The Tesla Story Gets Curiouser And Curiouser -- June 22, 2016; Some Think Tesla Shares Could Rise 30-Fold

Updates

August 21, 2017: Tesla's junk bond issue already trading underwater -- MarketWatch.  But isn't that why they're called junk bonds. Seems like a lot of risk for 5.3% yield.

August 7, 2017: Tesla to issue $1.5 billion in JUNK bonds.

July 10, 2016: Tesla's losses are horrendous. 

Later, 7:26 p.m. Central Time: a reader sent me this link regarding battery technology. He's very knowledgeable; lots of experience. Something tells me we are all going to learn a lot more about batteries over the next decade. 

Later, 2:58 p.m. Central Time: I think from almost the "very beginning," I always felt Tesla was a battery company disguised as an automobile company. I'm not going to look for the first time I posted that, but here is a quote from June 19, 2015:

For newbies: my world view of Tesla is that it is a battery company disguised as an automobile company surviving on tax breaks, subsidies, and grants. Just days after borrowing another $750 million (from seven banks, no less), Tesla "bagged" another $15 million in tax credits from the state of California.

Building the "gigafactory" was perhaps the piece of evidence labeled #1. Now, with the purchase of SolarCity by Tesla, we have a piece of evidence that can be labeled #2.
 

Original Post

 

It must be the "silly season" as Hillary would say. Or two adult men have just gone bonkers.

I wasn't going to bring up President Obama and his recent comments on global warming (even environmentalists moved on from "global warming" years ago and are now talking about "climate change"). But when President Obama said that rising oceans could flood/drown the Statue of Liberty, I knew a) he was going bonkers; b) he was getting desperate; or, c) it was simply the "silly season" that we are in.

But, now, I at least have someone with whom to compare MuskMelon's most recent remarks. Less than 24 hours after entering into perhaps the worse deal for shareholders since the Indians sold Manhattan, MuskMelon tells his investors to expect a trillion-dollar Tesla.

Tesla's market cap today, after the announcement, is $29 billion.

145 million shares outstanding x $200 = $29,000 million or $29 billion. Total debt is $3.4 billion. So, enterprise value is about $32 billion. Yahoo!Finance says the enterprise value for Tesla is slightly over $31 billion.

So, to get to a trillion-dollar enterprise value, leaving debt as it, .... $1,000,000,000,000 - $3,400,000,000 = 996,600,000,000 / 145 million = $6,873/share.

The WSJ says to be a trillion-dollar company, TSLA shares would "require a more than 30-fold increase from today's value."  $200 x 30 = $6,000.

Yup, the numbers work almost perfectly.

I didn't see the MuskMelon speech. But on the surface, the first question one must ask: does it bother the SEC that a CEO is telling his investors they should expect their shares to increase in value from under $200/share to more than $6,000/share?

I don't know. But it seems if Harold Hamm did that.... well, whatever.

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Batteries

I've been following the battery technology for quite some time.

There are four reasons why the battery story intrigues. As Apple Fanboy #3 I remember well the number of times Steve Jobs lamented how much more he could do if he had a battery.

The second reason, of course is Tesla.

The third reason: my son-in-law used to work for a battery technology upstart. At best it is still an upstart; I don't know if it's still around.

The fourth reason: during the four years we were in Boston, we were just down the street from A123 and I followed battery research with interest.

Now this update from Bloomberg. First of all, the Tesla update from the article:

Cheap and reliable energy storage is central to the idea of an off-the-grid, solar-powered household. Such a home needs energy at night, when the sun isn't shining: It has fridges, air conditioners and other appliances running, and a Tesla charging in the garage. So it needs a good battery, and Tesla's Powerwall doesn't necessarily fit the bill -- if only because the cost of the energy it supplies, including amortization, is higher than grid prices.

Because of this, and given the high price of Tesla cars , the lifestyle on offer is an expensive statement. In terms of cost and convenience, it's not competitive with the traditional grid-and-fossil fuel model.

Tesla has killed off the more powerful version of the Powerwall due to low demand, and even Solar City has taken some time to figure out how to make its photovoltaic systems work with the battery.

Tesla is putting out a new version of Powerwall this year, but it can only be incrementally better than the previous one: Musk doesn't appear to believe in any battery technology other than the one that powers Tesla cars  -  the old lithium-ion battery with a liquid electrolyte, in use since the early 1990s.

Tesla's "gigafactory":

That's what Tesla's "Gigafactory" in Nevada will be turning out, too, when it comes online. Tesla is working on improving it, by using more and more silicon, rather than graphite, in the lithium-ion cell's anode to increase the cell's charge capacity. That is a promising path, but battery tech is such a hot field today that hundreds of teams are working on different approaches to making lighter, cheaper, more capacious batteries -- and one or several of these may turn out to be more promising.

Others:

• Nissan: similar to Tesla's approach; new battery technology for the Leaf would double the driving distance to more than 200 miles, in line with Tesla's range
• Toyota and VW: appear to be working on solid-state technology that would replace the liquid electrolyte with crystal materials.
• VW: bought a share in battery tech startup QuantumScape, in 2014; has announced a battery factory larger than Tesla's, suggesting VW is confident with what it has
• Dyson: acquired a battery start-up called Shakti3 last year; promises to deliver solid-state batteries with double the energy density at one-fifth the cost of current technology

Other technology:

• "aluminum-graphite dual-ion battery": China
• sodium-ion batteries: UK company Faradion
• lithium-air batteries being worked on by numerous companies
• wide range of other exotic technologies

Something could be announced overnight, but it would be a huge surprise to me if there is an announcement of any disruptive technology any time soon. Companies with very, very deep pockets, -- most notably Toyota, Apple, and Sony -- have been working on the battery problem for decades, and there hasn't been a whole of improvement.

So, we'll see. I'm not holding my breath.