By John Shinal
SAN FRANCISCO (MarketWatch ) — It’s a lucky thing for Tesla Motors shareholders that the U.S. Department of Energy loves the company’s loan applications.
Without the hundreds of millions of dollars Tesla (NASDAQ:TSLA) has received from the federal government this year, the electric-car maker’s financials would be gasping for air as 2012 winds down.
Andrew Yeadon/Wall Street Journal
2012 Tesla Model S Signature.
Given the ugly state of Tesla’s finances — and the company’s sky-high valuation of almost $4 billion — it will rank among the top candidates in Silicon Valley for a 2013 stock collapse, unless it receives significantly more cash next year.
The Palo Alto, Calif., company’s financials are, in fact, in worse shape even than such high-profile Internet IPO flameouts as Zynga and Groupon.
As of Sept. 30, Tesla had cash and short-term securities of $86 million, down from $280 million at the start of the year. That leaves Tesla with less than six months’ worth of cash, given that it burned through almost $200 million during the first nine months of 2012.
Including its $159 in automobiles — and much smaller items such as accounts receivable and restricted cash — the company’s total current assets were worth $285 million at the end of the third quarter. That’s down 24% from $373 million at the start of 2012.
CEO Elon Musk had thus burned through a quarter of his tank (so to speak) by the end of September, even while failing to deliver the production numbers promised to both customers and investors. That failure forced Musk in late September to slash by 40% Tesla’s 2012 revenue-forecast range, from one with a midpoint of $580 million to one whose midpoint is $420 million.
Including its factories and other longer-term assets, the company held $809 million in assets at the end of the third quarter. At the same time, its liabilities stood at $837 million.
Getty Images
Elon Musk arrives at the Environmental Media Awards this autumn.
In other words, even with government help, Tesla’s balance sheet is in the red.
A year of net losses and negative operating cash flow
On Dec. 3, Musk said via a tweet that the company had been “narrowly cash flow positive” the previous week.
Whether that statement is accurate, or whether the cash flow came from its operating, investing or financing activities are questions we won’t know answers to until the company reports fourth-quarter results, most likely to come in February.
Given Tesla’s recent history, though, it’s hard to see how the car maker could post a quarterly operating profit. In fact, Tesla’s cash flow from operations for the first nine months of 2012 was negative, running a deficit of $206 million.
The company’s income statement is also pretty ugly, as third-quarter revenue fell 13% from the year-earlier quarter, to $50 million, while Tesla’s quarterly net loss widened to $111 million from $65 million. See the company’s latest quarterly filing.
Perhaps the filing’s most bullish item, if we can call it that, is a $414 million entry on its balance sheet for long-term debt held as of Sept. 30, thanks primarily to the federal loans. That was up 50% from the $268 million it owed at the start of the year. During those same nine months, Tesla sold cars whose worth it pegged at $91 million, or less than a quarter of its debt.
As things stood on Sept. 30, then, the company has less than six months’ worth of cash left and a balance sheet in the red — and it’s losing more money from operations every quarter. That’s about as dot-com-esque as things get, even in Silicon Valley.
Friends in high places
In any other company, this would be cause for serious alarm — and an 11th-hour visit to an investment bank in hopes of drumming up a rescue operation.
Indeed, one of Tesla’s chief rivals, Fisker Automotive, said in early December that it had hired investment bankers to help it raise more cash.
In spite of Tesla’s sketchy finances, however, its shares are up more than 30% since early November.
That’s because the re-election of President Obama means it’s quite likely the company will maintain access to the loans that have kept it afloat. And, in addition to those direct loans, Tesla also benefits from a federal tax credit for electric-car buyers of up to $7,500. Moreover, the state of California — home to the nation’s largest car market — offers a $2,500 rebate and has also mandated that car makers increase the number of electric vehicles they produce.
Even with that help, Tesla is awash in red ink.
What’s worse, it has a poor habit of failing to deliver to customers the cars it has promised them, while simultaneously raising the prices of those yet-undelivered cars.
If an unprofitable business, a lousy level of customer service and an almost-absurd valuation aren’t enough to warn investors away from Tesla shares, there is yet another red flag. It can be found in an SEC registration statement for a secondary offering the company filed in late September.
