What's Wrong With Tesla? How Much Time Do You Have?

I’ve been warned before by the B&B not to read too much into the forward-looking statements in SEC filings, especially the ones where companies ruminate over all the things that could still go wrong with their struggling firms. These legal disclosures of worst-case-scenarios often reflect unlikely scenarios and can be downright misleading, so we held off from diving too deep into Tesla’s IPO S-1 filing [complete document here]. Others around the web have jumped in without compunction, and this week has yielded a steady drip of troubling revelations. It’s a wild and woolly collection of issues, but given that people are going to be asked to invest in this nightmare of a company, it’s only fair that we give the grievances an airing.

One serious issue hidden in the forced doom-contemplation exercise is this one, uncovered by Wired Autopia: Tesla doesn’t own the name Tesla in Europe. It has two trademark filings pending, but these

are subject to outstanding opposition proceedings brought by two prior owners of trademarks consisting of the word Tesla

Egads! How did that one slip by Tesla’s leadership? Speaking of which, another worrying issue is the fact that Tesla can’t dump its chief egomaniac officer, Elon Musk, before the Model S goes into production. Wired Autopia teased this nugget out of the S-1 filing, and strangely, it seems that keeping Musk is a condition of Tesla’s DOE loan. Per the S-1:

Our DOE Loan Facility provides that we will be in default under the facility in the event Mr. Musk and certain of his affiliates fail to own, at any time prior to one year after we complete the project relating to the Model S, at least 65% of the capital stock held by Mr. Musk and such affiliates as of the date of the DOE Loan Facility.

This is mainly troubling in the sense that the S-1 reveals Musk “does not devote his full time and attention” to Tesla, a wholly unsurprising disclosure in light of Musk’s other ventures like private space firm start-up Space X. Musk’s history of Nixonian tendencies doesn’t make a strong case for lashing him to the wheel either.

Meanwhile, Wired dug up another interesting bit: Daimler, which invested $50m into Tesla requires Musk to stay in charge until the Model S rolls out, or the end of 2012, whichever comes first (bets, anyone?). Moreover, Daimler’s investment fund Blackstar enjoys

a right of notice on any acquisition proposal we receive for which we determine to engage in further discussions with a potential acquiror or otherwise pursue. Blackstar then has a right, within a specified time period, to submit a competing acquisition proposal.

And yet, Gawker’s Valleywag suggests that Google could be moving to rescue Tesla through some convoluted financial manouvering. This would be the final nail in Tesla’s coffin, proving once and for all that it’s a Silicon Valley toy company (the alleged Google front is also investing in a zeppelin company) rather than the world-changing automaker Musk has thus far touted it as.

A Google-backed buyer is possible in the sense that Daimler is developing its own battery thermal management system and has other, bigger irons in the battery-supplier fire. Besides, Tesla’s deal was only to supply drivetrain components for an EV version of the dead-in-the-water Smart. In short, the only OEM to touch Tesla with a 50-foot pole has largely moved on. Meanwhile, BMW is showing Daimler how the EV-development game is played, getting overenthusiastic early-adopters to shell out $850 per month for the right to be guinea pigs for its MINI E development. Not only is this a smarter model than investing in start-ups like Tesla, it also soaks up the rather limited EV-at-any-price demand that might otherwise spend their money at Tesla.

All in all, the signs don’t look good.