Will Tesla Have to Take on More Debt?
Tesla is under fire yet again. This time it’s not Elon Musk’s tweets or another fatal crash, but an influential financial group believes that Tesla may have to tap capital markets to fund its auto operations.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Tesla Inc. (NASDAQ: TSLA) is under fire yet again. This time it’s not Elon Musk’s tweets or another fatal crash, but an influential financial group believes that Tesla may have to tap capital markets for a nice chunk of change by 2020 — that is, if the company wants to fund its auto operations.
The company has options for raising these funds, whether it’s new bonds, convertible notes or equity. However, each of these options has a downside for investors.
According to Goldman Sachs analyst, David Tamberrino:
We see several options available to the company to refinance maturing debt and raise incremental funds, which should allow Tesla to fund its growth targets. However, issuing incremental debt (including priming current creditors with secured debt) may weigh on the credit profile of the company while issuing additional equity or convertibles at lower premiums would dilute current shareholders.
[nativounit]
In an effort to stave this off, Musk is frantically cutting costs across the board and doing some restructuring within the company, insistent that he should not have to raise more funds — at least not this year.
Bloomberg believes the math is sound for that claim, but there could be issues:
Tesla’s view that it doesn’t require a debt or equity raise this year is mathematically correct, but highly imprudent from a credit and risk perspective if followed
Goldman Sachs has a Sell rating with a $195 price target, implying a downside of 32% from Wednesday’s closing price of $286.48.
Shares of Tesla were last seen trading at $287.79 on Thursday, with a consensus analyst price target of $316.92 and a 52-week range of $244.59 to $389.61.
[recirclink id=464051]
[wallst_email_signup]
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
