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| 08 February, 2018

Elon Musk fiddles while Tesla burns

Tesla looks set to incinerate truckloads of greenbacks this year

Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the International Space Station Research and Development Conference in Washington, U.S., July 19, 2017.

Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the International Space Station Research and Development Conference in Washington, U.S., July 19, 2017.

REUTERS/Aaron P. Bernstein
NEW YORK - Elon Musk is fiddling while Tesla burns. The entrepreneur has recently pulled off successful PR stunts for his other firms. And he has just broadened the electric-car maker’s funding options. But Tesla looks set to incinerate truckloads of greenbacks this year. Fourth-quarter results unveiled on Wednesday show the maker of the Model S and Model X ended 2017 with $3.3 billion in cash on its books. That’s only slightly less than at the end of September.

But Musk has already had to push back Model 3 production targets three times in recent months after warning last summer of “at least six months of manufacturing hell.” And he has also committed the company to a number of other projects, including its Semi truck and an all-new Roadster. As a result, Tesla may set fire to almost $4 billion of cash by the end of December, reckon Barclays analysts.

Moreover, carmakers are starting to spend a good chunk of money to secure increasingly expensive or hard-to-get raw materials for electric batteries. Last month a Toyota unit agreed to spend $240 million to take a 15 percent stake in Australian lithium miner Orocobre. Tesla has discussed building a lithium-processing plant in Chile with Santiago-based miner SQM, Reuters reported last week. And last year Volkswagen tried to secure 10-year supplies of cobalt, Reuters exclusively reported.

The cash shortfall Tesla faces isn’t the kind that can be rectified with gimmicks that have worked elsewhere. Musk, for example, just raised $10 million for his tunneling firm, The Boring Company, by selling 20,000 flamethrowers – in reality, pimped-up, overpriced roof torches. SpaceX is likely to benefit from another of his stunts: on Tuesday its Falcon Heavy rocket ship put a Roadster into space - an effective pitch to companies needing to take payloads out of the Earth’s atmosphere.

He and finance chief Deepak Ahuja have also taken Tesla on a successful trip to the asset-backed securities market, raising almost $550 million last week with a deal that reduced the company’s funding costs a tad.

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Keeping the carmaker’s focus solidly on the road ahead, though, requires more than just tinkering. Another multibillion-dollar stock sale is fast approaching.



CONTEXT NEWS

- Tesla on Feb. 7 reported a fourth-quarter loss applicable to common shareholders of $675 million, or a hit of $4.01 a share, compared with a loss of $121 million or 78 cents a share in the same period a year earlier. After adjusting earnings to exclude the cost of stock-based compensation and losses from buying SolarCity, Tesla was in the red to the tune of $3.04 a share. The consensus estimate of sell-side analysts was a loss of $3.12 a share.

- Revenue of $3.29 billion compared with the consensus estimate of $3.28 billion.

- On Feb. 1 Tesla issued its first securitization, selling $546 million of bonds backed by leases on its Model S and X vehicles. The triple-A-rated bonds pay interest at a rate of 0.3 percentage point over three-year swap spreads.



(Editing by Tom Buerkle and Martin Langfield)

© Reuters News 2018