Updated to reflect Tesla 8-K filing with the SEC and DOE loan repayment. NEW YORK ( TheStreet) -- As Tesla Motors ( TSLA) repays nearly $500 million in government loans, the Elon Musk-founded automaker will be just a prime example of successful government stimulus. Tesla could have been worth a lot more when it comes to the bottom line for taxpayers, even if the government's financial backing may have helped to create the nation's fourth automaker to supplant the Big Three of Ford ( F), General Motors ( GM) and Chrysler, according to Morgan Stanley analysts. When Tesla repaid $465 million in Department of Energy loans nine years ahead of schedule on Wednesday, the company extinguished highly profitable stock warrant contracts the government held in the fast-rising automaker. The government had held 3,085,011 Tesla warrants, some of which Tesla carried an exercise price of $7.54 and some that carry an exercise of price of $8.94 a share. At Tesla's current share price of about $90, those warrants would be in the money by about $250 million, helping the government to recoup any losses in about $30 billion in financing it doled out in the wake of the financial crisis to commercialize the electric car and spur on investment in infrastructure. Late on Wednesday, Tesla said the warrant contracts have expired unexercised in accordance with the terms of its DOE loan grant. Tesla CEO Musk said in a "tweet " Monday that the company would repay the loan after raising about $830 million in private capital through a stock and convertible note offering earlier this month. Musk is investing $100 million in Tesla's capital raise, according to a May 15 company statement. With the warrants expired, only $12 million in interest payments made by Tesla will remain on the government's books for its near half-billion loan. Those loans, made under the DOE's Advanced Technology Vehicle Manufacturing Program (ATVM) were issued at about the government's long-term borrowing rate. In total, Tesla will have provided the government marginal return for a significant outlay made in President Barack Obama's oft-criticized stimulus program. In hindsight, Tesla was clearly worthy of the government's support, especially at a time when private capital for new business was extremely scarce.
The ATVM loans were granted during the Bush administration, but paid out as part of a 2009 stimulus under Obama While little evidence will remain of the government's backing of Tesla, the DOE loan, nonetheless, leaves behind the most exciting new U.S. automaker in over a generation, if not a century. Ford and Nissan were even bigger recipients of DOE loans made under its ATVM program and a Ford executive told TheStreet in April the low-cost financing helped the automaker electrify its fleet and build new plant and equipment.
The question is whether the DOE left big money on the table in its loan to Tesla as some lawmakers try to continue to politicize the government's efforts to grow an electric car market. The DOE, after all, may lose as much as $217 million on loans to Fisker and Vehicle Production Group. Some political ideologues are likely to try and emphasize those companies' struggles over the success of Tesla in criticizing the electric car and Obama's stimulus efforts. The government also has been criticized for the backstop of the nation's largest banks and its direct bailout investment in Fannie Mae ( FNMA), Freddie Mac ( FMCC ), Bank of America ( BAC), Citigroup ( C ) and AIG ( AIG), in addition to a remaining stake in General Motors ( GM). On bank bailouts, Treasury has reported significant profits and it recently booked about $60 billion in revenue from Fannie and Freddie earnings. It remains unclear whether taxpayers will net a direct profit from the government's involvement in the rescue of General Motors. For now, Musk will breathe a sigh of relief that the company has been extricated with ideological debates that consume Washington. The company's stock and convertible debt offering, in concert with an expiration of low-priced DOE warrants also looks like a particularly shareholder friendly deal. Over the long-term, however, Tesla's increasingly likely success raises the question of whether government venture financing, particularly at times when capital is in short order, should contain a profit motive. Warren Buffett of Berkshire Hathaway ( BRK.A) surely would never have cut such a feckless warrant contract. At Berkshire's May 4 shareholder meeting, Buffett said the company will be a source of emergency capital in financial panics, as it was during the crisis. Still, the 'Oracle of Omaha' only recently invested in the resurgent auto industry through a stake in GM shares. Berkshire subsidiary MidAmerican Energy also recently made a flurry of big investments in government financed solar and wind energy developments. In response to a politically charged question at Berkshire's shareholder meeting, Buffett vigorously defended the government's stimulus efforts. -- Written by Antoine Gara in New York Follow @AntoineGara