1

1he 1esla MoLor Company was founded ln 2003 by a group of Slllcon valley englneers
(1esla MoLors, lnc., 2013). 1esla's headquarLers are locaLed ln alo AlLo, CA ln Lhe
hearL of Slllcon valley and currenLly employ over 2000 people (1esla MoLors, lnc.,
2013). 1he organlzers of Lhe company chose Lhls locauon because of Lhe close
proxlmlLy Lo oLher Lechnologlcally lnnovauve companles and Lhe ablllLy Lo work wlLh
Lhese organlzauons Lo creaLe a Lechnologlcally advanced vehlcle (1esla MoLors, lnc.,
2013). 1he goal when Lhey sLarLed Lhe company was Lo acceleraLe Lhe world's
Lransluon Lo elecLrlc moblllLy wlLh aordable, fun Lo drlve, and envlronmenLally
frlendly elecLrlc cars (1esla MoLors, lnc., 2013). ln 2008 Lhe 1esla 8oadsLer, Lhe
company's rsL elecLrlc car, was lnLroduced Lo Lhe markeL and Lhe company has
grown conslderably slnce Lhen. CurrenLly Lhere are 1esla 8oadsLers ln more Lhan 37
dlerenL counLrles and Lhe organlzauon has locauons for servlce and sales ln 31
nauons (1esla MoLors, lnc., 2013). 1esla MoLors ls run by CLC Llon Musk, who works
closely wlLh an execuuve Leam ln all aspecLs of deslgn and developmenL of Lhe
company's vehlcles. 1esla became a publlcally Lraded company on Lhe nASuAC sLock
exchange ln 2010 when Lhe company launched an lnlual publlc oerlng of Lhe sLock aL
$17 a share (1esla MoLors, lnc., 2013).
2
CLC Llon Musk was Lhe prlnclpal founder of Lhe 1esla MoLor Company when Lhe
company was founded ln 2003 (1esla MoLors, lnc., 2013). 8efore Musk goL hls sLarL ln
Lhe car lndusLry, he was lnvolved ln many oLher very successful organlzauons. Pe co-
founded ayal, Lhe world's leadlng lnLerneL paymenL sysLem, and has been an
execuuve ln companles such as Spacex, SolarClLy, and Zlp2 (1esla MoLors, lnc., 2013).
Musk's passlon for Lechnology and sclence pushed hlm Lo sLarL 1esla MoLor company
Lo Lry and creaLe a fuLure full of susLalnable energy vehlcles (1esla MoLors, lnc., 2013).
Musk has broughL a vasL amounL of englneerlng and buslness experlence Lo 1esla and
ls Lhe prlnclpal nancler of Lhe organlzauon (1esla MoLors, lnc., 2013). As Lhe CLC of
1esla, Musk has worked closely wlLh Lhe oLher execuuves on Lhe producL
developmenL and deslgn of each car slnce Lhe sLarL of Lhe organlzauon (1esla MoLors,
lnc., 2013). Along wlLh Lhe 8oard of ulrecLors, Musk oversees Lhe managemenL and
dlrecuon of Lhe organlzauon and looks ouL for Lhe besL lnLeresL of Lhe company. 1he
board ls also responslble for ensurlng Lhe company ls ln compllance wlLh governlng
laws and regulauons (1esla MoLors, lnc., 2013).
