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Tesla Raising Another $2.3 Billion To Stay Alive

Industry News / 13 Comments

But it might be too little, too late.

One reason Tesla brings out such a wide range of emotions from people - either admiration or outright disdain depending on who's talking - is because it's singlehandedly pushed the auto industry into building EVs before most companies were willing. But it's also missed so many deadlines and fallen through on so many promises that its word can't be taken seriously.

It's why, after swearing it would not raise any more money by issuing debt, Tesla has just told the Securities and Exchange Commission that it will try to raise $2.3 billion in cash by issuing more bonds and stock. If you've been following Tesla's tumultuous saga, then you know that the automaker sent out an incredibly disappointing first-quarter report last week.

In the first three months of 2019, the automaker lost about $700 million and now has about $2 billion left in cash. This money grab was predictable given Tesla's horrendous Q1 and is a way for the automaker to bail itself out so that it has enough cash to keep Elon Musk's dream of an electric future going strong. But even with the cash infusion, Tesla would only have around $4 billion on hand.

That's a stark contrast to established automakers with similar market caps to Tesla, like Ford. By comparison, the Blue Oval has about $24 billion in cash and can raise an extra $35 billion if it needs to, more than enough to stay in business a few years if the economy tanks. Tesla's paltry $2 billion is only enough to keep the lights in Palo Alto on for another year.

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Tesla's latest fundraising venture will look a little different than its junk bond issuance in 2017. For one, it'll be split between issuing convertible bonds and making 2.7 million of its shares public. The bonds will bring in $1.35 billion while putting stock up for sale should reap an extra $642.3 million. Musk has personally pledged to buy up $10 million of the new stock, enlarging his 19% stake in the company. The money is sure to help Tesla out with its big plans, which include building the Model Y, Roadster, and Semi as well as opening up a Gigafactory in China. The haters, the ones who see Musk's words as paper thin, probably view this move as a sign that Tesla's days are numbered. The fans, on the other hand, will be happy to hear that Tesla will keep fighting until the bitter end. Only time will tell if Tesla survives this year.