. A similar subpoena was sent to Cardiovascular Systems, which makes medical implements.
The question is how the executives can trade their shares. Reuters reports that it is fine by Securities and Exchange Commission (SEC) rules for executives to use something called a 10b5-1 plan to trade their own stock, “even when they have access to private information.” The subpoena does not seem to have anything to do with questions over whether Tesla CEO Elon Musk’s recent “overzealous” Tweet was in any way illegal.
This week, analysts at Longboard Asset Management said they believe Tesla common stock will hit $100 in the next 18 months on the way to $200 per share within five years. In any case, we’ll have more information ammunition for the debate when Tesla releases first quarter results May 8th.
Related Gallery2012 Tesla Model S: First Drive
Anyone paying attention to the electric vehicle scene for the last few weeks knows that the stock value of Tesla Motors has been climbing faster than a SpaceX rocket. As of this writing, TSLA is sitting pretty at $92 a share. Three weeks ago, it was at a then-record-high of $53.
In light of all the commotion, Tesla is going to make some money and pay back the government. The company announced yesterday it will sell 2.7 million shares (with a value of $229 million given the closing price of $84.84 yesterday) and $450 million in convertible senior notes. All told, Tesla will sell up to $830 million in shares and debt and use the money to pay back its $465-million Department of Energy loan. The DOE has agreed to let Tesla modify the terms of its loan and repay the money early., but the exact timeline of the repayment was not specified. As Tesla CEO Elon Musk put it to Bloomberg earlier this month, “Of all the car companies that got government funding, we got the least, and we’re going to pay it off first. That’s not bad.” Musk will also buy $100 million worth of shares, $45 million in common stock and $55 million to be be “purchased directly from Tesla in a subsequent private placement.”
The DOE handed out four loans through the Advanced Technology Vehicles Manufacturing Loan Program: along with Tesla, Ford got $5.9 billion, Nissan got $1.6 billion and Fisker got $529 million. Tesla’s press release is available below.
Related Gallery2012 Tesla Model S: First Drive
A recent report indicates that there’s a dark and shadowy secret just waiting to wreck havoc on Tesla Motors: a federal probe into whether, as the conservative Washington Times puts it, “the automaker was using foreign instead of American parts in manufacturing their electric vehicles.” Tesla has openly said it uses Panasonic battery cells, for example, so the need for a probe is not quite clear.
According to a PDF that the Times says comes from an Immigration and Customs Enforcement (ICE) investigation, ICE asked the Department of Energy for documents about the Advanced Technology Vehicles Manufacturing (ATVM) loan program on December 5, 2011. There are lots of “may” and “possibly” phrasings in the memo, and it reads like someone saw a mention on the DOE website about a “buy American” requirement and went fishing for information. The DOE responded on December 22 that “the $465m Tesla loan was not appropriated through the Recovery Act of 2009. The $465m Tesla loan was actually appropriated through Public Law 110-329 and does not have the buy American requirement,” adding that “The DOE [Office of Inspector General] would not be investigating this matter any further.” For some reason the Times concludes that the memo, “provides no information on how, or whether, the customs probe concluded.”
A Seeking Alpha contributor notes that the ICE:
is still proactively investigating whether Tesla is using its foreign trade zone status to bypass the so-called “loan requirements.” A foreign trade zone facilitates the creation of certain areas at or near customs port of entry where products can be imported without standard import duties and customs entry procedures. Tesla’s application for a “subzone” within San Jose’s foreign trade zone was approved in September. ICE is neither affirming nor denying an investigation. Also, Tesla has made no mention of this investigation in its SEC disclosures.
He add that he’s not worried about a negative impact on TSLA stock or the company based on the investigation. For the record, Tesla’s official statement is as follows:
We have not at any time been made aware of an investigation regarding this issue by ICE or any other governmental agency. It is customary for car manufacturers in the United States to use imported parts and we have openly indicated throughout the development of Model S that we purchase certain parts, like the cells used in our battery pack, from foreign suppliers.
Related Gallery2012 Tesla Model S: First Drive
Julie Christie, the rumors are true. After plenty of hint-dropping over the past few months, Tesla officially released 2013 first quarter (Q1) financial details today, and it was the first quarter in which the ten-year-old company was actually profitable. CEO Elon Musk, speaking on a conference call to investors today, made it clear that the numbers are good, but behind-the-scenes factors make them even better.
