Tesla CEO Elon Musk wrote in a Tweet Wednesday that a software update will be released in a few weeks. The third quarter is crucial to Tesla’s future because the company is trying to acquire SolarCity Corp. and preparing to roll out the Model 3, its lower-priced sedan, late next year.
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The company, through a filing to the Securities and Exchange Commission, is looking to raise cash through an equity offering or a debt offering. An analyst at Barclays said that the automaker’s filing reinforces the requirement for the solar panel company to have quick access to capital.
Daniel Sparks owns shares of Tesla Motors.
As a result, Tesla would have around US$400 million in cash at a time when both Tesla and SolarCity have been burning through cash. Musk’s vehicle firm said it could issue up to 15 million shares to pay out shareowners of the San Mateo solar panel company in the proposed deal, which is expected to provide around $150 million in cost savings.
Despite that, Tesla which has not been able to generate an annual profit, since more than three years ago, launched its Gigafactory in Nevada in August. As you can see, billions in financing is needed to run these companies.
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.
The update from Musk came shortly after SpaceX, another company where Musk is chairman and CEO, faced a major setback when its Falcon 9 rocket exploded on the launch pad, destroying a payload valued at almost $200 million, along with the Falcon 9 booster.
Past year the company had $421 million at its disposal and now its cash reserves have declined to $146 million as of June 30. Tesla aims to boost annual vehicle production from about 50,000 vehicles a year ago to 500,000 units 2018.
Growth is making the cash burn worse, and combined SolarCity and Tesla Motors have burned through $1.04 billion of cash in the first half of 2016.
The next day, the final suitor dropped out as well because “it did not believe that it was in a position to make an acquisition proposal within the range of Tesla’s original proposal”, according to the filing.
Tesla has been operating in the red and has had a negative cash flow since early 2014, Reuters notes.
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Tesla is also retooling its factory in Fremont, Calif., in preparation for the Model 3, which is expected to begin selling at $35,000 before incentives.
