The new factory is on the way to be built and preorders for Model 3 is surprisingly high. For Elon Musk and his ambition to change the auto industry, the only problem left was money and is still money. Tesla burnt huge amount capital on R&D and will need more to implement its home battery plan by buying Solarcity. Tesla has done more than 2 rounds of money raising in this year and still need the support from Deutsche Bank to conduct the car leasing program. Yet, Tesla may still raise funds from public market.
The deal is Tesla can borrow up to $300 million for its vehicle leasing program through an agreement with Deutsche Bank as part of a broader effort to bolster the company’s finances. In a filing with the U.S. Securities and Exchange Commission, Tesla said the new liquidity meant its own cash requirements for its direct leasing program would be “significantly reduced.” As a result, Tesla can raise fewer funds from the public market as it gears up for its much-anticipated Model 3 mass-market vehicle.
The amount outstanding from the loan and security agreement is due on Sept 20, 2018.
Tesla, which burned through over $600 million of cash in the first half of the year, faces a cash crunch as it ramps up manufacturing capacity for the Model 3 next year and completes construction of its massive “Gigafactory” battery factory in Nevada.
Tesla’s planned $2.6 billion acquisition of SolarCity, which itself has pressing cash needs, will add to its liquidity issues. Combined, the two companies’ debt totaled $5.43 billion with a combined cash burn of $830 million last year.
Tesla said in previous SEC filing that it plans to raise additional money this year to help fund development and production of its new Model 3 sedan and build out a giant battery factory.
In August, the company said it had $3.25 billion in principal sources of liquidity as of June 30, 2016, but in July it repaid $678 million on a revolving credit line and planned to redeem $411 million of 2018 convertible notes, warning it could spend more on the securities.
The company also warned that the value of its secured assets had limited its ability to borrow under its asset-based revolving credit agreement with a syndicate of banks. In response to such speed of burning money, the stock price went down more than 2% today and investors are concerning the potentials for not meeting its debt obligations.