Tesla (TSLA) closed its latest capital increase on May 15, th and collected about 2.7 B of cash from a sale of 3.55 MM shares linked with a 2% convertible senior note increase of $ 1, 84B. As per the 8-K file provided in support of this capital increase, the conversion price of the higher note corresponds to $ 309.83 per TSLA share, with the issued shares being priced at approximately $ 243 per piece.After the poor 1Q-2019 finances showing a net income of $ 668 million, despite delivering 63,000 vehicles and a reduction in net cash and equivalents of 1,594 BB (after repayment of the failed 0.25% Convertible Senior Notes 201 9 – the offer) this cash injection was the regular gallon of water pulled into the abdomen by dehydrated bank accounts. Reported cash and cash equivalents amounted to USD 2.20 at the end of the first quarter, with accounts receivable of $ 1.05 B. This matched almost one to one with the $ 3.25 B balance of payments account. Halfway through 2Q 2019 and the jury are still out on whether there will be a significant demand for recovery for TSLA vehicles. We should have Insideevs.com view of May 2019 US deliveries within the next 7-10 days, followed by information on Europe and China deliveries tracked by a cadre of valued applicant Alpha contributors not long afterwards. With the various and well-documented price reductions for various TSLA models during the first quarter, at a high level, these seem…
After the poor 1Q-2019 finances showing a net income of $ 668 million, despite delivering 63,000 vehicles and a reduction in net cash and equivalents of 1,594 BB (after repayment of the failed 0.25% Convertible Senior Notes 201
9 – the offer) this cash injection was the regular gallon of water pulled into the abdomen by dehydrated bank accounts. Reported cash and cash equivalents amounted to USD 2.20 at the end of the first quarter, with accounts receivable of $ 1.05 B. This matched almost one to one with the $ 3.25 B balance of payments account.
Halfway through 2Q 2019 and the jury are still out on whether there will be a significant demand for recovery for TSLA vehicles. We should have Insideevs.com view of May 2019 US deliveries within the next 7-10 days, followed by information on Europe and China deliveries tracked by a cadre of valued applicant Alpha contributors not long afterwards. With the various and well-documented price reductions for various TSLA models during the first quarter, at a high level, these seem to have been relatively constant during the second quarter (without news of a series of price increases). However, this can change with the redemption of the last five weeks of the quarter. My opinion is that TSLA is likely on the way to a net income (loss) of ~ $ 500 MM, a similar result to Q1. A slightly reduced loss based on what I hope is a better thought and planned delivery effort on ships to overseas markets. Deliveries can reach around 67500 to 70000, with a large part of these as a reduction in deliveries “in transit” at the end of the second quarter compared to the first quarter.
Held on Monday 22 nd April 2019, the event was a future of TSLA’s future. I will not go into detail about the event (and I am not authorized to comment on the technology), but just give an overview of the presentation below about what is covered, which I have downloaded from CleanTechnica:
Let us be clear, it was a presentation that was put to the investment community, not to fans, employees and the who believes in the “mission”. As per the CleanTechnica article linked above “as the subscription begins, I notice how common the room is. This looks less like a regular Tesla presentation and more like an investor conference that is interesting.” The only purpose of this event was true it was said at the beginning of the presentation per TSLA, to focus on the rest of the story. Translated to “what we really mean”, convincing the investment community was that Tesla was still a company that would be classified and stocked and multiples of exponential growth potential.
Measured against the purpose of TSLA or by “what we really mean” language, it was a false failure. A F. A must repeat the beginner year of high school “failure. It did not” wow “and” stun “(not in the way TSLA hoped for) The majority of participants in the investment community, with some decreasing price targets before the 1Q-2019 revenue two days later after Wednesday 24 th April:
Analyst comments sources:
https://www.bloomberg.com/news/articles/2019-04-23/tesla-analysts-skeptical-of-bold-autonomy-plan-ahead- of results
Teslas Autonomy Investor Day – Analyst Comment
After the autonomy day failed to convince the investment fund that billions in sales and tens of thousands of vehicles produced and sold are merely window dressings in comparison to the “future” was writing on the wall. TSLA knew that the profit they would release for 1Q was terrible. The day, what can now be regarded as a 150-1 rough run (horse racing for a rank outsider in a horse race), last ran with seven furlongs, and this week would be ugly. And it did.
