Tesla Seeks Additional Funds For Model 3, Gigafactory

SEP 7 2016 BY ERIC LOVEDAY 36

Tesla Model 3

Tesla Model 3

Tesla Gigafactory

Tesla Gigafactory

It’s no surprise to us that Tesla will need additional funding to move forward with Model 3 production and Gigafactory build-out / expansion.

As Seeking Alpha reports:

“Tesla plans to tap either the debt or equity markets for additional capital before the end of the year.”

Official word comes via Tesla’s recent Form S4 filing with the SEC. Here are the relevant bits:

FUTURE LIQUIDITY NEEDS OF THE COMBINED COMPANY

As of June 30, 2016, Tesla had $3.25 billion in principal sources of liquidity available from its cash and cash equivalents, which included $2.76 billion of money market funds. Subsequent to June 30, 2016, Tesla has received notices of conversion from holders of approximately $422 million in aggregate principal amount of Tesla’s convertible senior notes due 2018 (“ 2018 Notes ”), which conversions require Tesla to repay the principal amount in cash. Tesla expects to pay this amount in the third quarter of 2016 and, after giving effect to these conversions, Tesla had approximately $224 million in aggregate principal amount of 2018 Notes outstanding.

Sources of cash are predominately from Tesla’s deliveries of vehicles, as well as customer deposits for vehicles, sales of regulatory credits, proceeds from retail financing activities, sales of energy products, and non-warranty repair and maintenance services. While Tesla expects that its current sources of liquidity, including cash and cash equivalents, together with its current projections of cash flow from operating and retail financing activities, will provide it with adequate liquidity based on its current plans through at least the end of the current fiscal year, Tesla is currently planning to raise additional funds by the end of this year, including through potential equity or debt offerings, subject to market conditions and recognizing that Tesla cannot be certain that additional funds would be available to it on favorable terms or at all. For additional information, see the section entitled “ Risk Factors ” beginning on page 35.

Such additional funds would be used primarily for tooling, production equipment and construction of the Tesla’s Model 3 production lines, equipment to support cell production at Tesla’s Gigafactory, as well as new Tesla retail locations, service centers and Supercharger locations. Secondarily, if the Merger with SolarCity is completed, the additional funds would also be used to support the additional capital needs of the Combined Company.

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36 Comments on "Tesla Seeks Additional Funds For Model 3, Gigafactory"

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Tesla’s core business has burned more than $3 billion in cash. This is “retained earnings” and so it excludes recoupable investments in capital equipment–factories, etc. It’s just cash that is gone forever. Add perhaps $1.5 billion from this next round, and you have $4.5 billion. Through 2016, Tesla will have sold roughly 200K cars, so they will burn about $20K per car sold until the Model 3 ships, at which point things should get much more interesting, and maybe even profitable.

That’s not surprising for a young company; the large manufacturers easily blow through multiple billions of dollars on new car design on each generation. As time goes on, Tesla will be able to develop new models cheaper. Right now they have to reinvent the wheel for the S (new design back when first developed) and 3 (goal of extreme cost reduction). Once they hit the sustainable number of sales to support this process, they will not have to rely on new stock offerings.

Ah – Heck, that’s Nothing! Bombardier Burned through more! They Spent $3 Billion more than they earned – Last year – in just the 3rd Quarter – Alone!!!

And they just make stuff that burns MORE Fuel! Well, OK – Maybe – LESS than competing Products, but more than if it was not out there! And – they are not really in the business of getting OFF Fossil Fuels at all!

It seems unwise to uncritically accept numbers regarding Tesla Motors’ operation from a serial Tesla basher like Four Electrics.

But even if those numbers are accurate, they’re not necessarily unusual for an auto maker. Mass producing automobiles is a very expensive business, with typically thin profit margins.

