SA国际传媒

Morning Report: Tesla needs more cash to fulfill its EV ambitions.聽

Yesterday, Tesla plans to issue $1.5 billion in debt to fund production of its Model 3 car. The new fundraising is not a surprise. As our recent analysis on electric vehicles (EVs) makes clear, the EV space is a cash-burning machine:

Despite basking in the center of media attention, Tesla is no exception.

Why Does Tesla Need More Money?

Since the launch of Model 3, its least expensive model to-date, Tesla has picked up around . While most Model 3 orders are starting late 2018, at the current pace of orders, Tesla needs to up to 500,000 vehicles per year by the end of 2018.

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Scaling production is not cheap. Hence the need for more capital.

Tesla has a history of delivery targets (the company even created a to appease its stans). On one hand, it鈥檚 good news for Tesla that it has received more orders than its current manufacturing capacity can handle. On the other hand, missing production deadlines again may damage the firm鈥檚 reputation, and correspondingly, relations with its investors and customers.

Tesla鈥檚 Cash Needs

It鈥檚 uncommon for companies to raise money after going public. Most companies that decide to IPO have either reached a certain maturity or have established stable revenue streams. Tesla, however, went public in 2010 with almost no product to market (besides the dying Roadster whose ), and it in 2013 as it neared the brink of bankruptcy.

Given how unusual Tesla鈥檚 fundraising activities are, we decided to take a look at the company鈥檚 post-IPO funding rounds.

In the following chart, the navy blue is Tesla selling new shares, whereas the light blue is the company raising debt that can convert into shares later. Note that the chart is not inclusive of the new $1.5 billion.

Tesla has not stopped raising money since it went public. The company has gyrated between selling shares directly, and raising capital through convertible debt, which can have dilutive impacts down the road.This March alone, Tesla raised almost $2.2 billion from issuing equity and convertible debt. The giant chunk of funding makes sense since the company needs to cover the costs of as well as .

This time around, rathering than making equity offerings and issuing convertible debt, which convert into shares, Tesla . In the world of high-yield corporate bonds, or junk bonds for short, the investors trade risk of default for higher yield, the issuer quickly raises a large sum by paying a higher interest rate.

The $1.5 billion debt offering into the high-yield junk bond market. But the move shouldn鈥檛 come as a surprise. Just as Jason Lemkin, , predicted five months ago on TechCrunch鈥檚 , Tesla continues to push the boundaries of the public market:

鈥淢y general rule with Tesla is that [Elon Musk] raises every dollar possible at the highest valuation and then more. My guess is that [even if] he couldn鈥檛 raise $3 billion today, he will still raise that $3 billion and push it to the limit…Eventually he will get it done, and it may even be 90 days before he is out of money.鈥�

How long until Tesla goes back for more?

From the聽:

Google said to fire memo author

1. Google has fired the author of a controversial and widely-read memo blasting the company鈥檚 diversity policies, Bloomberg聽. The company said the memo violated its code of conduct and advanced harmful gender stereotypes.

Oryx raises $50M for LiDAR

• , an Israel-based developer of LiDAR technology for autonomous vehicles, has raised $50 million in a Series B round led by Third Point Ventures and WRV and joined by new and existing investors.

Carmaker Faraday leases factory

• Electric carmaker聽听丑补蝉听聽on a production facility in Hanford, Calif., after recently abandoning plans to build its own factory in Nevada. Faraday says it plans to have its first vehicle on the road by the end of 2018.

IPOing like it鈥檚 1986

• SA国际传媒 takes a trip back to 1986,聽when Microsoft went public as a profitable, fast-growing company聽that didn鈥檛 need the money. In other words, it was in many ways the complete opposite of what we see in the current tech cycle. (For more stories, follow聽聽on Twitter and check us out on聽.)