Tesla to raise funds in preparation of 'manufacturing hell'

Mandy Carr
August 8, 2017

The company said it plans to use the net proceeds from the offering to "further strengthen its balance sheet during this period of rapid scaling with the launch of the Model 3, and for general corporate purposes". The rate at which TSLA is burning through cash is estimated to surpass $2 billion this year and has prompted short-sellers like Greenlight Capital's David Einhorn to bet on the fall of TSLA stock. The convertibles give holders a chance to profit if Tesla succeeds, by letting them swap the bonds for stock. In fact, there were around 63,000 customers who canceled their reservations as the original number of pre-orders was disclosed to be 518,000 cars.

Following the announcement, Standard & Poor's reaffirmed its negative outlook for the automaker and assigned a "B-" rating for the bond issue - deep into junk credit territory. Tesla is also still investing in capital heavily.

The high numbers associated with the MPGe ratings of electric cars underscore how efficiently they use energy, compared to the waste of 70 to 75 percent of the energy in gasoline as heat and noise in a auto that burns gasoline in an engine. Patience, though, has its rewards, as is the case with the Tesla Model X. The non-recourse debt was absorbed from the SolarCity acquisition past year, and is largely secured by leased solar systems.

Tesla also is involved in installing solar-paneled roofs and producing batteries that can store the energy and power homes.

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Musk said there should be "zero concern" about Tesla's achieving a production rate of 10,000 cars a week by the end of next year, in alignment with the company's longstanding goal to get to a production rate of 500,000 by December 2018. So as Tesla ramps up production over the next two years to deliver the Model 3 to those hundreds of thousands of people who preordered the auto, we're going to find out exactly what those masses think about this pared-down look.

At the launch, Musk, however, warned that Tesla would face months of "manufacturing hell" as it increases production of the sedan.

Last week, when the firm revealed its earnings for the three months through June, Tesla showed that it still had $3 billion in cash on hand. Rather, Musk is showing his company's commitment to them by not diluting their stock with an equity sale. Equities analysts predict that Tesla will post ($6.23) earnings per share for the current fiscal year.

Other reports by Guamnewswatch

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