Tesla Motors (NASDAQ:TSLA) Facing Severe Cash Crunch

Tesla Motors (NASDAQ:TSLA) Facing Severe Cash Crunch

Tesla Motors (NASDAQ:TSLA) Facing Severe Cash Crunch

$TSLA, $SCTY

Facing a severe cash crunch, Tesla Motors (NASDAQ:TSDLA) plans to raise money this year to help fund development and production of its new Model 3 sedan and build out a massive battery factory.

The EV maker plans to raise money through an equity or debt offering, it said in a filing with the U.S. Securities and Exchange Commission.

Some of that money could also support Tesla’s planned acquisition of its money losing sister company, SolarCity Corp (NASDAQ:SCTY).

Tesla CEO Elon Musk warned the combined companies might need “a ‘small’ equity capital raise” in Y 2017. Mr. Musk is the major shareholder in both firms.

Tesla’s cash situation has taken on additional urgency with the $2.6-B SolarCity deal announced on 1 August.

Mr. Musk also said that Tesla plans to release an update of its partly automated self-driving system “in a few weeks.” US regulators are probing a 7 May fatality in Florida in which a driver using Tesla’s Autopilot system crashed into a truck.

The timing of the SEC filing on Tesla’s fundraising plans “reinforces the need for SolarCity to have quick access to capital,” a Barclays analyst said.

Tesla’s cash position has seriously deteriorated, despite a $1.7-B equity raise on 19 May 2016

This August, Tesla said it closed Q-2 with nearly $3.25-B in cash, but in July it repaid $678-M on a revolving credit line and planned to redeem $422-M in convertible notes.

That would leave the company with $2.15-B in cash.

Mr. Musk  told analysts earlier this year it planned to spend $1.75-B in 2-H on plants and equipment, primarily to get the $35,000 Model 3 ready for production next year and finish construction at the Reno, NV, “gigafactory.”

As a result, Tesla would have around $400-M in cash at a time when both Tesla and SolarCity have been burning cash.

Tesla has posted operating losses in 14 straight Quarters and negative cash flow since early Y 2014.

The Big Q: How long to the Chapter 11 filing?

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 200.77 1 September 2016 -11.24 209.01 211.1 200.5 7,940,500
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Neutral (-0.23) Bearish (-0.41) Bearish (-0.31) Neutral (0.03)

All of my Key technical indicators are Very Bearish, the next support is 199.11, then 190.05, then NIL.

Elon Musk’s SpaceX firm suffered a major setback early Thursday its Falcon 9 rocket exploded on site destroying a $200-M communications satellite owned by Facebook (NASDAQ:FB)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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