By: Brad Taylor
Tesla Motors, Inc. was formed in 2003 to design and produce affordable EV’s (electric vehicle) and sell into the mainstream market place. The company is in the auto manufacturing industry and the consumer goods sector. To sustain its significant cash flow needs to support its heavy research and development spending and growing infrastructure needs (dealerships), the company completed a public offering in June of 2010 where it sold 13.3 M shares at a price of $17.00 in a successful IPO that raised $226.1 M and listed Tesla on the Nasdaq (TSLA). Combine the $226.1 M raised with its IPO, with its four private offerings, various investments from other partners, $465 M in term debt from the DOE and its $170 M raised from its secondary offering of 5.3 M shares of stock, the company has raised staggering amount of roughly $1242.7M ($1,054M if you exclude the $188.7M balance yet to be drawn of the DOE loan) since it began in 2003. There is still the question, is it enough? The IPO was originally slated to offer 11.3 M shares at a range of $14-$16 each, but due to the demand, Tesla, along with its investment bankers of Goldman Sachs, Morgan Stanley, JP Morgan and Deutche Bank increased the available shares by 20% and the offering price to $17. By the closing bell on opening day, the stock had risen to $23.89 and traded 18 M shares. Since then the stock has appreciated to $30.79 at the time of this report representing an 81% and 30% return to its shareholders from its opening day price $17 and closing price of $23.89 respectively. Trading on average 1.2 M shares daily, its 52 week range is $21.50 - $39.95. In the short term, it would appear that both the IPO and the company have been a success. With the IPO generating in excess of $226 M, and the company, while not paying dividends, returning 30-81% to its shareholders (based upon first day opening and closing values) – a healthy 2 year return. The real test for the long term investor will be in 2012/13 with the launch of its S sedan. Will Tesla be able to launch and sell enough vehicles and control its spending to generate enough operational cash flow to support its debt service while still providing a return to its shareholders? 1. Identify the company and its industry. The company chosen was Tesla Motors http://www.teslamotors.com and is traded on the NASDAQ under the symbol of TSLA. Tesla Motors, Inc. designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. The vehicles the company produces is the Roadster, which is currently in production, and the Model S sedan and Model X utility which are planned for production in 2012 and 2013 respectively. It markets its vehicles through three channels 1) corporate events; 2) directly to consumers through the phone and Internet, and 3) through its network of Tesla stores. The company, founded in 2003, and is headquartered in Palo Alto, California. 2. Discuss important financial and other facts about the company from its SEC filings. From the 2011 annual report, a couple of numbers jumped out at me from the financial statements the R&D and SG&A spend, clearly these numbers represent your typical start up high growth company. | 2011| | 2010| | 2009| |
Revenue| $ 204.20 | | $ 116.00 | | $ 112.00 | | | | | | | | |
R&D| $ 209.00 | 102%| $ 93.00 | 80%| $ 19.00 | 17%| | | | | | | |
SG&A| $ 104.00 | 51%| $ 84.50 | 73%| $ 42.00 | 38%| R&D in 2011 was 102% of revenue and SG&A was 51% of revenue! Consistent with several of the articles I read, Tesla was burning through cash and while the timing might not have been the best, it had to go public or go broke. These 2 numbers represent the 2 greatest challenges I think are facing Tesla in the near term 1) completing the development of its products S sedan and the...