These firms have burnt $100 bn in the past decade. They are capitalism’s bravest babies – Chesapeake Energy, Tesla, Uber, Netflix, and NextEra Energy.
John Lennon. JFK. We all have our own way of life. But that does not mean some lives cannot be bizarrely different. And then there are firms that are bizarrely different in how they perform wonders. That is, doing wonders by burning money.
Capitalism, in its essence, entails investing today for a fortunate life tomorrow. That is the example firms that are going big today setting for upcoming firms.
Chesapeake Energy
The company led by Aubrey McClendon for 23 years last year, Chesapeake had been burning $1 Billion a year for a staggering 14 years in 2017. The company based out of Oklahoma has pioneered the art of blowing up rocks and extracting all possible fossil fuels.
The main focus of production in this company is Hydrocarbon exploration. The recent acquisition of Wild Horse has paid off the long haul that Chesapeake took on at the beginning. The cost savings are already coming in effect for Chesapeake as it saves approximately $500,000 per well.
Chesapeake holds $10 Billion in debt as it shifts its market focus from being a natural gas producer to being an oil manufacturer.
The stock of this oil and gas company remain volatile. A good example of such a situation is the time when it was rose 35% at one point before falling down with oil prices.
Chesapeake’s balance sheet is still full of debt, as it makes a shift from being the largest natural gas producer to being more focussed on oil production.
NextEra Energy
NEE or NextEra Energy is a Fortune 200 energy company with about 45,900 megawatts of energy generation capacity. The company has close to 14,000 employees. The company generated $17 Billion in FY 2017.
The largest electric utility holding company by market valuation, it has various subsidiaries across the USA and Canada.
With a market valuation of $98 Billion, a huge chunk – over 50% of NextEra – is owned by institutional investors. Were these investors to change their mind regarding the company’s value, the price would fall very hard.
As America’s largest capital investor in infrastructure, NextEra has planned about $40 Billion in investments through to 2020.
They probably influence board decisions very heavily. NextEra is heavily invested in renewable sources of energy as well.
Uber
The controversial IPO release that happened last month put a question for investors. The firm wanted a market capitalization of $100 Billion which later fell to $90 Billion and eventually fell down to $80 Billion.
Uber has a UK Supreme Court hearing looming on its head. It has also faced various losses against drivers working for them who don’t get paid enough.
The fact that companies in the same field face issues of dipping shares, they need more funding and that is bound to be the case for Uber. Uber wants to be the Amazon of logistics. The goal it has set for itself is a rare achievement.
Netflix
The streaming service that offers numerous tv series and films, including its originals continues to burn money. Its expenditure will expectedly peak this year as it produces more content. After this peak, the cash burn is expected to go down.
Netflix is the industry leader with 125 Million subscribers globally.
The company burned $3 Billion in 2018. It has decided to spend $8 Billion on content production this year. By 2020, its debts are expected to stack up to $14.5 Billion.
Tesla
This electric car company that hopes to transform the way that vehicles work and drive is losing close to $7,340 every minute according to a data compilation by Bloomberg.
Tesla lost close to $700 Million in the first quarter of 2019. While it is a distraction from the goal Elon Musk has in mind, it hasn’t improved efficiency either.
While Tesla may be burning money, the goal that Elon Musk has may be our one hope to save our planet. The electric vehicles market needs to become more accessible and affordable, no matter the monetary outcome.
These firms are burning money for their cause. While there is approximately 0.5% to 25% chance for any company to burn $1 Billion for more than two years and go big, these firms may be the next ones to do so, if any.
