Tesla’s Elon Musk defends production delays, capital raise

Tesla CEO Elon Musk took to his blog Wednesday to respond to any negative publicity he felt had arisen in the wake of Tesla’s decision to raise capital combined with the fact that it’s looking like the company’s not going to hit its 5,000 car target for 2012.

Tesla plans to raise $221 million by selling 6.92 million shares at $28.25 a piece, a slight discount to where the stock is publicly trading right now. Musk will personally purchase about a million worth of stock during the offering. News of the secondary offering didn’t rattle the market much, even though investors don’t typically love secondaries since they increase the size of the float and often lower the per share price.

On his blog Musk referenced the fact that Tesla would be cash flow positive by the end of November and that the raise is an insurance policy against something unforeseen like a supplier problem or a natural disaster, which would slow production. He wanted the message to be clear that Tesla doesn’t “need” the money but that it’s nice to have. I’d add that it’s also the best time for Tesla to raise money, now when investors are bullish, the share price is strong, and all signs are headed toward profitability in 2013. Once the disaster has occurred, well, that’s the wrong time to raise money.

In terms of the production delay, it’s a delay because Tesla has been so open about its delivery targets for this year and next. What I really want to know is what the cancellation rate on reservations is and whether it’s increasing or decreasing. I don’t care how many cars Tesla is making. I care if its customers are starting to tire of waiting for the long awaited Model S.

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Adam Lesser

Cleantech Curator Gigaom Research

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