Four Electrics appears to be insinuating that Tesla isn’t managing its money properly. On the contrary, Tesla has succeeded astonishingly well, far beyond the expectations of most financial analysts… and continues to do so. If Tesla had listened to the advice of most financial analysts, it would have gone out of business quite a few years ago.

Go Tesla!

Would you say that it is equally unwise to accept Tesla numbers from a serial Tesla promoter? It’s just a question!

Ideally, they would be the same numbers. But it’s the way that information is presented, that makes a given psychological impression of something being positive, neutral, or negative.

the financial “analysis” by four electrics makes no sense to me.

Look at Amazon to see why profitability doesn’t really matter. Amazon is rarely profitable, yet no one seems to care except in the early days. While Tesla may go the way of Tucker instead of Amazon, I suspect not, and it’ll stay around despite having no profits.

http://www.businessinsider.com/analysts-wrong-about-amazon-profit-2015-1

that kind of reasoning is how you got “boom and bust” stock market bubbles in the 1980’s and 1990’s. the “profits don’t matter” rationale leads to highly unstable economics.

With ZoeR400 Tesla could get many cancels on the Model 3, Tesla should not invest to much. They advertise with a price of 35000 $ here in France, but a sales person said to me around 43000 €, this misconception in whole Europe will also bring many cancels.

Salesperson… a Tesla salesperson or a Zoe salesperson? 🙂

NOPE!

You are not from france and You have not asked.

If You where/did, they would explain to You that 35 000 $ price tag is BEFORE taxes, and 35 000 Euro price tag is BEFORE taxes. Further more You would know that VAT in EU is 22% for buying new car.

Thus ~43 000 Euro for the car, if no subsidies are applicable.

Further more You would know that this tax is applied to ALL cars. So Tesla is not at a disadvantage here. Everybody pays those 22% (but companies ofc.), so each car that would be priced at ~35k BEFORE taxes will cost 43k AFTER taxes. Bolt if ever arrives in EU will be priced similarly ABOVE pre tax sticker.

But You are not from here, so You did not knew 😉

PS Zoe 400 – (wtf is that? butt ugly name) will also have 22% VAT…

I know that its before VAT! But from 100 people who reserve 50 % don’t know (because there are stupid people in the world.) My neigbhour also said, woah Model 3 costs only 31.000 €, so cheap compared to a Zoe (21.000 with VAT). Zoe R400 “The total battery capacity should be 45-46 kWh for the Nissan Leaf and the Renault Zoe R400.”
http://pushevs.com/2016/08/11/update-on-the-nissan-leaf-40-kwh-story/

I would counter-predict that, after part 2 of the Model 3 reveal where Tesla shows the final car, the presumable HUD, and talks about Autopilot v2.0, that reservations will exceed 750,000.

+1000

There is a reason Tesla isn’t pushing for higher Model 3 reservations right now. Second reveal will likely convert any remaining fence sitters to jump on board.

It will be raining money. And Elon will hit another milestone.

Along with the timing for the 2nd Reveal (Reveal – Part 2), I expect that will not happen – until after the Gigafactory has actually started the production of the new 21-70 Cells to cover their planned Tesla Energy New products (which – in itself – will probably be after at least some testing of them in the lab, as well), and the Tesla Energy will be the first actual customer, followed by the first few hundred packs for the Model 3 – which will be built, and installed in their first Alpha Prototypes, and later in their Beta Prototypes, as they gather more data on range, performance, durability, thermal management (Which – by the way – is one of the reasons for the new P100DL, to test a new cooling design, which is planned for application in the Model 3 Modules and Battery Packs!), and they have solid, repeatable numbers for not less than the Single Motor, Basic Battery edition of the car, right up to the Dual Motor and larger battery options, and also their performance editions – targeted likely to beat BMW M3 Specs! Basically – the next Model 3 Reveal – will show much more of… Read more »

You’re dreaming.

Tesla is rate limited, so actual deliveries are all TBD. Potential newcomers know this, and so that’s why reservations have slowed, and will eventually reverse a little.

