Before Elon Musk talked to Google about buying Tesla, the car maker admitted that it was running out of money
REUTERS/Stephen Lam
Tesla was reportedly almost out of cash in early 2013. But in late September of 2012, the company was giving clear indications that it was running low on funds, as it struggled to get its Model S sedan to market.
Tesla was heading into its second stock offering at that juncture, after it's 2010 IPO. The critical problem was a $465-million loan that the company had received from the Department of Energy - a loan that had given Tesla a much-needed lifeline after a crisis in 2008 that almost saw the car maker go under.
When Tesla filed its plans with the Securities and Exchange Commission for what ended up being a $195-million offering in 2012, it noted that the company was "dependent upon" the DOE loan - which by late 2012 was completely tapped out - and that there was a good chance that the payment terms of the loan would have to be renegotiated.
"If we do not comply with the requirements of the DOE Loan Facility, such failure, if not waived by the DOE, could cause a default under the DOE Loan Facility," Tesla said in its 8-K filing with the SEC.
In the event of a default, the DOE could declare the existing outstanding loan amounts to be due immediately," the filing continued. "Any acceleration of the repayment of outstanding loan amounts would materially and adversely affect our business and prospects."
There was some good news at the time: The Model S was named Motor Trend's Car of the Year in late 2012, not long after the offering was announced. But it wasn't until the critical end of the first quarter of 2013 that everything turned around for Tesla, rather dramatically. As Vance writes:
With its quarter drawing to a close and two weeks worth of cash in its coffers, Tesla began selling thousands of cars, enough to post an $11?million quarterly profit on $562?million in revenue. ... Within two weeks of that announcement, the company's shares had doubled, and Tesla had repaid its $465?million loan from the U.S. Department of Energy early, with interest.
The stock price took off, beginning a climb that would ultimately see it hit $291 per share by September 2014. The DOE loan was indeed paid off, well ahead of schedule.
But there was plenty to worry about in late 2012. And we now know that the situation with Tesla was a lot worse than we suspected.
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