Firms that burn up $1bn a year are sexy but statistically doomed
Five outliers - Chesapeake Energy, Netflix, Nextera Energy, Tesla and Uber - have collectively lost $100bn in the past decade
YVES SAINT LAURENT, Lady Gaga, David Bowie. Some people do not operate by the same rules as everyone else. Might the same be true of companies? Most bosses complain of being slaves to short-term profit targets. Yet a few flout the orthodoxy in flamboyant fashion. Consider Tesla, a maker of electric cars. This year, so far, it has missed its production targets and lost $1.8bn of free cashflow (the money firms generate after capital investment has been subtracted). No matter. If its founder Elon Musk muses aloud about driverless cars and space travel, its shares rise like a rocket—by 66% since the start of January. Tesla is one of a tiny cohort of firms with a licence to lose billions pursuing a dream. The odds of them achieving it are similar to those of aspiring pop stars and couture designers.
This article appeared in the Business section of the print edition under the headline “Reality distortion field”
Business
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From the October 21st 2017 edition
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