Excitement over a new design is tempered once you realize you can’t actually take receipt of the product for a long, Long, LONG time.

As for me, I intend to keep my Model 3 reservation, unless the actual price jumps, or until I see something else (like a hybrid) that I want sooner.

There are many reasons to not reserve a Tesla, and one of them is Tesla has no ability to service the number of cars it intends to sell. They’re trying to expand their service centers, but their sales pace and volume are outstripping their ability to manage the fleet. Just imagine waiting for days to get your M3 tires installed, not to mention repaired for some defect.

Instead of continuing diluting shares, why not let people with reservations just increase their deposit amount? I’d be happy to let tesla borrow another grand or two at zero interest to further the cause of evs.

Maybe they will do that do let people bump themselves to the top of the list. Sort of like jukeboxes now, where you can put in more money to hear your songs first.

To me, it’s kind of a DB move, but it would raise more money for Tesla.

Leeper — you beat me to that comment. Here is even a better idea — offer current reservation holders a % discount if they pre-pay (i.e. reverse interest) — so for example if I decide to pre-pay an additional $10k — then I would receive an additional 5% or $500 towards the vehicle (i.e. $10k = $10.5K). It would be a cheap loan for Tesla and provide some incentive for buyers to pay up a little more. Then they would likely not need to raise a whole lot more $$$$ — just get some more of the future revenue today!

Or they could pull back the signature move and give some more goodies 😉

Elon should ditch the equity and debt markets, and just set up a Go Fund Me account for the Model 3 and Gigafactory. 😉

The whole show is becoming an institutional betting table.

Exactly. This is thinly-veiled gambling.

Where have you been? Wall Street is 99% casino style gambling wake up man

Tesla’s SEC filing says:

“…if the Merger with SolarCity is completed, the additional funds would also be used to support the additional capital needs of the Combined Company.”

And this is why I think the merger (assuming it happens, which seems likely) is a bad idea. Some of Tesla’s income will very likely be siphoned off to support financially troubled SolarCity, just when Tesla needs much more money than ever before, to put the Model ≡ into production.

Yeah, I agree with this. Many investors may want to support Tesla but are not so interested in SolarCity.

That’s exactly the reason why Elon had Tesla buy SolarCity in the first place: no one else was interested in giving SCTY any more money.

The Solar City thing needs to happen. That is the whole key. Tesla is not a car company. It is an energy company. With Solar City and Tesla to make batteries and inverters they will kill the competition. Some people just don’t understand how big the solar + storage business is. I agree with Elon that about half sales will come from cars and half from storage.

The Presentation for Tesla Energy Said they only needed 1 Pixels worth of Batteries to Store the Whole Energy Needs for Solar in the SUA to power the off peaks and cloudy Day Times – https://www.tesla.com/en_CA/energy so just how big ARE Pixels these days?

All kidding aside, if each Solar Panel could store, right at the panel, as much energy as said panel could produce in the very best day, the off panel energy storage would be much less!

You don’t want Lithium Batteries inside the panels, out on a hot roof, cooking day after day…

Carguy…BINGO…my only worry is if strongman Trump gets in he will push back on all renewable energy policy.

This sounds like Tesla is living out what happened to the James River and Kanawha Canal in 1852 and 1855. The Canal was trying to build the last section of the canal. But ran out of funds in the middle of construction leaving a half finished canal bed along the Upper James River.

Sounds like you are living in the past yourself OR.

Just because you are a serial Tesla-hater here doesn’t change the fact that Tesla is sitting on about 30 BILLION DOLLARS in pre-orders for the Model 3 AND they will get many more once final specs are released and they start hitting the streets.

Then there will be a Model Y SUV/CUV that will probably exceed Model 3 sales.

Intelligent, long-term investors are all over numbers like that.

I’m willing to start making payments on model 3 if it will help tesla.