Mr. Musk ignited controversy in June when he proposed combining the two companies.
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Reuters reports Tesla ended the second quarter with nearly $3.25 billion in cash, but is likely to have just $400 million left after it pays back a revolving credit line, redeems convertible notes and invests in its production expansion. Shares drifted lower in intraday trading.
“The cash problem is pretty serious for Tesla”, said Rob Enderle, an Oregon-based market researcher who tracks the technology industry. Tesla planned to redeem $422 million in convertible notes.
Before the bond deal was announced, SolarCity’s advisers had asked Tesla to “consider providing SolarCity with short-term financing” amid the pending merger deal, according to Wednesday’s filing.
The payments would be made by the end of the third quarter, which is due to end September 30, the SEC filing shows.
“Tesla is probably the one I think of personally because a lot of what Elon Musk does is just really driving toward that future that we can have that is so much more handsome and not restricted by the way things were done in the past.” .
Then there’s the rising costs at SolarCity and the fact that it’s being forced to transition from a leasing sales and financing model to a cash or loan sale model. The cash held by the company has declined to $146 million by June 30, compared with $421 million by the end of the same period past year.
“Neither company is profitable”, Enderle said. Already the company raised $1.7 billion of cash by offering secondary shares in March, the highest-ever share offering by the vehicle maker.
In its 10-year history, SolarCity has notched total revenue of just $1.5 billion, while amassing $3 billion in debt. Over the same one-year period, SolarCity lost $94.9 million on $537.7 million in revenue.
Lazard, SolarCity and Tesla declined to comment.
If Tesla chooses to opt for an equity fundraiser, this will mark the second time in the span of a year that the company has diluted its stock. “I’m still not sure if that makes sense”. One of the reasons is that EV makers are not willing to pay more money to get the ability to store more electricity in one space.
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Separately, Tesla plans to raise more money this year, either through an equity or debt offering, as it prepares to launch the $35,000 Model 3 auto while ramping up vehicle and battery production.
