Musk makes Ken Lay look like a kid playing with Legos.
Over the past year, the electric-car maker has been burning money at a clip of about $480,000 an hour, according to data compiled by Bloomberg News.
Hence, Elon needs more money.
How to get it?
Con fresh marks into paying him upfront to “reserve” a Founders Series Roadster – his purely theoretical electric supercar, which won’t be available for years and possibly never.
It will cost buyers a $250,000 down payment to “reserve” one of these unicorns – but the car won’t be available for at least two years. If 1,000 rich imbeciles ante up, it will mean $250 million in fresh cash to burn for Elon.
At least, for once, it’s not the taxpayers that’ll be screwed this time.
Tesla is also charging a total of $50,000 for reservations of the regular Roadster and trucking companies can also pre-order electric semis for $5,000, though they don’t go into production until 2019.
Meanwhile, Tesla is blowing through more than $1 billion each quarter; much of the latest losses due to massive investment in the Model 3 – Tesla’s “affordable” $35,000 EV that’s looking less likely to generate a return anytime soon.
“Whether they can last another 10 months or a year, he needs money, and quickly,” said Kevin Tynan, senior analyst with Bloomberg Intelligence, who estimates Tesla will be required to raise at least $2 billion in fresh capital by mid-2018.
Investors who bought $1.8 billion of debt three months ago remain under water even after the notes recovered a bit from a low of 93.88 cents on the dollar early this month.
That may leave selling equity as the most viable option. But that, of course, would dilute existing shareholders, and Musk, at 20 percent, is the biggest.
“So long as the company is burning cash, it will remain dependent on the patience and enthusiasm of public markets or the deep pockets of a white knight,” said Christian Hoffmann, a money manager at Thornburg Investment Management.
In other words, on the government teat – and the imbecility of snowflakes with money to burn.
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When Netflix was a DVD rental web site a lot of people thought they were crazy too. Shipping DVDs through the mail? Crazy. The post office boomed on the revenue. People were shorting Netflix, every quarterly report was laughed at.
Then the ISPs increased their bandwidth. And video compression got better. So Netflix pulled the trigger on their real business plan: streaming video over the Internet. They made it super simple to use your Netflix subscription on any screen you own. They did deals with ISPs. They own the space today, even with juggernauts like Amazon, Apple and Google in the game. Traditional cable and satellite TV are losing subscribers at an alarming rate. Hollywood would be done already if it weren’t for foreign distribution.
This is the new VC model. Keep your burn rate going long enough to maintain “mindshare” until technology catches up. Tesla isn’t about selling cars, it’s about transportation as a service. Uber isn’t about an alternative taxi service, it’s about transportation as a service. The people keeping Tesla afloat are thinking about Netflix, not about Ford. GM is trying to play this game but institutions like that can’t throw away the past so easily.
Will it work? Maybe. Probably. The US population is aging and going to be having difficulty driving. A sizable number of kids don’t have any interest in cars. It is drop-dead simple to get mundane and not-so-mundane shopping done online (thanks to Amazon, again the USPS is booming). I own a 3D printer, and it does a “good enough” job to produce parts and cases for some of my hobby projects and will only get better over time (3D printed glasses frames should be a no brainer, and the lenses could be ground in a desktop CNC mill). Telework is going to be the last holdout, but eventually managers will figure out they don’t need to be breathing down their employee’s necks all day to know if they’re working or not. Even if people aren’t shipped around in self-drivers, all the stuff we buy and use will be. And people won’t need to make all the boring trips, all the routine trips, all the commuting trips. Hope you like your house, because you’re probably going to be spending a lot of time there. But this is nothing new, in fact it harkens back to the pre-industrial revolution days when the land itself was productive and self-sufficient. If you were a professional like a doctor or shopkeeper it was very likely that you lived above the office or store. This is slowly happening again, but unfortunately most of our homes (and zoning laws) aren’t set up for this sort of economy. But get rid of the car and there will be a lot of garage space opened up for businesses.
At least, that’s the VC pitch. And some form of it will probably come to pass.
I don’t think it would work without QE and the rest of the LIRP/ZIRP/NIRP. If a bank CD payed interest like in 2007/08 all these companies would be liquidated.
Netflix actually had a viable model with the mail order and crushed blockbuster as a result. They made huge investments in machine capital to make the whole mail thing work. Bulk postal rates aren’t really that bad and a lot cheaper than teenagers at minimum wage who then need managers. Then of course rent and so on.
OK, so in a generation there will be a reduction of what, 50%, 60%, 80%, in cars being driven for personal reasons due to the trends you lay out?
Then why do we need CAFE laws? Or pollution laws? These things will be taken care of simply by the reduction in auto use. Right?
It would mean the implosion of the entire global petroleum industry. You think TPTB will let THAT happen? Think again.
Telsa Motors, Uber, all these new-economy companies are hemorrhaging money like crazy and they get more. This should tell us something about what purpose they serve.
The .com companies that claim such huge fortunes are the ones leaving me scratching my head. How could FB generate such a huge amount of money. Figure it all up and you’ll see it’s a lot of money(I did this but forgot to record it)per person as if every single person in the US used FB. I know lots of people who don’t use it. I can parade witness after witness before you that don’t and never have used it. So that means that number I came up with, hundreds of dollars per person for years is made how? I realize it’s worldwide but how do they collect from a business in a hostile country? And when some really rich new guy decides to buy some other company that is iffy to say the least, how is it valued in so many billions of dollars?
Maybe I should create a company and then a scandal so everyone knew its name and then go to the bank for some big loans. I’d bet these companies bankers would be difficult to find. Jeff, where do you bank? I I bank in m’bawa. Where? Oh, it’s a little country…..you probably never heard of. It’s bordered by Bezosland.
Big numbers for sure. They were big in Europe and the rest of the world before they were a hit in the US (I have an old Nokia phone from 2007 with a dedicated Facebook app pre-installed). Facebook also appeals to women with their family friendly posting policies. All it is really is just a canned blog site. The same thing could be done on a distributed basis with RSS feeds, but that requires some coordination (and creativity). Coordination and fake creativity that Facebook is happy to supply in exchange for about $12/head annually in ad revenue.
I “check in” on Facebook about once a week. But I only follow a few people I happen to know personally. For a while I got into it but found it lacking in many ways, mostly in that they constantly push ads at me, and rearrange the timeline in order to maximize wasting my time (and serving out more ads) looking for something I read earlier. This will eventually be its undoing, BTW, but not until a better solution comes along. A lot of people thought it might be Twitter, but that’s such a hot mess of bad management it seems like they want to fail. Personally I would like to see a good site that relies on subscriptions instead of ads. I’d happily pay $12/yr for a well organized Facebook competitor that spent their time working on improving my experience instead of maximizing their revenue (of course both objectives go hand-in-hand in a just-pay-for-it model).
Musk is a fraud, pure and simple. Tesla will crash down, hopefully sooner then later. Taxpayers will of course pay for it all.