“Here’s the deal, either we believe in the limited liability company or we don’t…
…Tesla’s business model ten years out is more proven today than years ago (they almost failed during the financial crisis), but they also have a LOT more competition today and still aren’t making money, still investing in new and speculative ventures, and constantly having to go back to investors for more capital, to cover their serious cash flow shortages. One mistake or the capital markets closing for firms like this could mean doom for them. Here’s the point, do we want companies to take risks, risks that could cause them to fail or not? You know, there is a lot of risk associated with “doing nothing” too, think Kodak, Xerox, Yahoo, so many more than the Googles, Facebooks, Amazons, and maybe Tesla…..With that said, most entrepreneurs and investors would not take those risks, if they knew they were going to be personally sued and held liable for losses arising from their business judgements, that in hindsight, don’t work out. That is the purpose of the Limited Liability corporation and The Business Judgment Rule, yet in California, federal courts have ruled that corporate officers are not protected by The Business Judgment Rule….that they could be sued for Ordinary Negligence, a very low bar and highly subjective. Think about it, isn’t running a business for ten years, that is reliant on continued funding from the capital markets, because it hasn’t achieved profitability/positive cash flow….negligent? And further, buying other companies (like your relative’s failing solar firm) and investing in new technologies, as opposed to finishing your small car and achieving positive cash flow asap….isn’t that negligent? Just saying….either we want people to take risks with Other People’s Money or we don’t? I think we do, but the California legal system sure doesn’t. How can any good lawyer, for a company like Tesla, allow their officers to place themselves and their families at risk, by being headquartered in California, where the federal courts have ruled they are not protected by The Business Judgment Rule?”, Mike Perry, former Chairman and CEO, IndyMac Bank
John D. Stoll, March 15, 2017, The Wall Street Journal
Tesla Raises Additional Funds for Model 3 Debut
Tesla is offering $250 million in common stock and $750 million in convertible notes due in 2022
Tesla Inc. shares rose 2.3% in after-hours trading. PHOTO: NICOLAS LAMBERT/ZUMA PRESS
By John D. Stoll
Tesla Inc. said it is on track to launch a more affordable car this year, but it needs to raise $1 billion to make sure it happens.
The Silicon Valley electric-vehicle maker said Wednesday it is offering $250 million in common stock and $750 million in convertible notes to strengthen a fragile balance sheet amid a risky ramp-up of Model 3 production. Billed as a cheaper offering by a company known for pricey super cars, the Model 3 is intended to sell in much higher volumes than the current models and compete with more mainstream brands.
Tesla shares gained 2.3% to $261.50 in after-hours trading. Analysts had expected Tesla to seek as much as $2.5 billion in the near-term, citing its inflated market value (which is near Ford Motor Co.’s market capitalization).
Tesla is a perennial money loser, however, notching two profitable quarters since going public early in the decade. Deeply indebted and planning to increase production capacity, the company needs a cushion to move ahead in the capital-intensive auto industry.
Tesla has more than $2 billion due in 2018—a year during which Tesla aims to sell significantly more vehicles than last year. It also plans to continue investing heavily in overhead and product creation in coming years.
The company plans to make 500,000 cars a year by the end of 2018 and 1 million vehicles in 2020. It is a long way off from that mark. Last year, Tesla produced nearly 84,000 vehicles.
Chief Executive Officer Elon Musk signaled the need for more financing last month, a move his company has made several times in recent years even as it has consistently notched year-over-year quarterly revenue increases. Already Tesla’s largest shareholder, Mr. Musk intends to buy about 10% of the common stock Tesla will issue in the public offering.
Mr. Musk has laid out plans for more electric models, including heavier-use products, such as a bus-like vehicle, and a pickup truck. With last year’s acquisition of SolarCity Corp., he is laying the groundwork to turn Tesla into a sustainable energy company offering solar power, batteries and electric vehicles.
The Model 3 project has been in the works for several years. The car is expected to debut with a price tag under $40,000 and achieve far more than 200 miles on a charge, and will compete most directly with General Motors Co.’s Chevrolet Bolt.
Appeared in the Mar. 16, 2017, print edition as ‘Tesla Cash Call: $1 Billion.’