Tesla Embarks on Cash Hunt, Seeks to Raise $2 Billion

Steph Willems
by Steph Willems
tesla embarks on cash hunt seeks to raise 2 billion

Financial Twitter and Tesla Twitter — groups that are often one and the same — are in hardcore prediction mode after Tesla announced plans to raise $2 billion through the sale of stock and convertible bonds.

The automaker’s move comes after a first-quarter earnings report showed a steep drop in deliveries and automotive revenue, plus a $702 million net loss. Tesla’s cash pile dwindled, quarter over quarter, to $2.2 billion — its smallest stack in years. Among those snapping up shares will be CEO Elon Musk, who promises to buy $10 million in common stock.

It’s a U-turn from last year’s repeated promises that Tesla would not need to raise cash via stock offerings or debt. Of course, things can turn on a dime at Tesla. Earlier this year, Musk expressed confidence that the two consecutive profitable quarters that ended 2018 could continue into the future.

After last quarter’s earnings report, he changed his tune, stating that Q2 isn’t likely to see black ink.

The shelf offering announced Thursday includes “$650 million of common stock and $1,350 million aggregate principal amount of convertible senior notes due in 2024 in concurrent underwritten registered public offerings,” Tesla stated, adding, “In addition, Tesla has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering.”

While the announcement prompted a slight boost in Tesla’s stock in after-hours trading, the company’s once sky-high valuation is a thing of the past. With a share price of $243.44 at last check, Tesla’s stock has declined roughly 30 percent since the beginning of the year.

In an earnings call last week, Musk said there was “merit” in raising capital.

Speaking to Bloomberg on Wednesday, Dan Ives, analyst at Wedbush Securities, said, “Musk and Tesla looked in the mirror and realized they needed to change their tune a little on the capital raise because the math doesn’t lie. Based on the profitability trajectory and what we saw in the first quarter, the writing is on the wall.”

At present, Tesla finds itself in the midst of construction of a Shanghai vehicle and battery plant (funded through local debt) and in the early stages of preparing for production of the Model Y, a crossover due out late next year.

[Image: Tesla]

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  • APaGttH APaGttH on May 02, 2019

    The $2.2 billion is even less. The over $650M in deposit money can't be touched until the delivery of said deposit is made - each vehicle at a time. Given some of those deposits are for semitrucks and other commitments that are years away, as I posted in the B&B section last week, TSLA only has enough cash for two more quarters at the rate of current cash burn. They have to raise more capital, which dilutes overall share value. It will get harder and harder to sell the shares. What comes first - viable Level IV autonomy or bankruptcy.

  • Dividebytube Dividebytube on May 03, 2019

    You know I would love to (be able to afford) a Tesla S, or a 3, performance version. But it isn't going to happen unless I wait a few years and buy used. Anyways - my point - I remember a few months ago when the 3 was finally available for sale; and all the Tesla fanboys were jumping up and down, pointing out how Tesla overtook BMW (and Audi and Mercedes) in sedan sales. And how Tesla is the wave of the future. How do they feel about Tesla now?

  • Jim Bonham Full EVs are not for everyone, they cannot meet all needs. Hybrids do a much better job of providing the benefits of EVs without most of the drawbacks. I have a hybrid sedan with plenty of room, plus all the bells and whistles. It has 360 hp, AWD, does 0-60 in just over 5 sec.(the instant torque is a real benefit), and I get 29 mpg, average. NOT driven lightly. I bought it used for $25k.Sure, it's a little heavier because of the battery, motor, etc., but not nearly as much as a full EV. The battery is smaller/lighter/cheaper and both the alternator and starter motor are eliminated since the motor assumes those functions. It's cool to watch the charge guage show I'm getting energy back when coasting and/or braking. It's even cooler to drive around part of the time on battery only. It really comes in handy in traffic since the engine turns off and you don't waste fuel idling. With the adaptive cruise control you just let the car slowly inch along by itself.I only wish it were a Plug-in Hybrid (PHEV). Then, I'd have A LOT more EV-only range, along with even more of that instant torque. The battery would be bigger, but still a fraction of the size of a full EV. I could easily go weeks without using much, if any gas (depending upon my commute) IF I plug it in every night. But I don't have to. The gas engine will charge the battery whenever it's needed.It's just not as efficient a way to do it.Electric companies offer special rates for both EVs and PHEVs which lower your operating cost compared to gasoline. They'll even give you a rebate to offset the cost of installing a home charger. You can still get federal (up to $7,500, plus some state) tax credits for PHEVs.What's not to like? My next daily driver will be a PHEV of some kind. Probably a performance-oriented one like the new Dodge Hornet or one of the German Hybrid SUVs. All the benefits, sound, feel, etc., of a gas vehicle along with some electric assist to improve fuel economy, performance, and drivability. None of the inherent EV issues of cost, range anxiety, long charging times, poor charger availability, grid capacity issues, etc. I think most people will eventually catch on to this and go PHEV instead of going full EV. Synthetic, carbon-neutral eFuels, hydrogen engines, and other things will also prevent full EVs from being 100% of the fleet, regardless of what the politicians say. PHEVs can be as "clean" (overall) as full EVs with the right fuels. They're also cheaper, and far more practical, for most people. They can do it all, EVs can't.
  • Ron rufo there is in WaSHINGTON STATE
  • ToolGuy @Chris, your photography rocks.
  • ToolGuy No War for Oli.If you have not ever held a piece of structural honeycomb (composite sandwich) in your own hands, try it.
  • ToolGuy You make them sound like criminals.