No guarantee declining sales of Tesla’s most expensive electric car models will bounce back, despite pragmatic cash-flow forecasts. Additionally, Tesla may have to raise capital for financing production of Model Y that was recently unveiled in Los Angeles.
Following the announcement of the electric carmaker’s Q1 revenues, Elon Musk expressed that Tesla might need additional funding for manufacturing Model Y. Consequently, Tesla has applied for the redemption of convertible debt valued at $1.35 billion (payable in 2024). On the other hand, the electric car manufacturer also plans to redeem 2.72 million shares, presently valued at $605 million.
Stock Market News – Options With Banks & Financial Institutions
Banks and financial institutions will have the opportunity to buy convertible debt worth $202.5 million and an extra 176, 405 shares. Tesla has not yet fixed prices for the offerings. However, the carmaker’s shares that had plummeted by almost 10% after the company had declared its Q1 earnings have gone up by more than 3% recently.
Wall Street strongly feels that Tesla is presently in a robust position to raise funds. It is because it still has a market capitalization of approximately $40 billion. Moreover, since the debt markets seem to be performing well, the carmaker can take the risk of raising capital. It is worthwhile to note that Tesla despite earning $2.2 billion in cash (apart from $11.5 billion in lease finance and long-standing debt), is taking the financing route.
Cash-flow forecasts for the remaining three quarters are positive. Though Tesla is optimistic about good cash-flows in the running year, the company does not believe that 2020 will be positive. For the record, the crossover electric car model, Model Y will go into production from 2020.
Tesla Stock News – Other Reasons Why Tesla Is Raising Funds
Another good reason why Tesla is raising funds is that the firm is anxious about its 2019 cash-flow projections. The electric carmaker is hoping that it might never need to use the $2 billion it is projected to raise. However, taking into account long-term organizational goals, short-term sales pressures, and its checkered history, Tesla doesn’t feel very confident.
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