3
1esla has Lhe goal of lessenlng Lhe global dependence on peLroleum-based producLs
for personal LransporLauon. 1he company lnLends Lo achleve Lhls goal by creaung
elecLrlc vehlcles LhaL reduce or ellmlnaLe Lhe need for fossll fuels (1esla MoLors, lnc.,
2013). 1esla's fully elecLrlc cars produce less greenhouse gases and polluLanLs Lhan
any oLher vehlcle LhaL ls for sale on Lhe markeL Loday (1esla MoLors, lnc., 2013). 1he
company has been able Lo achleve Lhls goal because Lhe fully elecLrlc bauery
produces no emlsslons of any klnd (1esla MoLors, lnc., 2013). AlLhough Lhe bauery
musL be recharged from an exLernal power source, on average Lhe amounL of
polluuon creaLed from Lhls process ls 1/3
rd
of any oLher alLernauve fuel or hybrld
vehlcle (1esla MoLors, lnc., 2013). 1esla also oers a solar powered phoLovolLalc cell
LhaL can be lnsLalled on Lhe roof of Lhe vehlcle Lo charge Lhe lnLernal bauery. When a
person drlves less Lhan 330 mlles per week Lhey are able Lo compleLely ellmlnaLe Lhe
need for any oLher power source besldes Lhe solar cell, maklng Lhelr carbon fooLprlnL
zero (1esla MoLors, lnc., 2013). 1he only way 1esla can achleve Lhelr long Lerm goal of
ellmlnaung Lhe need for fossll fuels ls Lhough Lhe use of cumng edge Lechnology
(1esla MoLors, lnc., 2013). 1esla MoLors ls commlued Lo Lechnology and ls consLanLly
lnnovaung Lo creaLe Lhe mosL emclenL vehlcles on Lhe road. ln facL, Lhe car ls llnked
Lo Lhe company headquarLers and ls rouunely updaLed Lo lmprove lLs operauon and
emclency (1esla MoLors, lnc., 2013). 1hls emphasls on Lechnology has produced Lhe
unquesuonable mosL energy emclenL and clean burnlng car on Lhe markeL.
4
1esla moLors had Lhelr sLrongesL quarLer ever ln Lhe 3
rd
quarLer of 2013 (1esla MoLors,
lnc., 2013). 1he company's gross proL margln lncreased 21 from Lhe 2
nd
quarLer of
2013 and has grown every quarLer slnce Lhe company was founded (1esla MoLors,
lnc., 2013). CuarLerly numbers showed a neL lncome of $16 mllllon or roughly $.12
per share aL Lhe currenL sLock prlce (1esla MoLors, lnc., 2013). uesplLe Lhe neL
lncome and Lhe lncrease ln free cash ows ln Lhe organlzauon, 1esla MoLors does noL
pay ouL a dlvldend Lo sLock holders. lnsLead of provldlng a dlvldend Lhe company
uses all earnlngs Lo nance fuLure growLh and relnvesLs all money Lo keep Lhe
company growlng (1esla MoLors, lnc., 2013). 1hls has resulLed ln sLeady growLh slnce
Lhe company sLarLed produclng vehlcles and a sLep ln Lhe rlghL dlrecuon Lowards Lhelr
ulumaLe goal of movlng Lhe world Lowards aordable and wldely avallable elecLrlc
LransporLauon. CLC Musk belleves LhaL by relnvesung ln Lhe organlzauon Lhey wlll be
able Lo make Lechnologlcal and producuon advances whlch wlll resulL ln 1esla models
cosung roughly x Lhe prlce of Lhe currenL $80,000 vehlcles Lhey oer (1esla MoLors,
lnc., 2013). ln order for Lhe organlzauon Lo reach Lhls long Lerm goal Lhey musL
conunue Lo grow and expand Lo reach new markeLs. 1esla has slgnlcanLly lmproved
Lhelr cash balances from $49 mllllon Lo LoLal of $796 mllllon ln Lhe 3
rd
quarLer of 2013
(1esla MoLors, lnc., 2013). WlLh Lhe lncreased cash ows Lhere has been a slgnlcanL
lncrease ln Lhe LoLal asseLs of Lhe organlzauon and Lhe neL worLh of Lhe company.
1esla has nearly doubled Lhelr asseL value from $1.14 bllllon aL Lhe end of 2012, Lo
$2.17 bllllon aL Lhe end of SepL ln 2013 (1esla MoLors, lnc., 2013).
