Planet Gore: The DOE Restructured Its Loan to Tesla

October 10, 2012 9:40 A.M.
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Imagine that. Weeks to go before the election and the Department of Energy has restructured its $465 million loan to the electric-car company to make sure it didn’t run out of cash. The New York Times reports: (Emphasis mine)

As it ramps up sales of its sleek electric sedan, Tesla doesn’t appear to be much of a loser right now. But a closer look at company’s cash flows suggests it is hardly out of the woods.

For young companies like Tesla, calibrating cash flows is critical. Customer demand may be high for a company’s product, but mistimed spending can lead to a cash crunch. And Tesla has been spending heavily to set up production as well as acquire the parts that make up the new sedan, called the Model S. The specter of cash problems returned last week. The federal government eased terms of its $465 million loan to Tesla to ensure the company didn’t breach key financial hurdles. The company then raised $193 million in a secondary stock offering, easing cash concerns.

This week, Tesla’s chief executive Elon Musk said that he expected the company to become “cash flow positive” at the end of November.

If Tesla does start becoming cash flow positive next month, and doesn’t stop, it certainly would not be a loser. But there are reasons to be skeptical.

First, it seems as if Tesla was running very low on cash in the third quarter. It said that, after the stock offering proceeds and drawing down the last $33 million of the federal loan, it had cash in hand of $293 million at the end of September. Another way of looking at the situation is that Tesla had $67 million of cash before it drew down the loan and did the offering. That’s not a lot for a company that has been consuming $120 million of cash a quarter this year. That figure combines the cash consumed by Tesla’s basic operations, as well as outlays for plant.

Tesla’s CEO has said he raised the $193 million “simply for risk reduction.“

Yeah. It’s called the risk to Obama of Tesla running out of cash right before the election.

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