Less Than $7,600, No Sooner Than 4th Qtr 2016

[CompTrex]

I've seen the headlines that Tesla looses money on every car. What I haven't seen (in the mass media) is how they (the media) determined that. Tesla is developing two new cars and their battery mega factory. Those expenses are hitting the bottom line that also includes revenue from selling the current car. Plus they're helping build out the charging infrastructure (they installed a new quick charge station on an organic farm near me this summer). The company as a whole having a net loss wouldn't surprise me, and it would be easy for headline writers to convert that into 'loss per car'. I have not seen a break down that proves they're actually loosing money on every car they sell.

I thought that this was where the selling of CAFE credits comes in. That's how they make their profit.

 

[Rob Croson]

the ATVM says its loans are not to be made to companies that aren't otherwise and already financially viable.

According to the offering, page 22: "...ATVM borrowers must remain financially viable over the life of the loan without the receipt of additional federal funding associated with the proposed project."

You forgot the part that says "...without the receipt of additional federal funding ..." IOW: Once they receive the ATVM money, they have to be financially viable without further government loans.

 

[Rickb]

And people wonder how we get income inequality...
Let's lend money to people that don't need it.

Keep in mind the primary purpose of the DOE Alternative Energy Program. It's not a Small Business Loan.

 

[Rickb]

Elon Musk - not Elio Motors....LOL

Thanks for that very funny clarification.

 

[Rob Croson]

At the risk of cross posting, there is news that affects EM's situation. It looks like RACER trust is not about to foreclose on EM due to the latest delay.

There was never a danger that Racer Trust was going to foreclose. (Aside from the fact that they couldn't "foreclose", as there is no mortgage involved.) As always: Follow the money.

From Page 18 of the offering statement:

"The [Shreveport assembly plant] was one of the facilities transferred to the Revitalizing Auto Communities Environmental Response (“Racer”) Trust in March 2011, which was created to redevelop and sell 89 former GM facilities. The facility was purchased by us from the Racer Trust, with all of the GM manufacturing equipment in place, for $3 million in cash and a $23 million promissory note. The real property was purchased by an affiliate of Industrial Realty Group, LLC (“IRG”), the Shreveport Business Park, LLC, for $7.5 million. IRG and Shreveport Business Park, LLC are entities owned and controlled by Stuart Lichter, one of our directors and significant shareholders."

Once again, the name of Stuart Lichter comes up. He owns the "real property" in Shreveport via his ownership of Shreveport Business Park, LLC. Elio Motors owes $23 million to Racer Trust for the part they bought. (FWIW - I'm not entirely clear as to exactly who owns what here. SBP owns the land and building, but EM owns everything in it? In any case, it's clear who owes how much to whom.)

Also from Page 18 of the offering: "The note to Racer Trust is secured by a lien subordinated to the lien of CH Capital Lending on certain machinery and equipment and is non-interest bearing. The note, as amended, requires monthly principal payments of $173,500 from January 1, 2016 through July 1, 2017, with the remaining outstanding principal due on July 1, 2017."

This is key: The note to Racer Trust, in the value of $9,850,000, is subordinated to the lien held by CH Capital Lending. "Subordinated to" means that the lien held by CH Capital Lending gets paid *before* Racer Trust. Racer Trust won't get a single dollar from the liquidation of Elio Motors until the entire value of that $9,850,000 lien gets paid out to CH Capital Lending. Then whatever is left can be split out to Racer Trust and the other creditors. (Or whatever other order, but in any case, CH Capital gets their $10m before Racer Trust sees the first red cent.)

From page F3 of the offering, EM has <$1m in "current assets". I believe that is cash in hand. The rest of their book value, just over $33m, is in refundable customer deposits and the manufacturing equipment. Their lease on the property is valued at $7.2m, but it's countered by the fact that they owe $7.5m for it. The customer deposits would have to go back, and the manufacturing equipment may or may not be able to be liquidated, but probably at a small fraction of its total value. Let's give it a generous 50% cash value against it's full book value. (From page F-11 of the offering: "The Company plans to dispose of excess or not strategically useful machinery and equipment in future years. Management has identified $14,875,319 of machinery and equipment identified for disposal at December 31, 2014. ... the sale is not probable and expected to be completed within one year." The equipment isn't in high demand, so probably wouldn't be bale to be liquidated anywhere near full value. They can't sell the stuffy they have been trying to sell for nearly a year already.)

That gives us the following:

Liquid assets: ~$1m
Machinery (at 50% discount) $10m

...and that's about it.