3
1esla has grown slgnlcanLly over Lhe pasL year and looks Lo conunue Lhls growLh
over Lhe nexL couple of years. 8evenues have grown from $106 mllllon ln 9 monLhs of
Lhe 2012 scal year Lo over $1.7 bllllon ln Lhe same 9 monLhs ln 2013 (1esla MoLors,
lnc., 2013). 1he company ls expecung Lo produce roughly Lhe same number of
vehlcles ln Lhe 4
Lh
quarLer Lhan lL dld ln Lhe 3
rd
quarLer of 2013, however, Lhe
organlzauon ls expecung Lo have gross margln lmprovemenLs as manufacLurlng cosLs
are reduced and producuon becomes more emclenL (1esla MoLors, lnc., 2013). Aer
a drop ln Lhe pasL year's research and developmenLs budgeL Lhe company ls expecung
Lo lncrease expenses ln LhaL area by nearly 23 as Lhey vamp up work ln Lhe new
models seL Lo release ln Lhe nexL couple of years (1esla MoLors, lnc., 2013). 1esla wlll
also see a slgnlcanL lncrease of 40 ln caplLal expendlLures as more money ls used
Lo lncrease facLory producuon capablllLy as well as lnfrasLrucLure supporL. As
expecLed, wlLh Lhe conunued growLh Lhe organlzauon has seen lncreases ln boLh
xed and varlable cosLs and Lhe company ls auempung Lo keep cosLs under conLrol as
Lhey grow by lmprovlng emclencles ln processes and producuon (1esla MoLors, lnc.,
2013).
6
Cash ow ls paramounL ln an organlzauon (Keown, Martin, & Petty, 2011). 1hls ls
due Lo Lhe facL LhaL cash ows represenL money LhaL can be spenL, and ls Lhe real
lndlcaLor of Lhe value of an organlzauon (Keown et al., 2011). Whlle many Lhlnk LhaL
proLs drlve Lhe value of an organlzauon, some proLable companles have gone ouL
of buslness because Lhe amounL of cash comlng ln dld noL compare wlLh Lhe amounL
of cash golng ouL (Keown et al., 2011). 1esla has slgnlcanLly lncreased Lhelr cash
ows over Lhe pasL year and has gone from negauve cash ows Lo posluve ones ln
one quarLer (1esla MoLors, lnc., 2013). lurLher analysls ls requlred Lo undersLand
how Lhe organlzauon has had such a slgnlcanL change ln cash ows over Lhe pasL
year and whaL Lhe fuLure may look llke. 1hrough SepL of 2012 1esla had overall
negauve cash ows of $228 mllllon (1esla MoLors, lnc., 2013). A ma[orlLy of Lhelr
posluve cash ows were from nanclng acuvlues and a ma[or source of used cash
was on operaung acuvlues and caplLal expendlLures (1esla MoLors, lnc., 2013). 1he
neL resulL of Lhls cash ow was $403 mllllon of spenL cash durlng Lhe rsL 9 monLhs of
2012 (1esla MoLors, lnc., 2013). Whlle Lhls ls a slgnlcanL amounL of cash belng used
by Lhe organlzauon, Lhese cash ows had a dlrecL lmpacL on Lhe overall posluve free
cash ows Lhe company saw ln Lhe 3
rd
quarLer of Lhls year (1esla MoLors, lnc., 2013).
1esla has used Lhelr cash ows ln 2012 Lo lnvesL ln Lhe fuLure of Lhe organlzauon. 1he
company has gone from Lhe $228 mllllon used ln operauons ln 2012 Lo $128 of cash
provlded by operaung acuvlues ln 2013 (1esla MoLors, lnc., 2013). 1hls galn ln cash
was Lhen used more ln lnvesung acuvlues Lhan whaL had prevlously been Lhe case.
