“About four months ago, I ran out of cash,” wrote Tesla Motors CEO Elon Musk in a court filing dated February 23, reports VentureBeat. According to documents filed in his divorce case, from ex-wife Justine Musk, he reportedly made $9,551,753 in 2008 and an average of $17.2 million a year from 2005 to 2008. His ex-wife is “seeking a sizable chunk of Musk’s holdings” and is asking the court to nullify her post-nuptial agreement with Musk, which she signed in March 2000.
Tesla is paying Musk to use his private airplane for company trips, according to an IPO filing with the Securities & Exchange Commission (SEC) dated January 29, 2010. An amended IPO filing on March 29 includes justification for paying for Musk to use his own jet. The filing justifies reimbursing Musk by stating that he needs to travel frequently, and commercial flights are not always available. The filing also states that Musk is reimbursed for less than half the operating costs of the jet, and only takes a $1 salary. The company paid $250,000 in 2009 and $110,000 in this year’s first quarter for Musk to use his “private airplane.”
The March 29 filing states that during the first five years of Tesla’s existence, Musk “fully paid for these expenses himself at a cumulative cost in excess of $1 million and has not sought reimbursement.” Tesla’s board members approved paying part of the operating expenses for Musk’s plane “staring in mid-2009” after the Blackstar investment. The reason given is that “Daimler required that he commit considerable additional time to Tesla for an extended period.”
In an amended May 27 IPO filing, Tesla again defends paying for Musk to fly his own jet:
By paying only the variable expenses of Mr. Musk’s private airplane, consistent with the reimbursement policy in place, we will recognize a cost saving as compared to the customary practice for an initial public offering road show, in which an issuer charters a private airplane and pays a much higher rate that implicitly includes the fixed costs as well.
The problem for Tesla is that Musk “ is the lead investor and chief product architect, as well as CEO,” as VentureBeat puts it. Musk still owns about a third of the company, some 81 million shares out of approximately 250 million. Based on Tesla’s filing on January 29, the company “incurred a net loss of approximately $55.7 million for the year ended December 31, 2009 and have incurred net losses of approximately $260.7 million from our inception through December 31, 2009.” The company believes, according to the filing, that it will “continue to incur operating and net losses each quarter until at least the time we begin significant deliveries of the Model S, which is not expected to occur until 2012, or possibly later.” However, Tesla admits that even if it is able to “successfully develop the Model S, there can be no assurance that it will be commercially successful.”
VentureBeat reports that the company “burned through $37 million in cash in the last three months of 2009,” based on Tesla’s May 27 filing. Venture Beat also reports that “Tesla slowed this burn rate in the first quarter of 2010 to $8.4 million, but only by drawing down part of a $465 million loan from the DOE, while reporting a net loss of $29.5 million.” However, VentureBeat points out that Toyota agreed to buy $50 million worth of shares “at the time of Tesla’s initial public offering,” but the company does not yet “have access to that promised cash, and must pay $42 million to buy the NUMMI plant in Fremont, California, from a Toyota-General Motors joint venture.”
Will Musk’s financial problems affect Tesla? What do you think?