Tesla Intending To Raise $1.5 Billion Via Bond Offering, To Be Used For Model 3 Production Ramp-Up

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Tesla will be looking to raise around $1.5 billion through a new bond offering, with the funds to be used to support the ramp-up of Model 3 production, the company revealed this morning.

The new debt/bond offering follows pretty closely on the final reveal of the Tesla Model 3 and the official start of deliveries.

Following the event, Model 3 reservations have been on something of a surge, reportedly, so the company will no doubt need quite a lot of funding if it’s to meet its current order obligations in a timely fashion.

Reuters provides more: “The debt offering comes as Tesla receives thousands of advance reservations for the Model 3, which were averaging at about 1,800 per day since the car’s launch in late July. … At the launch event, Musk said the company would face ‘at least six months of manufacturing hell’ as it increases production of the Model 3, which has a $35,000 base price.

“Tesla had over $3 billion in cash on hand at the end of the June quarter, compared with $4 billion at the end of the previous quarter and $3.25 billion a year earlier. Tesla’s cash burn, expected to top $2 billion this year, has prompted short-sellers like Greenlight Capital’s David Einhorn to bet against the Palo Alto, California company.”

It should be noted here, though, that Einhorn has been betting against Tesla for awhile now — to his loss. Obviously, Tesla stock isn’t going to rise forever, and there is likely going to be a market crash sometime in the next few years … but that doesn’t mean that Einhorn isn’t going to lose money with his current bets. We’ll have to wait to find out.

Some of the >100,000 people who reserved a Tesla Model 3 before Tesla even showed the car in March 2016. Photo by CleanTechnica.

Regarding demand for the Model 3, reportedly, Musk told a reporter (or a few reporters) that Tesla had 455,000 net reservations for the Model 3 (after cancellations). If you assume 1,800 new reservations a day (and negligible cancellations) for 9 days following the reveal, that adds 16,200 reservations to the 455,000 total, so brings it up to ~471,000 reservations for a $35,000+ car. Elon previously said he estimated the average selling price of a Model 3 to be $42,000. If that held up, you’re talking $19.782 billion in revenue from these reservations alone. (If you want to go even one speculative step further, Tesla has stated that it expects 25% gross margin on Model 3s it produces in 2018, when most of those 471,000 reservations will be built. Even if you assume 20% gross margin for those reservations, that’s approximately $4 billion for Tesla).

Overall, if you assume Tesla will more or less succeed on its targets, you can see why it doesn’t have much trouble securing financing.

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James Ayre

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.

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