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Elon Musk Makes Tesla Motors Inc (TSLA) a Money Magnet
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Tesla
Motors Inc (NASDAQ:TSLA) will soon more capital to finish construction
of its $5 billion Gigafactory, ramp up the Model 3 production, and to
fund the planned acquisition of solar panel installer SolarCity.
Elon Musk Makes Tesla Motors Inc (TSLA) a Money Magnet
Tesla Motors Inc (NASDAQ:TSLA) will soon more capital to finish construction of its $5 billion Gigafactory,
ramp up the Model 3 production, and to fund the planned acquisition of
solar panel installer SolarCity. Tesla CEO Elon Musk wants to cut costs
and boost productivity in the third quarter to impress investors,
according to an internal email that Musk sent to employees. The email
was acquired by Bloomberg. Musk said in his email that showing “at least slightly positive cash flow” would be “awesome” for fundraising, Fortune reported.
Morningstar analyst Dave Whiston believes that the electric car maker should think about a single, big equity offering that would give the company the cash to fund its ambitious growth plan and protect itself from rough times.
Tesla To Cut Costs in Q3
Musk urged workers to cut costs and
deliver “every car we possibly can” to show positive cash flow in the
third quarter. He belives that He thinks that this his final chance to
show improved financial numbers before he tries to raise more money.
“The simple reality of it is that we
will be in a far better position to convince potential investors to bet
on us if the headline is not Tesla Loses Money Again, but rather Tesla
Defies All Expectations and Achieves Profitability,” Musk wrote in an
email sent August 29.
Last month, in a filing with the U.S. Securities and Exchange Commission (SEC), Tesla Motors Inc (NASDAQ:TSLA) disclosed that it will spend about $1.1 billion in the third quarter
on payments and other planned expenditures. The company said that it
had $3.25 billion in principal sources of liquidity as of June 30,
including $1.7 billion from a public offering in May and a $678 million
credit line.
How Critical This Quarter is For Tesla?
The third quarter is crucial to Tesla’s
future as the electric car maker is buying SolarCity for $2.6 billion
and ramping up production next year of a mass market sedan, the Model 3,
according to the Bloomberg report. If the SEC approves the SolarCity
deal, shareholders at both companies could vote on the merger as early
as October.
Tesla delivered 50,568 vehicles in 2015
and plans to ship about 80,000 this year. The company missed its
vehicles delivery target for the second quarter. It produced 18,345
vehicles in the quarter, up 20% from the first quarter. But the company
was able to deliver 14,370 vehicles, down from 17,000 cars it expected
to ship.
Musk wrote in his email that “I thought
it was important to write you a note directly to let you know how
critical this quarter is. The third quarter will be our last chance to
show investors that Tesla can be at least slightly positive cash flow
and profitable before the Model 3 reaches full production.”
In addition, Musk wrote that Tesla Motors Inc (NASDAQ:TSLA)
“will need to raise additional cash in Q4 to complete the Model 3
vehicle and the Gigafactory” in Nevada. The automaker spent $117.4
million on the Gigafactory in the first half, and plans to spend a total
of about $520 million this year on the construction of the factory. The
company warned in its previous quarterly filing that the cost of
building and operating its Gigafactory could exceed the current
expectations.
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