Elon Musk has magic beans that make the stocks of his companies grow to the sky. What he doesn’t have are profits, but prosperity is just around the corner. From MN Gordon at economicprism.com:
Tesla Motors is up to something remarkable. But what it is, exactly, is unclear. According to the Tesla Motors website, the company’s mission is: to accelerate the world’s transition to sustainable transport.
This all sounds quite brilliant, indeed. Though we must admit, we’re not really sure what sustainable transport is…or why the world’s transition to it should be accelerated. Nonetheless, we’ll assume this is a noble cause.
Tesla’s bold CEO, Elon Musk, certainly thinks it is. In fact, the twelve billion dollar man’s so sure of the endeavor he keeps upping the ante. The company’s now on the hook to expand production of its electric vehicles to 500,000 a year by 2018.
No doubt they’ve got their work cut out for them. Production of 500,000 Tesla’s per year represents an increase of nearly 1,000 percent from the 50,580 electric vehicles delivered last year. Is this even remotely achievable?
Wall Street certainly thinks it is. For while Tesla’s on the hook to deliver 500,000 electric vehicles per year by 2018, the big banks, and the savvy investors they represent, just bought the challenge hook line and sinker.
Today’s Premier Purveyor of Spectacle and Hucksterism
Last week, for example, Tesla Motors raised $1.46 billion in new capital from the sale of its 6.8 million new common stock offering. “The shares were priced at $215 by the lead managers Morgan Stanley, Goldman Sachs, Deutsche Bank, Citigroup, and Bank of America Merrill Lynch,” IFR said.
From what we gather, Tesla had already raised over $4.5 billion through a combination of debt and stock offerings over the last six years. The $1.46 billion addition “will be used mainly to pay for $2.25 billion in capital investments Musk has said will be needed this year to prepare for high-volume production of the Model 3.”
Obviously, Musk takes his company serious. We wouldn’t expect anything less. Yet its noble brilliance may be obscuring what business it is that Tesla’s really in.
The company, if you didn’t know, doesn’t earn a profit. Thus their main activity is the consumption of capital. Investors with soft brains and warm hearts give Tesla money and the company devours it. By this we can make some conjectures about what business it is that Tesla’s really in.
For instance, one could easily perceive it’s a business someone like P.T. Barnum – the 19th Century’s premier purveyor of spectacle and hucksterism – could appreciate. In this respect, the business Musk is really in is not sustainable transport after all. Rather it’s the business of separating fools from their money. Without question, like P.T. Barnum, he’s good at it.
To continue reading: How Elon Musk Empowers Fools to Part Ways with Their Money
