Published: Thu, May 02, 2019
Markets | By Otis Pena

Tesla raising $2.3 billion after money-losing first quarter

Tesla raising $2.3 billion after money-losing first quarter

Analysts have been predicting for months that Tesla would need to raise money for its expansion plans, which include the construction of a factory in Shanghai, the upcoming Model Y SUV, and other projects.

Tesla paid off $920 million in March and is due to pay off around $2 billion in loans in the next couple of years, so the latest debt issue doesn't necessarily mean the company's overall debt burden will be on an upward trajectory.

The filing notes he has indicated his preliminary interest in purchasing about $10 million worth of Tesla shares in the equity offering - up to 41,896 shares.

The negative cash flow is the greatest loss Tesla has ever posted over one-quarter.

Tesla attributed the slowdown to challenges associated with taking the Model 3 to China for the first time. Electric-car experts say there is no doubt government incentives help drive electric-car purchases - noting when the new Conservative government in Ontario killed a rebate a year ago, electric-car sales in that province plummeted.

This story has been corrected to show more details about the price limits and provide accurate information regarding the Tesla Model 3's eligibility.

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Before Tesla's announcement on Thursday, however, analysts speculating about a capital raise had cautioned that the company had missed optimal timing - last year's third quarter, when the company posted a profit - and now would be negotiating with banks in a weakened position following disappointing results.

Tesla has made a series of moves to rework pricing strategies for its cars following the reduction of a federal tax credit for Tesla buyers to $3,750 a auto from $7,500. "Because there needs to be a base model that's under the $45K mark in order for the higher-priced variant to qualify for the rebate as well, that's essentially what Tesla did", Zhang said. It ended its first quarter with $2.2 billion in cash.

Musk, 47, will participate in the offering by buying as much as $10 million in stock.

Tesla expects capital expenditures of $2 billion to $2.5 billion this year and about $2.5 billion to $3 billion annually for the next two fiscal years.

In a sign of Wall Street's concern, Goldman Sachs recommended selling Tesla shares in an April 25 report, putting a 12-month price target of $200.

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