A Tale of 2 Elon Musk Companies: SpaceX Raises $1 Billion for Starlink, Tesla Can’t Afford Toilet Paper
60 Starlink satellites begin to separate after deployment from the Falcon 9 second stage. (Credit: SpaceX webcast)
On the heels of the launch of 60 SpaceX Starlink satellites on Thursday comes news that SpaceX has raised $1.02 billion since the beginning of the year. CNBC reports:
SpaceX continues to accelerate its fundraising, as SEC filings indicate the company sought equity rounds of $500 million in January and $400 million in April. CEO Elon Musk had said those rounds were oversubscribed in terms of investor interest.
The filing on Friday, an amendment of the company’s April filings, shows that SpaceX did bring in more funding than expected. The company raised $1.02 billion since the beginning of the year – greater than the $900 million it sought across the two rounds. Gigafund, led by Luke Nosek (a PayPal co-founder and SpaceX board member) and Stephen Oskoui, once again invested in the round for SpaceX, people familiar with the fundraising told CNBC.
Meanwhile, things at Musk’s electric car company aren’t nearly as rosy.
Credit: CCN
After a quarter in which Tesla lost $700 million, the company raised $2.35 billion. Musk told employees in an email the new funding would keep the company afloat for only 10 months.
In the same message, he also implemented a “hardcore” cost cutting program as Tesla’s stock continued to sink to under $200 per share. Electrek reports:
Sources familiar with the matter told Electrek that teams at several Tesla facilities are going to some extremes in attempts to cut costs, including skipping on ordering office supplies – even toilet paper.
A source even said that some employees are bringing toilet paper from home to the office in an attempt to reduce their overhead….
One of the bottlenecks in deliveries is the detailing of the vehicles and as Tesla’s delivery volume increased, they relied on car washing businesses.
A source familiar with the matter says that some stores are now cutting down on the expense and in order to still complete the work, some employees are bringing the cars home and cleaning them on their own time.
The author of the story, Fred Lambert, writes that it’s “fairly incredible” that employees would volunteer their time and spend their own money to help the company out. He sees it as a sign of how committed they are to the company and its mission.
Maybe. The reality is they might not have any choice if they want to wipe their asses at work. Employees’ willingness to wash and even deliver cars on their own time would probably count for a lot when managers are deciding who to lay off. People need their pay checks.
On a more serious note, Tesla’s problems have a real impact on Musk’s net worth and his ability to put his personal wealth toward his goal of colonizing Mars. As of today, Tesla’s shares had sunk to $187.65, down from a high of $379.57 in August.
Seeking Alpha reports that Musk’s shares of the company are heavily leveraged:
That gets me to the proxy filing also issued on Friday. On page 72 of the document, there’s a listing of major holdings and their positions. Musk has the largest stake in the firm, 21.7% of shares, with the following note attached regarding his position:
Includes (“I”) 33,824,680 shares held of record by the Elon Musk Revocable Trust dated July 22, 2003; and (“II”) 4,748,110 shares issuable to Mr. Musk upon exercise of options exercisable within 60 days after December 31, 2018. Includes 13,394,056 shares pledged as collateral to secure certain personal indebtedness.
The shares pledged for personal indebtedness amount to 39.6 percent of those held by the revocable trust and 34.72 percent when the exercisable options are taken into account. The figures for 2010 were 17.51 percent and 15.87 percent, respectively.
Continued declines in Tesla’s stock would not only hurt the company but could result in expensive margin calls for Musk, who in December took out $61 million in new mortgages on five mansions he owns in California.
Musk also has a tendency to intertwine his company’s operations. For example, SpaceX purchased SolarCity bonds before the latter company was acquired by Tesla.
I have yet to see an analysis of how interconnected Tesla and SpaceX are, and what might happen if the electric car company went bankrupt. The financial details are obscure so it’s hard for anyone to get a good handle on it.
36 responses to “A Tale of 2 Elon Musk Companies: SpaceX Raises $1 Billion for Starlink, Tesla Can’t Afford Toilet Paper”
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That’s excellent news with SpaceX. I was a little worried when their last offering didn’t entirely sell out, but it looks like things are turning upwards (maybe it’s the StarLink launches).
That Tesla news, though:
https://frinkiac.com/video/…
you never know what is aspirational with Musk and what is real
Wow! 5 mansions. Looks good in a Ponzi scheme to have 5 mansions. Not to say that is what he is doing.
Then why say it?
More FUD.
More random non sequitur brain dumpage and Id-filter failures more like.
Five mansions makes Musk look like a bit of a piker by the standards of many of his wealth-peers or even his wealth-inferiors. The late Sen. McCain, with a vastly smaller fortune than Musk’s had, what?, eight or nine? I seem to remember he couldn’t quite recall either.
Tesla’s hit rough patches before. The current quarter is 2/3rds over so new numbers will be out in 5 weeks.
That’s nonesense
One word: Tucker. They’ve done it before.
And Henry Kaiser.
Kaiser’s mistake was market timing more than anything else. He should have concentrated on the bigger, flashier models people wanted in the wake of WW2-era production diversions and general rationing-based privations. If he’d waited another decade to introduce the Henry J, he might have fended off Volkswagen’s penetration of the American car market at the low end. But, of course, he was gone by then. There were a lot of plain old-fashioned business miscues by a number of American car makers from the immediate post-WW2 period through the early 60’s. This was a period during which it took considerable effort to fail in the car business, but we had a number of players who proved to be up to the challenge.