lor Lhe year 1esla has seen nearly Lhree umes Lhe amounL of cash from nanclng
acuvlues Lhan Lhe prevlous year (1esla MoLors, lnc., 2013). Cne of Lhe mosL
lmporLanL lndlcaLors of cash ows ls Lhe free cash ows ln an organlzauon (Keown et
al., 2011). up unul Lhe 3
rd
quarLer of 2013 1esla had never seen a posluve amounL of
free cash ows (1esla MoLors, lnc., 2013). 1hey wenL from a $78 mllllon neL loss ln
Lhe 2
nd
quarLer of 2013 Lo a posluve $23 mllllon Lhe nexL quarLer (1esla MoLors, lnc.,
2013). 1hls ls slgnlcanL because lL Lakes lnLo accounL Lhe cash avallable from
operauons aer Lhe rm had pald for lnvesLmenLs ln worklng caplLal and xed asseLs
(Keown et al., 2011). 1hls free cash ow was Lhen avallable Lo be dlsLrlbuLed Lo Lhe
rm's credlLors and owners (Keown et al., 2011). ln Lhe case of 1esla, lL ls more
money LhaL can be relnvesLed lnLo Lhe organlzauon slnce Lhey do noL pay ouL a
7
Cash and cash equlvalenLs ln 2013 have grow aL a Lremendous raLe when compared
Lo 2012. AL Lhe end of uec 2012 1esla had cash and cash equlvalenLs of $201 mllllon,
Lhrough Lhree quarLers ln 2013 Lhey have almosL four umes more cash and cash
equlvalenLs wlLh $793 mllllon dollars (1esla MoLors, lnc., 2013). 1hey also have less
resLrlcLed cash Lhan Lhe prevlous year and nearly every ma[or lndlcaLor of growLh for
Lhe organlzauon has been posluve (1esla MoLors, lnc., 2013). 1he company has more
money from accounLs recelvable, a larger lnvenLory, and hlgher values of properLy
and equlpmenL (1esla MoLors, lnc., 2013). 1oLal asseLs have doubled ln only nlne
monLhs ln Lhe organlzauon (1esla MoLors, lnc., 2013). 1he lmprovemenLs ln LoLal cash
avallable are a resulL of Lhe nanclng acuvlues of Lhe organlzauon and Lhe subsLanual
amounL of growLh (1esla MoLors, lnc., 2013). 1hls growLh ls a large reason why Lhe
company's sLock prlce has seen such a dramauc lncrease over Lhe pasL year and ls a
Lrue lndlcaLor of Lhe overall growLh of Lhe company.
8
Slnce Lhe lnlual publlc oerlng of 1esla sLock aL $17 ln 2010, Lhe company's sLock
prlces have exploded over Lhe pasL year. Cne year ago Lhe sLock was prlced aL $32.32,
lL currenLly ls selllng aL $121.38 a share on Lhe nASuAC (Yahoo Finance, 2013). 1hls
400 lncrease ln sLock prlce has been fueled by Lhe hlghly popular cars and Lhe
growLh of Lhe company. As noLed before ln Lhe cash ows of Lhe company, 1esla has
slgnlcanLly lncreased Lhe amounL of cash ln Lhe organlzauon ln Lhe pasL year (1esla
MoLors, lnc., 2013). 1hey have gone from negauve cash ows Lo posluve cash on
hand ln Lhe same year and Lhe sLock markeL has reacLed Lo Lhe slgnlcanL amounL of
growLh ln Lhe organlzauon (1esla MoLors, lnc., 2013). 1he company's LoLal asseLs
have doubled ln Lhe pasL year and Lhey have shown lmprovemenLs ln every ma[or
lndlcaLor ued Lo nanclal growLh (1esla MoLors, lnc., 2013). 1hese sLraLospherlc galns
ln sLock prlce have noL come wlLhouL a cosL. Many nanclal experLs have come Lo
quesuon wheLher or noL Lhe sLock has been fueled by speculauon and has ouLpaced
Lhe acLual poLenual of Lhe company. 1hese reduced expecLauons have resulLed ln Lhe
sLock belng labeled as a sLrong buy for Lhe ma[orlLy of Lhls year Lo now belng
suggesLed as a hold by many ma[or nanclal rms (Levin, 2013). Many umes sLock
prlces are measured as a muluple of earnlngs per share, and slnce Lhe company dld
noL posL any earnlngs ln Lhe lasL quarLer some have begun Lo quesuon wheLher or noL
Lhe company wlll be as successful as some Lhlnk. AnoLher reason Lhe sLock has come
