Perhaps more alarming is the fact that Tesla also said the regulatory filing that 15 separate institutional investors passed on the opportunity of either acquiring SolarCity or injecting equity into the company.
Advertisement
Earlier this year, CEO Musk had warned of another “small equity capital raise”, to fund both the development of Tesla’s Model 3 vehicle, and to build out its massive battery-making “gigafactory”. Tesla has repeatedly said that customers need to still be engaged with driving and keep their hands on the wheel.
Now it looks like Tesla will need more money to finance its ambitious plans.
According to USA Today, the next portion of funds will be used mainly for production equipment, tooling and construction of the company’s Model 3 sedan production lines. Tesla reported a net loss of $486 million through the first six months of 2016, up 78% from a year earlier.
At some point, the hope is that Tesla will be able to fund those plans out of its own profits.
Earlier this month, Tesla said it closed the second quarter with almost $3.25 billion in cash, but in July it repaid $678 million on a revolving credit line and planned to redeem $422 million in convertible notes.
Tesla’s board took the possible deal more seriously on May 31 – just 13 days after the secondary stock offering was announced – when it directed management to assess a potential solar acquisition.
Given high demand for the Model 3, Tesla Motors Inc (NASDAQ:TSLA) has been spending a lot of money lately to ensure that it doesn’t repeat its previous mistakes that lead to delays in production and launch. So far, those fears have proven unfounded.
While Tesla understands the urgency to generate more cash before the end of this year, management has not made up its mind regarding which approach will be best to raise the capital required.
Tesla has yet to achieve profitability (although, that’s not what Tesla stock trades on), relying on the sale of cars to finance itself.
Advertisement
With the FTC’s approval, the only thing left for Tesla Motors to do to begin the acquisition process is to file the necessary documents with the Securities and Exchange Commission and set a date for the company’s shareholders to vote on the planned merger.
