Tesla was the youngest baby in the tech family. Everyone adored and loved the electric car manufacturer. Since 2010, when it went public, the stock grew as much as whopping 1500%. Moreover, Tesla’s net worth is already more than the revolutionizing car maker Ford, Fiat Chrysler. In fact, it’s just a few billion dollars away from the General Motors. Nonetheless, the corporation is in a difficult situation, now. Tesla faces a question- can it operate its business without raising money further?
Tesla’s valuation doesn’t quite reflect its recent performance
Tesla’s valuation doesn’t quite reflect its recent performance. The corporation is plodding through some problems. Continuous losses and wrestling with the production. Last year, Tesla had an appalling production number. The electric car maker just produced 101, 312 vehicles where Ford produced 2.3 million vehicles. Moreover, Tesla failed to produce Model 3 on time as well.
Tesla’s ability to finance its operation without raising money
Now, experts in the field are questioning Tesla’s ability to finance its operation without raising money. In fact, an institution like Goldman Sachs said, Tesla needs to raise $10.5 billion to go through 2010. Nevertheless, Elon Musk, Tesla CEO insists that he won’t raise money. NY Post reported, “That’s on the heels of a bizarre conference call last Wednesday in which Musk, asked by an analyst about Tesla’s cash needs, responded, “Boring, bonehead questions are not cool — next.”
Elsewhere on the call, Musk had said “no” and “I specifically don’t want to” when asked about whether Tesla will need to raise capital as it ramps up production of its mass-market Model 3 sedan”.
Goldman is recommending
Via Market Watch we learned, Goldman is recommending a trade on the company’s liquidity levels that involves buying the 0.25% 2019 convertible bonds and selling a March 2019 call option to isolate the credit value.
“We believe selling a lower strike $330 call against the convertible creates a 9.2% annualized yield if the stock ends the period below $330 (+15% from current) at maturity while only losing a maximum of 2.0% (annualized) if the stock reaches $359.87/share at maturity,” said the note.
Tesla said in its most recent earnings that it does not intend to raise capital this year, and, on a controversial earnings call, Chief Executive Elon Musk said he does not “want” to raise capital.