down from Lhe hlghs seen ln CcLober of Lhls year ls because of Lhe recenL res Lhe
cars have experlenced aer belng lnvolved ln accldenLs. 1he res and subsequenL
decllnes ln sLock prlce lllusLraLes Lhe power of Lhe consumer and Lhe consumer's
condence ln a producL. Cne of Lhe mosL lmporLanL lndlcaLors of Lhe healLh of Lhe uS
economy ls Lhe consumer condence lndex. 1hls economlc lndlcaLor ls based on Lhe
consumer's condence ln Lhe economy and as a resulL Lhe poLenual for Lhem Lo
spend money versus savlng lL. uesplLe 1esla's hlghesL safeLy raung among any car ln
lLs class, Lhe res have shaken Lhe condence of some consumers and lnvesLors
(Levin, 2013). 1he nauonal Plghway 1ransporLauon AdmlnlsLrauon (nP1SA) ls ln Lhe
process of openlng an lnvesugauon lnLo Lhe car res and many are concerned lL could
lead Lo a cosLly recall Lo x poLenual problems wlLh Lhe vehlcles. 1esla has malnLalned
LhaL Lhe cars are Lhe safesL on Lhe road and LhaL Lhe lnvesugauon wlll solldlfy Lhelr
Lop safeLy spoL. CerLalnly Lhe sLock prlce wlll reacL Lo elLher posluve or negauve news
9
Common sLock holders have Lhe rlghL Lo resldual lncome aer credlLors and preferred
sLock holders have been pald (Keown et al., 2011). Some organlzauons pay Lhese
sLock holders ln Lhe form of dlvldends whlle oLhers, llke 1esla, do noL pay ouL a
dlvldend (Keown et al., 2011). lnsLead of paylng dlvldends Lo lnvesLors, Lhe
organlzauon relles on caplLal galns on Lhe sLock prlces Lo reward lnvesLors. 1esla's
ulumaLe goal ls Lo lnvesL as much money as posslble lnLo research and deslgn Lo drlve
down Lhe cosL of Lhe cars, expand showroom and servlce locauons, and ulumaLely
conunue Lhe growLh of Lhe organlzauon (1esla MoLors, lnc., 2013). Whlle Lhe
organlzauon dld noL posL any earnlngs ln Lhe prevlous quarLer, lL has noL sLopped Lhe
common sLock value from conunulng Lo cllmb. Many lnvesLors have ocked Lo Lhe
sLock because of Lhe growLh of Lhe organlzauon and Lhe fuLure of Lhe clean energy
LransporLauon lndusLry. 1he company has expanded sLore locauons by 20 from
quarLer 2 Lo quarLer 3 of Lhls year and ls bulldlng a neLwork of charge slLes where Lhe
cars can be recharged for free (1esla MoLors, lnc., 2013). 1he demand for Lhe car has
never been hlgher and Lhe company can noL produce enough vehlcles Lo keep up wlLh
orders LhaL lL has recelved (1esla MoLors, lnc., 2013). As a resulL Lhe company has
had muluple common sLock oerlngs Lo ralse caplLal Lo conunue Lhelr expanslon. ln
CcLober of 2012 Lhe company compleLed a publlc sLock oerlng where Lhey sold
almosL 8 mllllon shares of Lhe common sLock Lo Lhe publlc ralslng $221 mllllon dollars
(1esla MoLors, lnc., 2013). Agaln ln May of 2013 Lhe company oered 3.9 mllllon
shares of common sLock Lo Lhe publlc and as a resulL neued over $333 mllllon dollars
(1esla MoLors, lnc., 2013). 1he slgnlcanL dlerence ln amounL of money ralsed ls
due Lo Lhe facL LhaL sLock prlces are nearly ve umes more ln 2013 Lhan Lhey were ln
2012 (1esla MoLors, lnc., 2013). Accordlng Lo Lhe mosL recenL 8-k reporL publlshed by
1esla, Lhey had a neL loss of $38 mllllon dollars (1esla MoLors, lnc., 2013). 1hls neL
loss resulLed ln a $.32 neL loss per common share of sLock whlch was calculaLed by
dlvldlng Lhe neL loss by Lhe welghLed-average shares of common sLock ouLsLandlng
for Lhe perlod (1esla MoLors, lnc., 2013). 1hls was an lncrease from Lhe prevlous
quarLer of $.26 per share loss buL a slgnlcanL lmprovemenL from Lhe prevlous years
$1.03 (1esla MoLors, lnc., 2013). 1hls ls obvlously ln sLark conLrasL Lo Lhe reporLed $.
