(Reuters) – Tesla Inc said on Monday it could seek alternative sources of financing although it expects cash generated from its business to be enough to fund its investments and pay down debt for at least the next 12 months.
FILE PHOTO: The logo of Tesla is seen in Taipei, Taiwan August 11, 2017. REUTERS/Tyrone Siu/File Photo
Wall Street has been looking for more details after Chief Executive Officer Elon Musk suggested last week that a capital raise could be imminent as the electric vehicle maker posted a $700 million loss for the first quarter.
“There is some merit to raising capital,” Musk said on an earnings conference call on Wednesday, after being asked why he had not done so yet. “It’s probably about the right time.”
Shares of the company, which were initially up 2 percent after Musk reached a deal with the U.S. regulators to settle a dispute over his use of Twitter, pared most of their gains to trade up 0.2 percent at $235.60 before the bell.
Many analysts had predicted the company would need to raise funds for its expansion, including the Shanghai factory, the upcoming Model Y SUV and other projects.
“We continually evaluate our capital expenditure needs and may decide it is best to raise additional capital to fund the rapid growth of our business,” the electric car maker said in a regulatory filing here.
Tesla has $2.2 billion in cash and expects capital expenditures of about $2.5 billion to $3 billion annually for the next two fiscal years. The company’s total debt stood at $10.33 billion as of March 31.
However, tapping the debt market for raising capital might become more expensive for the electric car maker.
Tesla’s $1.8 billion junk bond sank half a cent to yield 8.42 percent on Friday, more than 3 percentage points above the bond’s coupon rate of 5.3 percent.
Its spread, or the premium investors demand for the added risk of holding Tesla debt rather than a safer U.S. Treasury security, widened by about 15 basis points to a near-record 611 basis points.
“We may need or want to raise additional funds in the future, and these funds may not be available to us when we need or want them, or at all,” Tesla said in the filing.
Reporting by Supantha Mukherjee in Bengaluru; Editing by Shailesh Kuber and Anil D’Silva