Underwhelmed analysts with clients to serve, reputation for retaining (perhaps with some damage to mitigate) needed to take action. And they did it. There was no main plan for the future to point out to distract the results from 1Q-2019, from what was unthinkable literally a few months earlier after having posted a solid 4Q result, which gave a similar result in 3Q.
Let’s take a look at the chart showing 25 days on both sides of the autonomy day.
Source: Yahoo Finance TSLA Historical Data
Leading to the Independence Day, even after the end of 1Q-2019, price action and volumes were dampened, in addition to the blip from $ 291 to $ 268 on 4 th April when production and delivery numbers for 1Q came out and probably came the reality of a bad quarter ahead. But even then it was an atypical “stable as you are” daily volume and the price was crowded into a channel of $ 265 to $ 275. Then Autonomy Day, and then 1Q-2019 results. A week of fines below $ 240 and up on a Friday to $ 255 after announcing the capital increase was held on the following Monday, then sliding glide to where we ended on Friday before Memorial Day.
Does anyone know that the latest free case of the TSLA share price is not related to the autonomy day? This was meant to razzle and dazzle and convince the investment community to “keep the line”, to divert from the poor 1Q-2019 results. Don’t look at what we’ve just done, look at what to do, and not in five years, but in a year or less! It was a complete patent error.
The perfect time for the capital increase would have been 2Q-2018 to 3Q-2018 when the model 3 ramp was about to lift off. It would not have meant that Elon had previously said that TSLA could grow organically or did not need any other capital increase. He has said a lot of things that have proved to be optimistic (or late in timing), and many of them seemed to have had minimal or almost no impact on him as CEO or TSLA as a company and how TSLA was seen by the investment fund at that time.
It was not that investors would have believed it as much as the insurers could have sold it. But there were still many believers in 2018. Many would criticize this for another instance of “see what I do, not what I say” from Musk. In order to burn the growth story, based on phenomenal model 3 reservations and interest rates, a capital increase could have been defined for future Gigafactories and the development of future models. Hell, right now they could also be called sun and storage! Spend some time developing the Powerpoint images, developing the story (“story”) you sell and selling. My own opinion is that they could have (should have!) Raised another $ 3B to $ 5B, a split of equity and debt (a mix of convertible and 2025 + bonds). This would have deferred cash balance fear, bought time for the company to wipe out and solve the production efficiency and not handle the business in a higher level / crisis situation, which seems to be how TSLA works.
The diagram below plots Cash flow from financing activities per vehicle produced since 2008 (rolling 12 months since 4Q-2010) and cumulative net cash from financing activities. The previous capital increase was in 3Q-2017. If TSLA would continue to burn the growth story, 2Q-2018 through 3Q-2018 was time to do so. The TSLA share price fluctuated over $ 300 from June 2018 to August 2018. The investment market was waiting for the model 3 ramp. Surely all signs of a capital increase pointed to the benefit of TSLA riding high?
Source: TSLA 10-Q, 10-K, 8-K
Finally, some speculations from the author of former CFO. Someone so deep into the TSLA finances that former CFO Deepak Ahuja would surely have raised this with the CEO? He had been neck deep in TSLA longer than most senior executives and would you think has the best understanding of TSLA financials by anyone? Surely he would have flagged the chance to take advantage of the high TSLA share price and the upcoming model 3 ramp? His time to leave immediately after the Q4-2018 payout release (announced with a bungled comment in the tail end of Elon’s redeemed calls) might have thought excitement at management level. I don’t know, maybe, maybe not. I know from my own experience working with more billions of capital projects, which do not have a proactive leadership at the higher level to hunt and secure the right financing, whether it is the decision on sanction / final investment decision or annually more to screw with sound management practices than knee knee decisions and reactionary comments.
It’s about “putting the table” for success. Failure to have the right funding on site at project level can handle all decisions. Failure to raise additional capital by mid-2018 at the perfect storm of timing for TSLA was a catastrophic error assessment. Most of the SF (Special Forces) branches in different countries exercise armed forces an exponential amount of scheduling assignments / operations compared to the time required to perform them. British SAS (Special Air Service) is known for applying Six-Ps in mission / operation planning – Proper preparation prevents Piss Poor Performance. TSLA could carefully consider some of these advice and spend more time planning. TSLA has also learned in recent weeks that the investment society is not always your friend.
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