12 galn per share whlle only conslderlng neL lncome. 1he large lncrease ln Lhe sLock
prlce ls parL of Lhe reason why per share Lhe losses of Lhe organlzauon are smaller
10
Cne of Lhe mosL lmporLanL aspecLs of long Lerm nanclal susLalnablllLy ls Lhe cosL of
caplLal (Keown et al., 2011). Lvery organlzauon musL deLermlne how Lhey wlll ralse
caplLal ln order Lo expand and parL of Lhls process ls undersLandlng how Lhe newly
acqulred debL wlll lmpacL Lhe organlzauon ln Lhe long run (Keown et al., 2011). 1esla
has ralsed caplLal ln a number of ways, Lhrough common and preferred sLock, Lhe
lssuance of converuble noLes, uCL loans, and sLock opuons. As a resulL 1esla's long
Lerm debL LhaL has grown from $401 mllllon Lo $378 mllllon ln Lhe pasL year (1esla
MoLors, lnc., 2013). Cash and cash equlvalenLs are up as a resulL of Lhe lncrease ln
debL and Lhe cash provlded by Lhls nanclng acuvlLy grew a subsLanual amounL from
$163 mllllon ln 2012 Lo $600 mllllon ln 2013 (1esla MoLors, lnc., 2013). 1esla ralsed
over $1 bllllon ln Lhe rsL slx monLhs of Lhe scal year 2013 (1esla MoLors, lnc., 2013).
uslng Lhe caplLal Lhey ralsed Lhrough common sLock oerlngs and converuble senlor
noLes, Lhe company pald o all of Lhe ouLsLandlng ueparLmenL of Lnergy loans (1esla
MoLors, lnc., 2013). 1he organlzauon wlll look Lo conunue Lo ralse caplLal over Lhe
nexL couple of years as Lhey become more proLable and operauons expand
LhroughouL Lhe counLry and worldwlde. arL of Lhls process wlll be ensurlng LhaL Lhey
regulaung Lhe cosL of Lhe caplLal Lhey ralse by uslng converuble senlor noLes Lo hedge
agalnsL any sLock losses (1esla MoLors, lnc., 2013). 1he company wlll conunue Lo use
sLock opuons Lo ralse money as lL ls a dlrecL lnvesLmenL ln Lhe organlzauon and can
provlde a qulck source of nanclng.