Take, for example, Tesla’s capital expenditures. The automaker was profitable in Q1 despite spending a lot of money on things like new stores and Supercharger stations, things that won’t require as much money moving forward. Tesla says it plans to spend about $200 million on capital expenditures in 2013. Or how about the Tesla’s gross margin, which grew from eight percent to 17 percent from Q4 2012 to Q1 2013. That’s the average for the whole quarter, Musk said, and “the gross margin at the end of Q1 was much better than at the beginning.”
The call wasn’t all about money-rolling-in news. We knew Tesla would make money selling zero emission vehicle (ZEV) credits to other automakers, and it did, to the tune of approximately $68 million (12 percent of revenues). Musk said Tesla expects ZEV credit revenue to decline throughout the year, going to zero in Q4. The shareholder letter reads, “We expect this to decline significantly in future quarters, as ZEV credits will only apply to about 1/6 of worldwide deliveries, versus roughly half of US deliveries, and the price per credit has declined.” Some estimates put Tesla’s annual ZEV credit income at $250 million.
More numbers and tidbits from the announcement can be seen below.
Related GalleryTesla Motors, Inc. – First Quarter 2013 Shareholder Letter
- Tesla had record sales of $562 million, which was up 83 percent from last quarter and resulted in a profit of $15 million (GAAP profit: $11 million).
- 4,900 Model S EVs were delivered in North America last quarter. This was higher than expected, and likely beat both the Chevy Volt and Nissan Leaf, which has Q1 sales of 4,244 and 3,539, respectively, in the US.
- Tesla now expects US to exceed 15,000 Model S EVs a year, with global demand probably more than 30,000 a year. This breaks down to least 10,000 Model S sales in Europe and 5,000 in Asia (but it could be more, since China is a wild card, Musk said).
- Over a million people visit Tesla stores every quarter. Only a small number actually buy a car, of course, but, “There are lots of people who buy T-shirts,” Musk said. “We actually have millions of dollars in apparel sales, without really trying.”
- Musk said, “We are thinking of reducing the initial [Model S] deposit number, because we don’t really need the cash at this point.” The number is currently at $5,000 but it could be dropped to “some lower number.”
- Production rate for the Model S – currently around 400 a week – could increase. “We haven’t really started to push volume really hard yet, because you need to make sure your house is in order and the car is being made as efficiently as it can be made before you push volume,” Musk said, adding that we could see a “fairly significant increase in volume” next year.
- Musk remains confident that financing the Model S is the way to go. “If our car was exclusively available for purchase and not by financing, it would be available for roughly one million US households. With the right financing, it’s probably available to the top ten million households.” The deal is even better in Europe, where the gas prices are so much higher.
Looking further down the road, Musk said the company is “certainly making progress on the Model X” and will finalize the design of that vehicle in the second quarter. The company’s focus remains on Model S production and service but the X “will become our top focus towards the end of this year” in the lead up to the start of production towards the end of 2014.
TSLA stock jumped way up (over $70 a share as of this writing) in after-hours trading. It closed at $55.79. Musk stands to benefit hugely if all this good news continues, thanks to the 2012 CEO Grant, which you can read about here. You can see Tesla’s shareholder letter in the gallery and find SEC information about Tesla’s June 4, 2013 Annual Meeting here. But get ready for less glowing numbers at the next Tesla quarterly call. Tesla’s letter includes this bit of cold water:
The lease accounting treatment for cars sold through our new financing plan will have no impact on our cash flows, and we expect to be roughly breakeven on cash flow from operations in Q2, despite launch costs in Europe and a huge increase in service centers, stores and Supercharger stations. However, the deferred revenue recognition required by GAAP for lease accounting will lead to a net loss on paper in Q2.
Tesla Motors is a publicly traded company, and as such, is required to report its financials and give a summary of its business situation four times a year. Yesterday was one of those times and, accordingly, it sent out its latest shareholder letter and conducted a conference call, with CEO Elon Musk, CFO Deepak Ahuja, and George Blankenship (vice president, sales and ownership experience) fielding questions from financial analysts for over an hour. We listened in and, as well as getting an idea about the company’s financial health, heard a few tidbits worthy of passing along.
