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Will Elon Musk's Financial Problems Prevent Tesla from Going Public?

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On: Mon, Jun 7, 2010 at 2:45PM | By: Sherry Christiansen


Will Elon Musk's Financial Problems Prevent Tesla from Going Public?

Elon Musk, founder of Tesla Motors, is reportedly broke. According to a recent court filing in connection with his divorce case, Musk ran out of cash last year and has been living off of personal loans borrowed from friends since October of last year—even though he is spending $200,000 per month and bringing in $8,255 in monthly personal income. The question is: will the divorce between Elon and his estranged wife interfere with Tesla's plans to go public in the near future?

"About four months ago, I ran out of cash," Musk wrote in a court filing with the Superior Court of Los Angeles on Feb. 23, released by VentureBeat.com on Friday. "I had to obtain emergency loans from personal friends. These loans are the exclusive source of cash I have. If I did not take these loans, I would have no liquid assets left."

In addition Musk had this to say about a $1 million loan he made to Tesla; "I did not and could not actually receive this money from Tesla," he wrote. "It was converted to equity. This will cause me to pay taxes even though I didn't receive actual cash income, further straining my cash resources."

The Tesla Motor Company is not in much better financial shape than its founder; the company has been operating on a $465 million loan from the Department of Energy and it shows a $30 million loss for the first quarter.

 In a recent filing with U.S. securities regulators, the new California start-up company attempted to separate itself from the much publicized divorce between Elon and his wife. In the Securities and Exchange Commission filing, the company was quoted as saying; “We do not believe that Mr. Musk’s personal financial situation has any impact on us,” seeing that the company does not plan to have to rely on Musk’s finances again in the foreseeable future.

The concern is that if Musk’s estranged wife is awarded too much of the company’s stock (she is seeking 10%) in the divorce it could impact Tesla’s capability to retaining the U.S. DoE funds (totaling $465 million).

The solution is obviously for the company to go public, but that doesn’t happen instantly and in the meantime Tesla has committed to paying $42 million to purchase the NUMMI plant in Freemont so they can partner up with Toyota to build electric cars. Toyota has agreed to pay Tesla $50 million but notuntil it completes an initial public offering.




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