11
MosL of Lhe $1 bllllon ralsed for Lhe organlzauon was from 1.3 converuble senlor
noLes whlch neued $648 mllllon for Lhe company (1esla MoLors, lnc., 2013). 1hese
noLes wlll be due ln !une of 2018 and wlll pay ouL $660 mllllon Lo Lhe purchasers aL a
cosL of $12 mllllon debL lssuance Lo Lhe organlzauon (1esla MoLors, lnc., 2013). 1esla
also recognlzed $1.3 mllllon ln lnLeresL relaLed expenses whlch was a resulL of
amoruzed debL lssuance cosL and accrued coupon lnLeresL. 1he noLes wlll be able Lo
be converLed lnLo 8.036 shares of Lhe common sLock based on Lhe markeL prlce of
$124.32 aL Lhe ume Lhe noLes were lssued (1esla MoLors, lnc., 2013). 1he owner of
Lhe debL wlll be able Lo exerclse Lhelr opuon Lo collecL Lhe shares or Lhe guaranLeed
$1,000 prlnclpal of Lhe noLe LhaL was lssued (1esla MoLors, lnc., 2013). 1he
organlzauon also has used Lhelr lnLeresL expense Lo reduce Lhelr Lax burden and
reduce Lhelr Laxable lncome (Keown et al., 2011). As noLed earller, Lhe company has
used a mlx of sLock oerlngs and converuble noLes ln order Lo ralse caplLal.
12
ln accordance wlLh SLC rules Lhe organlzauon has produced a quarLerly reporL whlch
breaks down Lhe nanclal acuvlues of Lhe organlzauon (Keown et al., 2011). ln Lhls
consolldaLed balance sheeL lL ls posslble Lo evaluaLe Lhe overall book value of Lhe
organlzauon (Keown et al., 2011). 1he company has nearly quadrupled ln cash and
cash equlvalenLs ln Lhe pasL slx monLhs from $201 mllllon Lo $746 mllllon (1esla
MoLors, lnc., 2013). 1he lncrease ln sLock prlce, common sLock oerlngs, converuble
noLes, and greaLer producuon are all vlLal players ln Lhls dramauc lncrease (1esla
MoLors, lnc., 2013). lncludlng Lhe company's resLrlcLed cash, accounLs recelvable,
lnvenLory, and addluonal asseLs Lhe company has LoLal asseLs aL $1.88 bllllon whlch ls
up nearly 70 ln 6 monLhs from Lhe end of lasL year (1esla MoLors, lnc., 2013). 1he
company ls showlng slgnlcanLly hlgher llablllues due Lo Lhe lncrease ln long Lerm
debL and caplLal lease obllgauons. 1he lncrease ln asseLs ls also a dlrecL resulL of Lhe
lncrease ln sales and producuon of Lhe vehlcles (1esla MoLors, lnc., 2013). 1he
company has gone from produclng 400 vehlcles per week ln Lhe second quarLer Lo
300 ln Lhe currenL quarLer (1esla MoLors, lnc., 2013). As a resulL of Lhe lncrease
producuon auLomouve sales have lncrease from $22 mllllon ln 2012 Lo $401 mllllon ln
2013 aL Lhe end of each scal year's second quarLer (1esla MoLors, lnc., 2013).
lncreased sales have dramaucally reduced Lhe neL loss of Lhe organlzauon from $103
mllllon Lo $30 mllllon ln Lhe same ume frame (1esla MoLors, lnc., 2013). Plgher sLock
prlces have resulLed ln hlgher equlLy held by Lhe sLockholders of Lhe company. 1he
more sLock LhaL ls oered and Lhe hlgher Lhe prlce per share Lhe company wlll
conunue Lo lncrease Lhe equlLy owned by Lhe publlc sLock holders (Keown et al.,
2011). lncreased producuon and lncrease sales wlll conunue Lo lmprove Lhe book
value of Lhe organlzauon, Lhe company also faces challenges wlLh Lhe recenL drop ln
sLock prlce whlch would resulL ln a lower amounL of equlLy ln Lhe organlzauon due Lo
lower sLock prlces (1esla MoLors, lnc., 2013).
