People stand in a Tesla showroom at a shopping mall in Los Angeles on April 25, 2019. File photo: AFP/MARK RALSTON
People stand in a Tesla showroom at a shopping mall in Los Angeles on April 25, 2019. File photo: AFP/MARK RALSTON

Bengaluru — Tesla said on Monday it could seek alternative sources of financing though it expects cash generated from its business to be enough to fund its investments and pay down debt for at least the next 12 months.

Wall Street has been looking for more details after CEO Elon Musk suggested last week that a capital raise could be imminent as the electric carmaker posted a $700m loss for the first quarter.

“There is some merit to raising capital,” Musk said on an earnings conference call on Wednesday, after being asked why he had not done so yet. “It’s probably about the right time.”

Shares of the company, which were initially up 2% after Musk reached a deal with the US regulators to settle a dispute over his use of Twitter, pared most of their gains to trade up 0.2% at $235.60 before the bell.

Many analysts had predicted the company would need to raise funds for its expansion, including the Shanghai factory, the upcoming Model Y SUV and other projects.

“We continually evaluate our capital expenditure needs and may decide it is best to raise additional capital to fund the rapid growth of our business,” the carmaker said in a regulatory filing.

Tesla has $2.2bn in cash and expects capital expenditures of about $2.5bn-$3bn annually for the next two financial years. The company’s total debt stood at $10.33bn as of March 31.

However, tapping the debt market for raising capital might become more expensive for the electric carmaker.

Tesla’s $1.8bn junk bond sank half a cent to yield 8.42% on Friday, more than three percentage points above the bond’s coupon rate of 5.3%.

Its spread, or the premium investors demand for the added risk of holding Tesla debt rather than a safer US Treasury security, widened by about 15 basis points to a near-record 611 basis points.

“We may need or want to raise additional funds in the future, and these funds may not be available to us when we need or want them, or at all,” Tesla said in the filing.

Reuters