Elon Musk says that Tesla won’t need to raise money this year, but by 2020 the company may need to raise more than US$10 billion to fund its ambitious growth targets, according to Goldman Sachs.
“We see several options available to the company to refinance maturing debt and raise incremental funds, which should allow Tesla to fund its growth targets,” Goldman Sachs analyst David Tamberrino wrote in a research note on Thursday.
Tesla won’t have troubles raising the money but “issuing incremental debt (including priming current creditors with secured debt) may weigh on the credit profile of the company while issuing additional equity or convertibles at lower premiums would dilute current shareholders,” Tamberrino wrote.
The analyst has a ‘sell’ rating on Tesla shares, and expects the stock to plunge to $195 over the next six months—this would be a 32-percent slump from Thursday’s opening price at $286.
Goldman’s note comes amid a major reorganization at Tesla that includes streamlining activities and functions to improve its performance, and an exodus of senior executives in recent months.
In early April, Tesla said that it “does not require an equity or debt raise this year, apart from standard credit lines,” while Musk tweeted a couple of weeks later that Tesla would be profitable and cash flow positive in Q3 & Q4, so there was obviously no need to raise money. Related: Trump's Trade Dilemma: Export Growth Or National Security
Analysts have been wondering if Tesla may need to tap capital markets as early as this year, considering the high cash-burn rate and the bottlenecks in the ramp-up of the Model 3 production.
On the conference call after another record loss for Q1 (yet narrower than expected), Musk reiterated that Tesla won’t need to raise funds this year.
“I specifically don’t want to,” said Musk, asked about whether he would soon consider raising more money.
By Tsvetana Paraskova for Safehaven.com
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