Tesla Motors [NSDQ:TSLA] has confirmed via a Securities and Exchange Commission filing it plans to sell new stock in a bid to raise as much as $2 billion.
About $1.4 billion will be raised by the sale of new shares while the rest will come from the sale of CEO Elon Musk’s own shares to cover tax expenses stemming from stock options he's exercised.
Most of the funds raised will go into expanding Tesla’s plant in Fremont, California in preparation for Model 3 production. Tesla remains committed to starting production of the car in late 2017.
Many analysts predict Tesla won’t be able to meet its targets such as building as many as 500,000 cars by as early as 2018, up from just 50,000 last year, and the company is faced with many hurdles.
2016 Tesla Model X
For example, Tesla has had issues with production of the “falcon wing” doors of the Model X crossover, and just this week it emerged the company through one of its contractors had been underpaying foreign workers.
More worryingly, in the same filing, Tesla said it lost $283 million on revenue of $1.15 billion for the first three months of the year, and in 2015 the company lost $888 million on revenues of just over $4 billion. Its high cash burn rate has seen Tesla raise capital multiple times since its 2010 initial public offering, though this is to be expected for firms entering a capital-intensive industry like volume car manufacturing.
Despite the hurdles, Tesla’s share price has managed to stay at lofty levels, perhaps as investors price in the company’s disruptive potential, not only in terms of vehicles but also batteries and energy storage.
There’s no doubt that Tesla’s products are compelling. This was made clear with the huge number of deposits taken for the Model 3, many of them made before the car was even shown.