Elon Musk clarifies financing round, says Tesla to be cash flow positive by December 2012
Last week, overshadowing the Supercharger network announcement, some SEC filings by Tesla Motors created what Elon Musk today called "misconceptions" when "journalists gained the wrong impression" of what the filings meant. Those articles had the tone of the sky is falling because Tesla Motors is running short of money and the Dept. of Energy (DOE) is calling on Tesla to repay the loans early. In a blog post today, Elon Musk made his best attempt to clarify the situation, to reiterate that Tesla Motors is about to become cash flow positive, next month, and to explain the circumstance around the repayment terms for the DOE loan.
The blog post began by explaining that the company was in a quiet period required by SEC rules, because of a round of fundraising. That quiet period prevented Tesla's management from speaking about the misconceptions floating in the press. Further, because prospectuses are required to spell out all known risk factors, even the highly unlikely ones, Musk says they "described a relatively pessimistic scenario for Tesla, which was incorrectly interpreted by some to be what we thought was the most likely scenario."
At the June shareholders meeting, Musk claimed the company would become "cash flow positive" by 2013. How? Because of Tesla Model S sales. By the end of 2013 the sales projections are 25,000 units of the Model S. Musk claimed that Tesla would become cash flow positive on only 8,000 unit sales, and that at that time the company had orders in hand for 10,000 units. In late August, Musk reiterated the claim to a Dow Jones reporter with largely the same line of reasoning.
Musk's blog post today now claims "we expect Tesla to become cash flow positive at the end of next month." That is, the end of November 2012, which is a bit ahead of the previous prediction.
As for the round of financing, Musk talks about having a "global supply chain" that is susceptible to "floods, fires, hurricanes or earthquakes" which can cause "supply chain interruptions and halt production" and that raising more capital would "protect against such an event." The company had just gone through such a crisis, with a supplier whose factory flooded, causing production delays.