Tesla is getting close to releasing the Model 3, and the talks of money tightening up have already begun. Fortunately, they were totally expected.
According to The Detroit News, the electric automaker has to raise at least $1.15 billion to bring the Model S – the brand’s entry-level sedan – to life. Before everyone starts running for the hills screaming “the sky is falling,” most financial experts expected this need for additional capital, as Tesla burned through tons of cash in 2016.
Elon Musk, CEO of Tesla, said the automaker actually has the cash needed to start production of the Model 3 without raising capital. It’s raising this money, which will be in the form of roughly $250 million in stock and $750 million in convertible debt, to give itself a cushion during production. Without it, Musk said “we get very close to the edge,” which is not a place for a still-young automaker to be.
There is no mention of when the fundraising efforts will take place, but they should start soon, as there are about 373,000 preorders for the $35,000 (before government incentives) Model 3, and production is set to start sometime in 2018. So, the clock’s ticking.
The most ironic thing about this announcement is that after announcing it needed to raise cash by selling more stock, its stock price rose by 2.5% to $262.05. Typically, when a company announces fundraising efforts, buyer confidence and stock prices fall.
Stay tuned for updates.