Tesla To Raise $1.5BN In Bond Offerings


Tesla Inc announced at the beginning of the week that it is planning to sell bonds worth $1.5 billion in its efforts to raise its balances in able to ramp up the production of its Model 3 vehicles.

The Model 3 vehicle which is the company’s most affordable vehicle yet at a starting price of $35,000 received more than 400,000 in pre-orders during its launch last year is currently receiving reservations of 1,800 daily following its official launch last year.  Tesla shares touched the $350 level last week after it released an upbeat earnings report along with a positive outlook for the vehicle due to the rising demand. Tesla currently has a target of completing 1,500 units of the Model 3 vehicle by September and increasing it to 20,000 vehicles per month before the end of the year.

Just recently, new reports revealed that the demand for Tesla’s Model 3 could exceed 700,000 units this year following hints from Tesla Chief Executive Officer Elon Musk that the demand is rising to an annual rate higher than 700,000 units.

The company posted lesser than expected losses during its second quarter earnings report at $1.33 per share compared to most analyst expectations of $1.88 per share on a revenue of $1.51 billion. Tesla Inc was also able to beat most expectations after their revenue came in at $2.79 billion. However, Tesla shares still lost around 13% following a weak second quarter sale.

Tesla investors have been primarily concerned about the company’s massive cash burn in preparation for the launch of the Model 3. However, due to the huge demand and the bright outlook of the vehicle, Tesla shares have sustained above the $300 level. By last week, Tesla shares have risen by almost 6.5% which is its highest since April when it gained around 8.7%.

The company’s announcement of issuance of debts was expected by some investors after Tesla chief executive officer Elon Musk stated last week during their earnings call that they should expect a debt issuance instead of an equity tap.

The bonds which will be sold are expected to mature in the year 2025 and the company’s total debt will be at around $8.2 billion where $4.7 billion is set to be a long-term debt.

Analysts commented that speeding up the production of the Model 3 would mean that the company would have to upgrade its capital expenditures if the company is to boost its overall production in its assembly plant and battery plant in California and Nevada respectively.

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