“They” were in a much more commanding position when they did in Tucker 70 years ago. Musk is waaaay beyond Tucker territory and the “Big 3” are all wizened husks of their former selves. Musk’s consequential enemies these days all seem to live on Wall Street.
https://twitter.com/elonmus…
Tesla only looks bad right now because they’re public and has tons of shortsellers against them, spreading lies and FUD everywhere. SpaceX will suffer the same if they ever go public, just think about the FUD around the Dragon 2 test anomaly if SpaceX was public.
I hope Elon reconsider the decision not to take Tesla private, the public stock market is cancer, this is the moral of the tale of 2 companies.
Maybe the next he tries to take Tesla private he will avoid committing securities fraud. He seems to like everything about heading a public company except the public part.
If Tesla’s problems were just short sellers the company would be fine. It’s also facing sinking demand, disappearing tax credits, and servicing an enormous debt. It’s structured to produce far more cars than it can sell.
Demand is not a problem – they simply can’t produce enough cars to satisfy demand. Gigafactory 3 will help, but there will still large markets under-served due to production limitations. Model Y and FSD will only increase demand further.
Model Y builds will start at Fremont, and they’re deciding where the European Gigafactory will be built. Odds are Germany.
Shanghai’s Gigafactory 3 pre-orders have opened and Tesla logged on enough orders first day to crash the site. Production starts later this year as the factory is nearly done.
“It’s structured to produce far more cars than it can sell.”
The Q2 numbers are likely to contradict you as demand is up,
https://cleantechnica.com/2…
And with the Shanghai factory opening later this year Chinese sales will boom (taking orders now.) Sales is sales, where ever.
Q1 was.expected & predicted by Tesla months ahead. Many balls in the air; Models S&X changeover for the driveline & battery upgrades, shipping cars to overseas customers, plus a dip in the market that hit the auto market in general.
“Maybe the next he tries to take Tesla private he will avoid committing securities fraud.”, “It’s also facing sinking demand, disappearing tax credits, and servicing an enormous debt”: That’s the FUD and lies I mentioned in my post.
According to the SEC, Musk’s “funding secured” tweet was an attempt to manipulate the market. Significant monetary penalties and being stripped of the Chairman title proves that’s not FUD. The tax credits have already been cut in half, and they are on schedule to be halved again soon. Not FUD. And Tesla already used up 900 million cash paying off a note in the first quarter. More notes are coming due. I assume you believe Musk when he says they will run out of cash in 9 or 10 months…
No, that is what they attempted to charge him with, but they couldn’t prove it which is why the SEC made a deal. The SEC doesn’t have the money needed for such long questionable court cases so they try to scare CEOs into obedience.
trump’s SEC is way out of line. They should be going after the shorters for the manipulation they are doing.
SEC has been out of line for 3 decades, creating crap from whole cloth which has no legislative basis while unevenly applying said crap.
the fact that SEC accused him of it, and he settled to keep costs low, does not mean that it is real.
Hell, the SEC accused him of breaking the deal, and even the judge laughed that one out of the courtroom.
And Musk did NOT say that they will run out of cash in 9-10 months.
He said that if we continue spending like they had, they would run out in 9-10 months. BIG difference.
They do NOT have notes due until next year. They now have 4+B, the china factory is coming on-line and should produce at 200-400K level by end of year.
“And Musk did NOT say that they will run out of cash in 9-10 months.
He said that if we continue spending like they had, they would run out in 9-10 months. BIG difference.”
Hence, bring your own toilet paper and volunteer your time to wash and deliver cars.
One struggles in vain to imagine such a thing being done to benefit, say, the rapidly fading GM by the entitled louts of the UAW.
One of the reasons I hate writing anything about Musk is the fanboys that defend him for his most boneheaded actions. They can’t admit he ever does anything wrong or that people have any legitimate criticisms of him.
This doesn’t help. The hero worship just reinforces his idea that he should be able to do whatever he wants and that normal rules don’t apply. In the end, It helps him justify all the stupid things he does.
This was a clear violation of SEC regulations. The man is lucky he got off with a fine and losing his role as chairman. It could have been much worse.
No, it’s wasn’t and you need to read up more about what the regulations, written in the pre-social media age, actually say and how the courts interpret them. Which incidentally was why the Judge basically ordered the SEC to provide clear guidance to Elon Musk when the SEC accused him of violating their agreement a couple of months ago.
Indeed, technically stories with negative headlines, and statements like you made above. about it being a clear violation, could even fall under them IF you owned any Tesla stock. That is why financial bloggers always include a statement they have no positions in the stock or plans to buy it.
What sinking demand? Far from producing more cars than it can sell, Tesla’s biggest problems have always been producing enough cars to meet the demand. Given the level of demand indicated by pre-orders in China the nearly completed Gigafactory 3 there is facing the same problem. Meanwhile, site selection for a Gigafactory 4 in Europe is underway.
Disappearing tax credits are no sudden development either. From its inception, the program has provided for sunsetting the credits as production volumes rise.
And don’t forget how the old auto industry is doing its best behind closed doors to run him out of business so they won’t have to modernize as fast.
along with oil companies.
I don’t think the oil companies care that much. Musk’s solar mania notwithstanding, the oil companies know their natural gas operations are going to wind up generating more and more of the electrons that push all those EV’s around. Motor fuel production and sales, on the other hand, requires a lot more low-margin distributed infrastructure.
https://tech.slashdot.org/s…
Looks like a pretty low-wattage effort to me. And it’s a lobbyist, not a company exec. Lobbyists and lawyers are known for doing things they think will impress their clients.
What 2 mansions aren’t enough?
Gotta have one mansion for each bidness, don’tcha know…