First, before we get to the good stuff, some quick numbers. Tesla posted a $105.6 million loss after receiving revenue of $27 million from sales of 10 Model S sedans, 89 Roadsters and 100 Toyota Rav4 EV drivetrains. That’s perhaps a smidge better than what was expected and things shouldn’t get too tight, as it still has access to $233 million in cash and sales could bring in as much as $600 million by the end of the year.
Still, there’s a lot of pessimism in the market when it comes to TSLA – fueled recently by a report from Wunderlich Securities, which predicted a need to raise more capital, as it doesn’t think a production target of 5,000 will be reached in 2012 – and the company’s stock price recently tumbled from just shy of $36 to just under $29 as of market close on Wednesday.
Production does seem to be Tesla’s biggest problem at the moment. It only just recently increased its build rate to 10 vehicles a week – up from five – after running into some quality issues. Small “knick-knacky” things as Musk describes them: interior trim not well-enough aligned in places, chrome finish on door handles not up to snuff. It has slightly revised the timing of production increases and bolstered it interior engineering team in response.
The company should now see about 500 vehicles produced in the 3rd quarter with a “geometric” ramping up in the 4th that should see an additional 4,500 beautiful all-electric machines roll off the line. While it’s sticking with its 20,000 unit prediction for 2013, the team acknowledged that at that rate, it would be able to actually produce 30,000 Model S next year. With reservations rolling in at record levels, it’s not beyond the realm of possibility that that might happen.
A continuance of the increased build rate will also help the company achieve it goal of reducing the wait time for customers. Currently, the queue stretches out for a year and it hopes to bring that down to three or four months as quickly as possible. Tesla realizes that when most people want to buy a car, they want it sooner rather than later, and a shorter line will lead to even more reservations and fewer cancellations.
So, what other interesting things did we learn? Well, perhaps the most exciting thing might be that the Tesla Supercharger unveiling should come in September. While we expect to see 90-kW charge rates, solar panels and battery swapping, we can’t help but wonder what else is involved. Musk believes it will change how people think about electric cars and says it’s, “Way cooler than anyone realizes.”
Musk also touched briefly on batteries. He stated that, while Tesla’s battery warranty covers the initial eight years, he expects the useful life of the packs to be good for double that. Still, he also conceded that warranty-covered replacements are being accounted for.
He is also staying consistent with his view of battery prices, saying that he sees a substantial drop coming in three or four years. Curiously, that timing also seems to coincide with his prediction of substantial chemistry improvements he says will arrive with the company’s less-expensive Gen III products.
If you’d like to check out all the details for yourself, you can read the 3rd quarter shareholder letter here (PDF) and listen to the recording of the conference call here.
As A. Whitney Brown once said, “There’s really no use in beating a dead horse. I mean, except for the pure joy of it.” Well, if Tesla’s recent string of successes is said horse, then we hope you enjoy the rest of this post.
Let’s start with politics, and Tesla CEO Elon Musk’s step back from Facebook founder Mark Zuckerberg’s new immigration reform political action group, Fwd.us. Musk is one of the big names that is taking his name off the supporter list because Fwd.us gave money for ads that supported US senators who also supported the Keystone XL pipeline and Alaskan oil drilling.
Then we have Tesla stock, TSLA, which has more than doubled so far this year. It was news when it crossed the $50 mark a few weeks ago but right now it’s sitting at $83.75, up almost $7 from Friday. The reason for the rapid rise is clear to anyone who’s paying attention, as you can see in the interactive widget below, but there is a trading history here that involves a lot of people betting against Tesla. There’s a good rundown on the history of TSLA stock shorting here, and it includes these words of warning: there are a number of factors that “could drive the stock down in time. Probably will, say some analysts” and “If you own Tesla stock, enjoy the ride.” We recommend the same if you own an actual Tesla.
Related GalleryTesla Model S
Tesla’s share price rise on Dipity.
Depending on when Tesla Motors CEO Elon Musk is speaking, he’s either pointing out that his electric vehicle company has a rough road ahead or that everything will be fine. Both lines can be kind of true, which is one reason that Tesla is such a fascinating company. It’s also potentially a very profitable endeavor for Musk, depending.