13
1esla MoLors faces a number of challenges headlng lnLo Lhe fuLure. 1he company has
lncreased producuon every quarLer slnce lncepuon and ls now Largeung new markeLs
ln boLh Lurope and Asla (1esla MoLors, lnc., 2013). WlLh Lhese new markeLs come
new challenges Lhe company has noL faced before. 1hey musL be able Lo dellver Lhe
number of cars Lhey promlsed on ume Lo cusLomers all around Lhe world (1esla
MoLors, lnc., 2013). Any sorL of economlc slowdown would also dramaucally aecL
1esla llke all oLher car manufacLurers (1esla MoLors, lnc., 2013). 1esla currenLly
produces cars LhaL are LargeLed Lowards people wlLh hlgher lncomes, lf an economlc
slowdown were Lo Lake place, Lhe number of people Lhe company could sell Lhe cars
Lo would dramaucally decrease. uue Lo Lhe hlgh end feaLures on Lhe vehlcles and Lhe
facL LhaL Lhe company ls new Lo Lhe markeLplace Lhey have noL been able Lo dlverslfy
suppllers Lo prevenL posslbly supply dlsrupuons (1esla MoLors, lnc., 2013). Any sorL of
supply chaln problems would slgnlcanLly lmpacL Lhe ablllLy of Lhe company Lo
compleLe vehlcles on ume. 1hls supply chaln dlsrupuon would dramaucally alLer Lhe
fuLure proLablllLy of Lhe organlzauon and hurL publlc percepuon (1esla MoLors, lnc.,
2013). Alongslde Lhese challenges are unlque challenges LhaL only 1esla wlll face due
Lo Lhe producL Lhey produce. 1hey are Lhe only fully elecLrlc car company ln Lhe
world, and as a resulL musL slnglehandedly deal wlLh Lhe challenges of promoung a
new producL Lo a markeL full of companles LhaL are well esLabllshed and have been
around for decades (1esla MoLors, lnc., 2013). 1he recenL res Lhe cars have had and
subsequenL sLock prlce drop ls a LesLamenL Lo Lhe fraglle publlc percepuon of Lhe
elecLrlc cars (1esla MoLors, lnc., 2013). Coupled wlLh Lhe percepuon LhaL Lhe cars wlll
llmlL owner's freedom due Lo Lhe range of Lhe bauerles, Lhe company has Lo reach
ouL Lo Lhe publlc and bulld a posluve lmage Lhrough currenL owners experlences
(1esla MoLors, lnc., 2013). 1esla musL also work on bulldlng an lnfrasLrucLure LhaL can
supporL Lhe elecLrlc cars so poLenual owners do noL feel handcued by Lhe range and
ablllLy Lo recharge Lhe vehlcles bauery (1esla MoLors, lnc., 2013).
14
1esla's sLock prlces have ranged from $32.30 Lo $194.30 over Lhe pasL 32 weeks . 1hls
volaullLy ln sLock prlce has Lhe poLenual Lo boLh slgnlcanLly help or hurL Lhe
company as lL moves forward. 1he varlances ln sLock prlces can hurL consumer
condence and drlve away fuLure lnvesLors as a resulL (1esla MoLors, lnc., 2013).
Coupled wlLh Lhe facL LhaL Lhe company ls noL plannlng on oerlng dlvldends ln Lhe
fuLure lnvesLors musL rely on lncrease ln sLock prlces Lo obLaln any sorL of proL from
lnvesung ln Lhe company (1esla MoLors, lnc., 2013). ln order Lo conunue Lo grow
1esla has Laken on a slgnlcanL amounL of debL. ln order Lo pay o Lhe debL Lhey
currenLly have ln Lhe form of senlor noLes, Lhey wlll requlre a large amounL of cash on
hand (1esla MoLors, lnc., 2013). lf producuon or sales slow down and Lhe company ls
noL able Lo reach proLablllLy paylng o Lhe debL could become a challenge (1esla
MoLors, lnc., 2013). 1hls problem would be exacerbaLed by a low sLock prlce and Lhe
company would have posslbly have Lrouble ralslng enough cash Lo purchase all Lhe
noLes wlLh Lhe accrued lnLeresL (1esla MoLors, lnc., 2013). 1he fuLure of Lhe company
wlll be hlghly conungenL on Lhe growLh of Lhe company.
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