News Worms
News Worms

Tesla seeks to raise $1.5 billion to fund Model 3 production

Tesla seeks to raise $1.5 billion to fund Model 3 production

To that end, Tesla (TSLA) said Monday it is raising $1.5 billion in a senior note offering. The critical issue for investors to consider here is the impact that adding another $US1.5 billion will have on Tesla's already increased debt levels, following its acquisition of SolarCity in late 2016.

Tesla's management hinted that it could be coming during last week's conference call with financial analysts discussing second quarter 2017 results. The Tesla Model S was a regular production auto that featured standard low rolling resistance tires and the drivers ensured that vehicle stayed running for as long as possible.

The notes will be due in 2025, and unlike prior debt offerings that included convertible notes, this offering will consist of straightforward paper. That's likely only to be part of the cash need, however.

But can Tesla make enough money per vehicle? We are thinking about debt, but we're not thinking about an equity raise. According to the release, the date of the auction and the coupon will be decided by market conditions, among other factors. The company is lobbying the California Legislature to make up the difference if the federal subsidies run out. That's not an assurance of positive cash flow, however.

Tesla plans to spend around $2 billion more by the end of 2017, which leaves them with about $1 billion in reserve.

Tesla (NASDAQ TSLA) opened at 356.91 on Thursday.

Tesla's bond will price later this week after several days of meetings with credit investors, who will weigh factors including the absence of a borrowing history, its lack of profit and its high cash-burn rate against its growth potential and its attractiveness as an environmentally-friendly "green" issuer. This time around though they are going for a different approach of issuing debt. With the EV innovator, however, investors seem to be happier to find that the company is getting rid of the uncertainty. Bank of America Corporation dropped their price objective on shares of Tesla from $170.00 to $165.00 and set an "underperform" rating for the company in a research note on Wednesday, April 26th.

But while Musk often boasts about how Tesla is building hardware into its cars that can someday enable full autonomy, that day is still a ways away - on both the technical and regulatory sides. Also, Director Kimbal Musk sold 2,190 shares of Tesla stock in a transaction dated Tuesday, August 1st.

Regarding demand for the Model 3, reportedly, Musk told a reporter (or a few reporters) that Tesla had 455,000 net reservations for the Model 3 (after cancellations).


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