Tesla, Solar City in cash crunch ahead of merger

Tesla Motors and Solar City are facing a cash squeeze ahead of their merger, and Tesla said it will seek to raise up to $2.89 billion in capital through a stock sale in connection with the transaction.

In a new filing with the Securities and Exchange Commission, Tesla said bondholders have said they are seeking payments of $422 million for convertible notes that are due in 2018.

Palo Alto-based Tesla said those payments to the bondholders would be made by the end of the third quarter, which is due to end on Sept. 30, the SEC filing shows.

“Tesla is currently planning to raise additional funds by the end of this year, including through potential equity or debt offerings,” the company said in a filing with the SEC this week.

Separately, SolarCity appears to be going through cash at a rapid pace.

At the end of June, Solar City had $145.7 million in cash on hand, according to documents filed with the SEC. That’s quite a drop from the $382.5 million in cash the company had at the end of December.

During the 12 months that ended in June, Tesla lost $1.13 billion on $4.57 billion in revenue. Over the same one-year period, SolarCity lost $94.9 million on $537.7 million in revenue.

The maker of electric vehicles said it has a number of proposed uses for the cash.

“Such additional funds would be used primarily for tooling, production equipment and construction of the Tesla’s Model 3 production lines, equipment to support cell production at Tesla’s Gigafactory, as well as new Tesla retail locations, service centers and supercharger locations,” Tesla said.

But some of the cash could be used in connection with the combination of the two green tech companies.

“If the merger with SolarCity is completed, the additional funds would also be used to support the additional capital needs of the combined company,” Tesla said in the filing.

 

Photo: Interior of a Tesla vehicle. (Getty Images)

 

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  • Martin Winlow

    Yet again, no mention of Solar City’s, soon to open, gargantuan (but not quite ‘Giga’) PV module factory in NYS. Kind of thinking this might explain where some of the ‘losses’ have gone… no?

  • cocoacoder

    A Wall Street Journal article from yesterday (9/1) goes into a bit more detail as to the reasons for SCTY’s cash issues; the factory is not the problem.

    SCTY has a D/E ratio of 345%, which is astounding. Creditors are not willing to put-in any more funds, which is causing a liquidity squeeze, before the TSLA merger because…well, why? SCTY will be TSLA’s problem soon.

    With SCTY’s YOY burn-rate of roughly $30M/mo it has only 4.8 months of cash. And that’s just from operations. It has bond payments coming up soon. Since creditors will not contribute more, SCTY is essentially going broke. Left on its own, it will be in bankruptcy within months.

    I’m not sure why TSLA’s board though it would be better to purchase SCTY’s through a merger rather than in bankruptcy where it would go for pennies on the dollar. And I don’t see how the attach rate of SCTY makes-up for the operational cash, never mind debt obligation, drain that TSLA is assuming from the merger.

    As for TSLA’s next fund-raising round, given it’s own D/E ratio of 145.5%, never mind what that number will be after the SCTY acquisition, and a burn-rate requiring it to go back to the trough, it’s no wonder that TSLA is off by nearly 11% since Monday. Maybe Musk will give another speech and all of that will invert.

 
 
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