Over the weekend, when looking carefully at Tesla's cash burn, pardon cash inferno...
... we said that at "the current cash burn rate, TSLA can only fund just two more quarters of cash burn at which point, and most likely well before it, the company will have to aggressively raise new capital."
It wasn't 1-2 quarters. It was barely 3 days. Moments ago TSLA announced that, just as we expected, it would dilute its shareholder by just under 2% by issuing $500 million in equity. From the press release:
Tesla announced today that it intends to offer, subject to market and other conditions, $500 million of additional shares of common stock in an underwritten registered public offering. In addition, Tesla intends to grant the underwriters a 30-day option to purchase up to $75 million of additional shares of common stock.
Elon Musk, Tesla's CEO, intends to purchase $20 million of common stock in this offering at the public offering price.
One wonders if the entire $20 million "out of Elon's pocket" was once again funded by $20 million out of California taxpayers' pockets.
Tesla intends to use the net proceeds from this offering to accelerate the growth of its business in the United States and internationally, including the growth of its stores, service centers, Supercharger network and the Tesla Energy business, and for the development and production of Model 3, the development of the Tesla Gigafactory, and other general corporate purposes.
In other words, at the current burn rate, TSLA just bought itself one more quarter of cash flow. Expect another equity offering in the next 1-2 quarters.
And if there is a reason why Morgan Stanley did not upgrade the stock with a $320 price target yesterday as it did back in 2014 the day before it issued a convertible offering for TSLA, is that this time the lead left is Goldman, not MS:
Goldman, Sachs & Co. and Morgan Stanley are acting as lead joint book-running managers for the offering, J.P. Morgan and Deutsche Bank Securities are acting as additional book-running managers for the offering, and BofA Merrill Lynch and Wells Fargo Securities are acting as co-managers.
And since this is the new paranormal, a $500 million dilution of the $30 billion market cap company promptly pushed its market cap higher... by $500 million, confirming yet again that to algos a GAAP equity offering is really just a non-GAAP buyback.