Tesla Motors Inc (NASDAQ:TSLA) has entered into an agreement with Deutsche Bank allowing it to borrow up to $300 million for its vehicle leasing program. This move is part of Tesla Motors Inc (NASDAQ:TSLA)’s broader effort to bolster its finances, according to Reuters.
Big cash needs
In a filing with the SEC, Tesla Motors Inc (NASDAQ:TSLA) said the new credit line will result in a significant reduction in requirements for its direct leasing program. This means it won’t have to raise as much money from the public market as it gears up to bring the Model 3 mass market vehicle to the market. The amount outstanding from the loan and security agreement is due on Sept. 20, 2018.
Tesla Motors Inc (NASDAQ:TSLA) burned more than $600 million in cash in the first half of the year and is facing a cash crunch as it works on ramping its manufacturing capacity for the Model 3 next year. Also the company is heading towards completion of its massive Gigafactory in Nevada.
Hedge Funds: Small Firms Profit As Big Names Close In 2020
At the beginning of July, Lansdowne Partners, one of Europe's oldest and best-known hedge fund managers, announced that it was closing its flagship hedge fund after a run of poor performance. The closure is the latest in a string of high-profile hedge funds that have decided to shut up shop in recent years. Billionaire investor Read More
Also the EV firm entered into an acquisition agreement with SolarCity for $2.6 billion, putting more pressure for cash on Tesla Motors Inc (NASDAQ:TSLA) that is already facing liquidity issues. Combined, the two companies’ debt totaled $5.43 billion with a combined cash burn of $830 million last year, notes Reuters.
How Tesla (TSLA) plans to address the issue?
In its previous SEC filing, Tesla Motors Inc (NASDAQ:TSLA) said it planned to raise additional money this year to fund the production of its Model 3 and build out a giant battery factory. Also CEO Elon Musk has asked his employees to produce more and spend less. Bloomberg News recently obtained an email dated August 29 in which Musk has urged workers to cut costs and deliver every car they possibly can.
Tesla Motors Inc (NASDAQ:TSLA) will be able to raise funds easily, provided it is able to show positive cash flow this quarter.
“We will be in a far better position to convince potential investors to bet on us if the headline is not ‘Tesla Loses Money Again,’ but rather ‘Tesla Defies All Expectations and Achieves Profitability.’ That would be amazing!” Musk wrote to employees.
Musk intends to make a good impression on Wall Street, and this is clear from his message. Wall Street analysts are split on this matter. Of the 19 analysts surveyed by Bloomberg, seven have a Hold rating on the EV firm, five consider it a Sell, and seven had a Buy rating.
On Wednesday, Tesla Motors Inc (NASDAQ:TSLA) shares closed down 0.55% at $201.71. Year to date, the stock is down more than 15%, while in the last year, it is down almost 17%.