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Tesla Motors Bailout ?

Posted By Barry Ritholtz On November 30, 2008 @ 6:19 am In Bailouts,Technology,Venture Capital | Comments Disabled

[1]Guess who is the latest firm seeking to jump on the Bailout gravy train [2]?

Electric car start up Tesla Motors.

“THE Tesla Roadster is an electric car that goes fast, looks sensational and excites envy. The seductive appearance, however, obscures some inconvenient truths: its all-electric technology remains woefully immature and don’t-even-ask expensive. If enough billionaires step forward to inject additional capital to keep the doors of its manufacturer, Tesla Motors, open, I’m happy for all parties.

If investors pass up the opportunity, however, why should taxpayers fork over the capital that Tesla needs? The Roadster is not much more than a functioning concept car that sells for $109,000. The company is requesting $400 million in low-interest federal loans as part of the $25 billion loan package for the auto industry passed by Congress last year.

The program is intended to encourage automakers to improve fuel efficiency, but should it be used for a purpose like this, as the 2008 Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act? Can you conceive any way that federal dollars could be put at greater risk — and for no equity in return, keep in mind — to benefit fewer people?

Tesla Motors, a privately held company based in San Carlos, Calif., has spent almost all of the $145 million in capital it has raised to date. It says it will soon receive another round of $40 million from its private investors to sustain operations.”

If the government wants to get into the business of funding start ups for new technologies, that’s an option that should be carefully debated and discussed prior to cash being disbursed. I am not totally against the idea, as there are some worthy technologies that have too long a development period for private equity to wait on.

But an ad hoc series of companies sidling up to the gravy train after private equity has funded them once, and no longer thinks it s a viable business model?

No thanks. . .

>

Source:
Only the Rich Can Afford It. Should Taxpayers Back It? [3]
RANDALL STROSS
NYT, November 28, 2008

http://www.nytimes.com/2008/11/30/business/30digi.html


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URLs in this post:

[1] Image: http://www.ritholtz.com/blog/wp-content/uploads/2008/11/tesla.jpg

[2] Bailout gravy train: http://www.ritholtz.com/blog/2008/11/bailout-gravy-train/

[3] Only the Rich Can Afford It. Should Taxpayers Back It?: http://www.nytimes.com/2008/11/30/business/30digi.html

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