Tesla spends US$6,500 every single minute – report

On April Fools’ Day this year, Tesla CEO Elon Musk joked about his company going bankrupt on Twitter with a photo captioned: “Elon was found passed out against a Tesla Model 3, surrounded by Teslaquilla bottles, the tracks of dried tears still visible on his cheeks.”

Funny as it may be at the time, a Bloomberg report says “there is now a genuine risk that the 15-year-old company could run out of cash in 2018” without additional financing, and that it is burning through more than US$6,500 (RM25,543) every single minute.

This is referring to data compiled by Bloomberg as well as Tesla’s filings, where the latter’s 12-month trailing free cash flow number (US$-3,475.468M) is divided by the number of minutes in a year. Free cash flow refers to the amount of cash a company generates after taking into account any capital expenditure, which has been negative for Tesla five consecutive quarters. The electric carmaker is set to release its latest financial report within this month.

The company is currently facing production issues with its Model 3, which is just one of three models being offered, with the other two being the Model S and Model X. These problems could intensify further when additional vehicles like the Semi truck, Roadster and Model Y crossover are added to an already disrupted assembly line. There’s also the case where another person died in a crash involving its Autopilot feature, which has prompted regulators to question the system’s capabilities.

It isn’t just products either, as things like manpower also impacts the company’s spending. As reported, Tesla only had 899 employees in 2010, but that number has since swelled to nearly 40,000 workers today. A few sudden shocks along the way include scaling up for Model 3 production, which saw the workforce double in 2017 when employees were acquired from SolarCity. Despite a growing headcount (tripled from 2014 to 2017), the revenue per employee remained unchanged.

Looking back at the company’s history, the 2003-founded Tesla depended on private and venture capital funds in beginning, with Musk himself providing a lot of the funding. In its first seven years, Tesla raised US$7.5 million (RM29,473,500) via Series A financing (first round of financing given to a new business once seed capital has been provided), while Musk contributed US$6.3 million (RM24,757,740) and secured a US$40 million (RM157,192,000) debt deal in 2008 amidst a financial crisis.

Later in 2010, Tesla raised more money through an initial public offering, which was then followed by money-raising efforts such as selling stock and convertible bonds, monetising leases and floating junk bonds (high-yielding high-risk securities). Daimler’s equity investment and Toyota’s partnership with Tesla, both of which has now been abandoned, also helped in the past.

There’s also funding from the United States Department of Energy, where Tesla was awarded a US$465 million (RM1,827,357,000) loan in 2010, which has been paid off since 2013. At the end of 2017, Tesla had a cash balance of US$3.4 billion (about RM13 billion) but with US$9.4 billion (about RM36.9 billion) in outstanding debt and almost US$2 billion (about RM7.9 billion) in losses.

Even so, Musk has reaffirmed his commitment to the company on numerous occasions, often purchasing more shares when new equity is issued to maintain about 20% ownership of the company (about 33 million shares).

He also agreed to new compensation plan put forth by Tesla shareholders, where a US$2.6 billion (about RM10 billion) package in 20.3 million option shares will be bestowed upon him if he manages to get Tesla’s market capitalisation to US$650 billion (about RM2,554 billion) while meeting revenue and earnings targets.

Elon was found passed out against a Tesla Model 3, surrounded by "Teslaquilla" bottles, the tracks of dried tears still visible on his cheeks.

This is not a forward-looking statement, because, obviously, what's the point?

Happy New Month! pic.twitter.com/YcouvFz6Y1

— Elon Musk (@elonmusk) 1 April 2018

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