Tesla Motors Inc (NASDAQ:TSLA) is out to sell more stock before the end of the year to boost the development of its upcoming Model 3 sedan as well as to fund its ginormous Nevada factory. In its regulatory filing with the Securities and Exchange Commission or SEC, Tesla discussed the likely liquidity needs of the company.
“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.”
The American automaker added that the raised funds would support other programs:
“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.”
Analysts are not surprised with Tesla’s another round of fundraising. In the past, CEO Elon Musk made it clear that the company would seek “a small equity capital raise” at some point. In addition, Musk’s grand plans are likely burning a hole in the company’s pocket. His latest plan, pegged as “master plan, part deux,” will reportedly cost $10 billion to complete, which is problematic given Tesla could barely keep up with the production of its vehicles.
Business insiders are wary of yet another round of stock sales as the dilution will hurt the company’s share price. But judging by the carmaker’s last equity offering in May, the market is absorbing all of Tesla’s fundraising in stride.
Still, Tesla is likely to present more equity offerings in the next couple of years. Fortunately, the carmaker’s stock trades are generating sky-high valuation. As long as investors support the stock sales, Tesla should be able to raise funds without much trouble…at least that’s what Musk is hoping for.
Tesla’s CEO is still in talks to buy out its sister company Solar City, an acquisition that’s likely to boost the company’s core auto-making business. However, shareholders are still wary of the deal. In the filing, the electric carmaker is requiring about $2.6 billion to fund the struggling energy firm.
Meanwhile, Tesla is gearing up for Model 3’s grand launch, which will happen in the second half of 2017. Musk is expected to lay out its future plans during the launch.
Tesla’s stock closed Friday’s regular trading at $197.78, down $2.99, or 1.49%. Shares have declined 14.24% in the last 4 weeks and 10.38% in the past three months. Over the past 5 trading sessions the stock has lost 10.10%. The Palo Alto, CA-based company, currently valued at $29.41 billion has a median Street price target of $242.50 with a high target of $500. TSLA is down 20.40% year-over-year, and about 18% since January 1.