Tesla (NASDAQ:TSLA) Must Raise Billions To Meet Musk Dreams

Tesla (NASDAQ:TSLA) Must Raise Billions To Meet Musk Dreams

Tesla (NASDAQ:TSLA) Must Raise Billions To Meet Musk Dreams


Tesla Motors (NASDAQ:TSLA) has to raise Billions by selling stock to meet Elon Musk’s production plans.

The Big Q: Will the benefits will be enough to outweigh the dilution of the falling share price.


When CEO Elon Musk drove the EV company’s target ahead to increase vehicle assembly to 500,000 a year to Y 2018 from Y 2020, he added that capital spending will increase by about 50% or $750-M from the original budget for this year, which requires fundraising.

Notably, the fledgling EV company faces huge capital expenditures (billions) as it ramps up its massive battery factory toward full production, adds tooling for a 3rd model, expands sales and service operations globally, seeks to hire additional manufacturing experts (the top people have already ankled) and contemplates adding more vehicle-assembly capacity.

Not to mention finding buyers in a demographic that has no money to buy his dream machines.

A Barclays analyst projects a $3-B equity raise sometime in Q-2. At current stock prices, a transaction of that size would be about 14.5-M shares, an increase of 11% to the number of shares outstanding now.

“With its ambitious plans that will require an incremental fundraising, we view Tesla as more of a cash-hungry startup Unicorn than a traditional public company,” wrote Barclays in a research note. “With Tesla likely to come to the market for a capital raise near-term, it’s worth asking whether it deserves an up round or a down round.”

This would be Tesla’s 6th capital raise in the last 4 years, following its June 2010 IPO, when it raised $226-M, Mr. Musk the largest shareholder with a 22% stake.

With the Q-1 earnings release last week, Tesla said it had $1.44-B in cash and cash equivalents as of 31 March, up from $1.19-B 3 months earlier. Long-term debt rose to $3.12-B from $2.65-B at year-end.

Most of the cash generated via orders placed for the Model 3 came in after the Quarter closed, that money is not ideal for capital investments as it is refundable on demand.

The company started the year anticipating $1.5-B of capital expenditures and now projects spending $2.25-B to take it from nowhere to high volume automobile manufacturer.

“The significant acceleration of capacity and assembly plans of course necessitates a large increase in capital spending, providing perfect rationale for a large equity capital raise which might have otherwise been needed or at any rate desired, due to ongoing free cash burn and liquidity-comfort levels,” wrote Ryan Brinkman of JPMorgan Chase & Co.

Elon Musk is challenged in here and no amount of bravado will solve his billion dollar problems.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 207.61 13 May-2016 0.33 207.78 211.2 206.7 2,819,900
HeffX-LTN Analysis for TSLA:  Overall Short Intermediate Long
Neutral (-0.24) Bearish (-0.33) Bearish (-0.27) Neutral (-0.11)

Note: My 3 Key technical indicators are flashing Very Bearish 

Have a terrific weekend.

Paul Ebeling

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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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