Elon Musk’s company, Tesla, expects to raise nearly $1.8 billion by selling “junk” bonds to private investors – even more than the electric automaker aimed for when it announced the offering this month.
Tesla said the money will keep its balance sheet steady as it ramps up manufacturing of its newest car.
The company aims to make 5,000 of its mass market Model 3 a week by the end of this year.
It has estimated it is already spending about $100 million a week to hit that target.
On August 4, Tesla said was looking to raise $1.5 billion by selling bonds, but after one week it said it now expected to raise $1.77 billion from the sale.
The fundraising is limited to major institutions and not private investor.
Junk bonds are ones that pay a higher yield than normal bonds (5.3% in Tesla’s case), but also carry a higher risk of not being paid back. The bonds are set to be repaid in 2025.
Analysts said Tesla‘s ability to raise more than $1.5 billion indicated an appetite for risk among investors, as low interest rates have limited returns in many other types of investments. High stock market valuations have also made it harder to make a profit.
“Without the proceeds from the note offering, Tesla’s liquidity position would be stressed,” analysts at Moody’s said, warning of risks to potential investors.
Tesla had about $3 billion in cash at the end of June, but it spent more than $2 billion in the most recent quarter.
The company has frequently turned to investors to overcome persistent operating losses.
Tesla plans to eventually make more than 500,000 of the new Model 3 cars a year at its Fremont factory – or about 10,000 per week.
Moody’s said the target was ambitious given the relatively small size of the US electric car market.
The four-door Model 3 will then be available to the public, with a base price of $35,000, almost half that of the Tesla’s next-cheapest model.
Tesla’s share price more than doubled between December and late June as investors backed Elon Musk’s strategy to transform the low-volume luxury electric car maker into a producer for the crowded mass-market, but has since fallen back.
Registrations for new Tesla cars in California, its largest market, were down 24% in April compared with April 2016, according to IHS Markit data. Tesla responded by calling the figure “cherry-picked” data.
Image source Twitter
Tesla reported that first-half 2017 global deliveries for all its models rose to 47,100. That was at the lower end of its predicted sales range of 47,000 to 50,000.
In its last full financial year results, Tesla made a loss of $889 million.
Elon Musk’s tweeted images follow news last week that Volvo would become the first traditional vehicle manufacturer to phase out the petrol and diesel powered combustion engine, in a move toward hybrid and electric car production.
Pre-orders of Tesla’s much-anticipated Model 3 electric car currently total 276,000, CEO Elon Musk has announced.
Tesla unveiled the five-seater car – its lowest-cost vehicle to date – on March 31.
Elon Musk tweeted the total reflected the orders received by the end of April 2.
Pre-orders of the Model 3 will not necessarily all translate into actual sales when the car is released, with first deliveries in late 2017.
Potential car owners need to put down $1,000 deposits to reserve their vehicles.
Such has been the interest that Elon Musk tweeted the company was “definitely going to need to rethink production planning”.
Elon Musk has said his goal is to produce about 500,000 vehicles a year once production is at full capacity.
The basic model will start at $35,000 and have a range of at least 215 miles per charge.
Tesla delivered 50,580 vehicles in 2015. Most of those were its Model S saloon, which overtook Nissan’s Leaf to become the world’s best selling pure-electric vehicle.
However, Tesla still posted a net loss of $889 million for 2015, partly because it spent $718 million on research and development over the period.
It left Tesla with cash reserves of $1.2 billion, down from $1.9 billion a year earlier.
Tesla is facing competition from other electric cars with a similar price and range that will become available first, including General Motors’ Chevy Bolt and BYD’s Qin EV300.
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