So if Racer Trust were to somehow try to call in their note (Which I don't think they could do anyway, since EM is not supposed to even start paying off the note until Jan 2016. ("The note, as amended, requires monthly principal payments of $173,500 from January 1, 2016...")), they wouldn't get s**t.

No one is going to pull out now. The company has no assets to liquidate. They only have two things of value: A bunch of manufacturing equipment that is of questionable liquidation value, despite its paper value, the prospect of actually building and selling cars. If anyone tries to pull out and sink the company, then everyone involved would only recover a tiny fraction of what they invested. And they have to have known this from the start.


A sidenote, in regards to the DoE loan, Page 22 of the offering provides this insight:
"As of January 15, 2015, we have received information from the Department of Energy that we have achieved the technical criteria for the loan and that remaining due diligence is pending upon confirmation of our financial backing, which includes this offering."

That makes it sound like the DoE is, at least in part, waiting to see the results of the A+ stock sales before moving forward. Makes sense to me. Financial backing could include both the continued growth of reservations, which demonstrates continued and growing public interest in their product, and the purchase of stock by the public, indicating public interest in the success of the company and a willingness to put money on the line for it. The combination of reservations, private placement investing, and successful public stock offering helps build the picture of financial viability. A successful A+ campaign could go a long way toward convincing the DoE to approve the loan.

 

[CompTrex]

Keep in mind the primary purpose of the DOE Alternative Energy Program. It's not a Small Business Loan.

So what is the purpose if not to incentivize people who normally wouldn't have the means to think outside-the-box and to bring good energy reducing ideas to market?

 

[bowers baldwin]

Two words: Solyndra/Fisker . The government has been burned too many times lending money to shaky companies. EM is as shaky and speculative as it gets - like it or not..... It is a political PR nightmare when companies are gifted public taxpayer money and never produce anything. I guess we are seeing why it is hard to build a car company from the ground up. It usually takes a billionaire like Elon Musk - not a guy that was working as a roofer. I am rooting for him in a Horatio Alger sort of way but this is an uphill road. I have $1100 skin in the game so I hope for good news but rarely even think about EM these days and will not throw more good money after bad. The next 3-4 months will be interesting. I suspect this affair will play out by January month end at the latest.

Plagirized form the internet:


According to a report by the Department of Energy, interest payments to the government from projects funded by the Loan Programs Office were $810 million as of September - higher than the $780 million in losses from loans it sustained from startups including Fisker Automotive, Abound Solar and Solyndra, which went bankrupt after receiving large government loans intended to help them bring their advanced green technologies to market.

Still, the federal loans program is a success for taxpayers, judging by the numbers in the new report, the DOE said. After Solyndra's 2011 collapse, the program was sharply criticized by Republican lawmakers as a waste of public money and a fountain of cronyism. The outcries mounted as others in the program failed, and the DOE issued no new loans between late 2011 and this year.

"Taxpayers are not only benefiting from some of the world's most innovative energy projects... but these projects are making good on their loan repayments," Peter Davidson, executive director of the Loan Programs Office, said in an interview on Wednesday. Davidson took over the loan program in May of 2013.

 

[Rickb]

According to the offering, page 22: "...ATVM borrowers must remain financially viable over the life of the loan without the receipt of additional federal funding associated with the proposed project."

You forgot the part that says "...without the receipt of additional federal funding ..." IOW: Once they receive the ATVM money, they have to be financially viable without further government loans.

That my friend are the key points to consider in determining whether or not EM is pre-loan and post-loan financially viable by the DOE. EM currently has no income streaming in and is operating only on high interest loan venture capital.

I speculate that if the long shot ATVM Loan was/is approved that much of that funding source would go to repay the venture capital investors with remaining funds earmarked for production needs.

 

[Rickb]

So what is the purpose if not to incentivize people who normally wouldn't have the means to think outside-the-box and to bring good energy reducing ideas to market?

Providing incentive to develop alternative energy options is exactly the purpose, but the qualifications must be met in the process of the loan application. It's not designed to gamble with taxpayer money. Gambling on alternative energy vehicles should be private venture and crowdsource funded not taxpayer source funded.

 

[CompTrex]

Providing incentive to develop alternative energy options is excatly the purpose, but the qualifications must be met in the process of the loan application. It's not designed to gamble with taxpayer money. Gambling on alternative energy vehicles should be private venture and crowdsource funded not taxpayer source funded.

100% agree.
Though qualifications of, <paraphrase> you are qualified to receive this loan if you don't actually need this loan</paraphrase> seem very government-esque.

I'm not a fan of this program in the first place. That being said... I sure hope that Elio gets the loan guarantee.