By Mick Weinstein
Zack Kirkhorn is a former Tesla Motors Inc. (NASDAQ:TSLA) employee and ‘huge EV [electronic vehicle] supporter’. On Quora, Kirkhorn ran the math on the question “Has Tesla made more money selling cars or selling stock?”
Selling Cars: Based on public filings (10-K and 10-Q) and press releases, Tesla has cumulative revenues from “Automotive Sales” of $414M as of the end of Q2 2012. Q3 2012 Revenue guidance is $44M for both “Automotive Sales” and “Development Service” (e.g., research and development contracts with Toyota). So at most, “Automotive Sales” are $455M as of end of September 2012. Please note that this is revenue, not profit.
Selling Stock: On the stock side, Tesla has raised $362M in net-proceeds from the public markets from its IPO, and two subsequent follow-on offerings. They’ve raised an additional $139M from the private sale of stock post IPO (i.e., Toyota, Panasonic, Elon, and Blackstar investments). Tesla also sold stock before the IPO in the Series A-F rounds, totaling $319M. So my estimate for total money made by selling stock is $820M.
What this means: I caution you against reading too much into this. Its very common for companies to raise funds in the private or public markets to fund future growth. Tesla is investing heavily in current and future products (Model S, Model X, powertrain advancements with Toyota and Daimler, unannounced products). You should evaluate Tesla based on its
(1) overall strategy and path to profitability,
(2) execution of its strategy to date,
(3) the company’s ability to execute going forward, and
(4) gross margin for products in production.
If you believe these to be strong or trending positive, then I wouldn’t worry too much about revenues vs. financing in the current growth phase.
But as Mark Rogowsky notes in his response:
it appears all but certain that sometime in Q1 2013, this meaningless comparison will have revenue > total stock sales. I use approximately 2000 cars in Q4 and 3500 cars in Q1 to build this assumption (5500 * $70000, both of which feel conservative enough, to bring total revenue ever to ~$840M).
If the company sells 20,000 cars as intended next year, revenues for 2013 will exceed $1.3 billion. Using some crude guesstimates of gross margin, it seems like by the end of 2015, gross margin will exceed total proceeds raised by stock sales.
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Evaluating Tesla with an October 2012 snapshot is misleading at best. I predict the market will have a very different attitude about Tesla by Q2 2013. Not only is Tesla highly likely to sell all of their projected 2013 Model S production (20,000 units), but they will also be generating thousands of paid reservations for their upcoming Model X SUV. This company is just beginning to reach their stride. When they do, we’ll see short sellers running for the hills.