When Musk promised ~5 k a week of model 3 deliveries
by next month, he was also promising his shareholders and creditors ~$1 B of model 3 monthly revenue.
It is now a near certainty that model three revenue will not arrive in time to prevent TSLA from running out of cash...again.
The recent price decline of TSLA junk bonds
indicates Musk's next appeal for fresh capital may not be as well -received as in the past.
https://www.bloomberg.com/news/articles ... t-stumbles
Tesla Sparks Fresh Cash Concerns After Model 3 Rollout Stumbles
Tesla Inc.’s delay in getting mass production going is increasing the likelihood that Chief Executive Officer Elon Musk will need to turn to Wall Street for more capital.
With battery bottlenecks holding up output of the cheaper new Model 3 sedan, Tesla may need more funds in 2018. While Musk has brought in more than $3 billion this year from equity, convertible bond and debt offerings, his electric-car maker has burned through about $2.6 billion in cash during just the last two quarters.
“We worry that another capital raise may be necessary,” Toni Sacconaghi, a Sanford C. Bernstein & Co. analyst, wrote in a report to clients. He estimates Tesla will have burned through more than $10 billion in cash by year-end since its founding and that it may be the biggest public company ever to have never generated annual profit or positive cash flow.
“There is a dose of reality for Tesla and the market’s reaction is reflecting that,” said David Kudla, chief executive officer of Mainstay Capital Management LLC. “This raises the question: Can they ever get positive cash flow? Will they ever get there?”
While Tesla exited the third quarter with about $3.5 billion cash in hand, the company is pouring money into its assembly lines and toward the buildup of battery production it needs to deliver more cars and bring in cash...
https://www.marketwatch.com/story/tesla ... 2017-11-10
Tesla’s junk bonds are trading under water — and it could spell trouble for Elon Musk
Tesla Inc. first-ever pure corporate bonds are trading under water, boding ill for the Silicon Valley car maker’s next attempt to tap capital markets.
Tesla TSLA, +0.07% sold $1.8 billion in the senior notes in August at a yield of 5.300%, at the height of excitement about the Model 3 and expectations the sedan’s production ramp would run as smoothly as Chief Executive Elon Musk had predicted.
That same month, Tesla shares rose 10% to mark their last monthly gain this year so far. The stock lost 4.2% in September and 2.8% in October.
The stock is down 9% so far in November, on the heels of a quarterly miss earlier in the month and news that the company has further pushed out its Model 3 production targets.
“Third-quarter results put some pressure on the cash flow needs,” said Efraim Levy, an analyst with CFRA Research. The wider-than-expected quarterly loss and production delays “makes it harder for them to get a sweeter deal than they had in the past,” on capital raising, be it when selling bonds or equity, he said.
The 5.300% notes, which mature in 2025, were trading at 93.81 cents on the dollar on Friday to yield 6.320%, according to trading platform MarketAxess. On a spread basis, they were trading at 393 basis points above comparable Treasurys. The bonds fell under par within a week of issuance, but were holding above 97 cents for much of October.
...the weak performance of the bonds may be a sign that bond investors, at least, are starting to disbelieve Tesla’s growth story and will be looking for higher premiums to take on higher risk, said Trip Miller, a managing partner at hedge fund, Gullane Capital LLC. That higher cost of borrowing will have its own negative implications, he said.
“Maybe the dam is starting to break for Tesla,” Miller said. Gullane does not have a position in Tesla because “their balance sheet is very, very troublesome for us,” he said...