Tesla (NASDAQ:TSLA) Needs Lots of Cash to Produce M-3
Tesla (NASDAQ:TSLA) is going to the Junk Bond market to borrow another $1.5-B to fund production of its new Model 3 sedan.
The EV (electric vehicle) and clean energy company has raised cash in 4 of the last 5 Quarters, while it continues to struggle to meet analyst and consumer expectations.
Tesla plans a wide launch of its lower-cost EV next year, and to boost overall vehicle production from 100,000 vehicles this year to its claimed target of 500,000 in Y 2018.
“Tesla intends to use the net proceeds from this offering to further strengthen its balance sheet during this period of rapid scaling with the launch of Model 3, and for general corporate purposes,” the company said in a statement Monday before the market open.
CFO Deepak Ahuja said last week capital spending by the company has hit “historic highs” — about $100-M a week. Most of the spending pays for Model 3 manufacturing equipment, but the company has several other high-profile projects in the pipe.
Tesla is building a solar factory in Buffalo, NY, a battery plant near Reno, NV, and adding capacity to its Fremont auto plant.
The company also plans to 3X the size of its fast-charging network to accommodate new Model 3 customers. The network has about 6,100 superchargers around the world at 900 stations, enabling long-range travel for Tesla vehicles.
Maverick entrepreneur CEO Elon Musk outlined an aggressive growth plan to analysts last week, adding 4 more “gigafactories,” including facilities in China and Europe. The international expansion will lower vehicle and delivery costs to customers in Asia and Europe, he says.
The company expects cash flow to improve as it starts selling Model 3’s. The Palo Alto-based automaker has about 455,000 reservations for the Model 3, Mr. Musk said.
Musk unveiled the electric sedan in March 2016. It has room for five adults, a 220 mile range on a single charge and a base price of $35,000. Early, non production, hand made editions were delivered to 30 company employees on 28 July 28.
Tesla stock rose sharply after the event to near record marks. Shares dropped slightly Monday on the news of the borrowing and finished a bit higher on the day.
Here is the Big Q: The M-3 stripped is 35,000, the real price will be about $50,000, who is going to buy it, as it is beyond the price of its customer demographic, and Tesla has no financing for buyers?
Note: Tesla, Inc. is not a real carmaker it is an rentier adventure in clean energy dreams, that looks doomed to fail like its namesake Nicola Tesla.
The company is seeking cash earlier than expected, and will have to go to the B- or deeper Junk bond market, and who knows if it will be enough to support the needs.
Tesla shares are overpriced.
|NASDAQ:TSLA||355.17||7 August 2017||8.08||357.35||359.48||352.75||6,324,400|
|HeffX-LTN Analysis for TSLA:||Overall||Short||Intermediate||Long|
|Neutral (0.24)||Neutral (0.19)||Neutral (0.21)||Bullish (0.31)|
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