Elon Musk's financial woes

Anonim

He wants to go to Mars, revolutionize the railways, dominate the electric car sector. According to some rumors never denied is also the inspiration of the figure of Tony Stark, the billionaire engineer who turns into Iron Man.

It is Elon Musk, the eclectic entrepreneur of Silicon Valley patron of Tesla, SpaceX, of the super maglev train and other "hyper hi-tech" initiatives, such as the one on artificial intelligence.

He is also sincerely convinced that we all live in a kind of matrix, but that's another story

Two bills in Elon's pocket. However, some recent operations announced by Musk have raised doubts about the financial soundness of his empire . The merger between two companies of the group, Tesla and SolarCity, specialized in renewable technologies, ends up under the analysts lens.
According to some, the operation, worth 2.5 billion dollars, would hide an attempt to rescue SolarCity with fresh capital injection, given that the company does not seem to be sailing in good waters.
But even Tesla's accounts do not seem to be in top form: the company has announced that it wants to produce 500, 000 cars a year by 2018, but today more than 80, 000 of them do not come from the Musk workshops. To achieve the goal, huge investments will be necessary and SolarCity does not seem to be able to produce profits.
Cash question. According to the Economist, in 2016 the Elon Musk group will reduce its liquidity by 2.3 billion dollars, which will add up to 6 billion in consolidated debts. And to these must be added the 422 million dollars that Tesla will have to repay to bondholders in the coming weeks.
However, Musk will not fail, at least not in the short term: the 5 billion dollars of liquidity and bank credit never used will guarantee its companies a long operational autonomy.

Tech, but not digital. However, it is clear that the group does not have the high profits and low investments that characterize the hi-tech enterprises of Silicon Valley. Also because, unlike "digital" companies like Facebook, Musk's group produces material goods whose production requires plants, warehouses, raw materials.

If investments continue at this rate, Elon Musk may find himself short of capital within a few years. To solve the problem he will have to turn to the market, selling shares, thus diluting his share of ownership.

The solutions. Alternatively, Musk could decide to reduce investments, but this could negatively affect the value of Tesla's shares which is based on the perhaps too optimistic growth prospects envisaged in recent years.

The blanket, in short, is always short: it is unlikely that Musk will be able to simultaneously produce profits, maintain control of its companies and grow rapidly as it is in its programs.

However, if it succeeds, it will be a success on many fronts: it will demonstrate to the world that even consolidated businesses such as the automotive sector can be renewed by entrepreneurs from other sectors, and that even companies listed on the stock exchange can carry out long-term projects that look a little further than the profits of the next quarter.