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.