Business Week is reporting that Musk’s compensation package, designed “to keep him at the company,” included an option to buy 5.27 million TSLA shares at $31.17 a share over the next ten years. That would cost $164 million and could be worth way more than his official $33,280 annual salary. Perhaps that’s why he’s already said he plans to stay at Tesla for “several more years.” Right now, BW says, Musk controls 25.8 percent of Tesla and is the largest shareholder. TSLA shares are currently trading at $29.40.
Related GalleryTesla Model S
Tesla chief Elon Musk is making a major announcement next week, and here’s guessing it’s not another salvo about what a bad job that reporter from The New York Times did writing up the Tesla Model S.
“Am going to put my money where my mouth is in v major way.” – Elon Musk
“Am going to put my money where my mouth is in v major way,” Musk tweeted Monday, saying there would be an “exciting” announcement on Thursday. Later on Monday, Musk updated the timing of the statement to next Tuesday in order “to ensure no end of quarter distractions.” Tesla shares rose 2.5 percent in Nasdaq trading Monday and were up another 1.2 percent after hours.
Seeking Alpha wonders if Musk may have another stock offering and will use some of the cash to pay off its government loans. Late last month, Musk said he’d cut his company’s slated 10-year timetable to pay back its $465 million US Energy Department loan in half because of better-than expected results, including what Musk said would be Tesla’s first-ever profitable quarter in the first three months of 2013.
Either way, the Tweets are more sanguine than the blasts Musk sent out after a reporter from The New York Times said in a write up last month that the single-charge range in the all-electric Model S is far less than advertised. Some Tesla owners and a few other publications backed Musk’s assertion that the reporter was sloppy in his record keeping and a Times editor allowed that some missteps may have been made in the review.
Related Gallery2012 Tesla Model S: First Drive
By Danny King
A new blog post by Tesla Motors CEO Elon Musk shows a bit of attitude, reacting to the way the company’s stock and reputation took a bit of a hit last week (despite its supercharger announcement) after downsizing its 2012 production and resulting revenue estimates. Tesla also announced a follow on stock offering, which had some pessimists pouring themselves some long tall glasses of haterade.
Elon’s response? Well, he makes it clear that things are going pretty well, actually. Tesla, he says, is doing another funding round as a means of risk reduction, not out of necessity. Wham! Further, the automaker will likely be cash flow positive by the end of next month. Bop! Also, despite being a few weeks behind in production – due, in part, to flood damage at a supplier – the company has built 500 vehicle bodies, finished 359 Model S sedans and placed over 250 in the hands of customers. Pow!
He also goes on to state that Tesla has never suggested postponing its DOE loan repayment. Yes, it did renegotiate some terms that weren’t part of the original arrangement, but the federal agency is still confident in the company’s ability to pay up and is, in fact, bullish about Tesla’s future. Finally, he reiterates once again that the company fully intends to pay back the DOE “at the earliest opportunity.” There has even been talk of early repayment. You can read Elon’s words here.
We’re willing to bet there are bottles of champagne popping all the way from Washington, DC to Palo Alto, CA today with the announcement that Tesla Motors has, as suspected, paid off the entirety of its $465-million Department of Energy loan.
“I hope we did you proud” – Elon Musk
As far back as July 2012, Tesla began talking about paying the US government back early, but it was apparently the tremendous rise in the company’s stock value recently that prompted CEO Elon Musk to push for the immediate repayment this week. From a price of $33.87 on January 1, TSLA has climbed to $87.24 today (down a bit from the recent highs of over $92). Last week, Tesla sold enough stock to raise over a billion dollars to repay the Advanced Technology Vehicle Manufacturing (ATVM) loan, with interest. This makes Tesla the first automaker to pay the DOE back, and it did so nine years ahead of schedule. In a prepared statement, Tesla CEO Elon Musk thanked the DOE and Congress and “particularly the American taxpayer from whom these funds originate. I hope we did you proud.”
The DOE is certainly proud, issuing a release that said the repayment “shows the strength of energy department’s overall loan portfolio.” The DOE has come under fire recently for the loan it gave to Fisker Automotive. Two other ATVM recipients, Nissan and Ford, have not yet paid all theit money back, but there are no apparent worries there, either. Energy Secretary Ernest Moniz said in a statement that, “not every investment will succeed” but that the DOE’s overall $34-million loan portfolio of more than 30 loans “is delivering big results for the American economy while costing far less than anticipated.” Details in the press releases below.