Tesla shares slip as cash-burn raises concerns

Reuters News
Posted: Feb 23, 2017 10:41 AM

(Reuters) - Tesla Inc's <TSLA.O> shares fell nearly 6 percent as the electric car maker's freewheeling cash burn deepened concerns that the company would need to raise more capital as it pushes ahead with the production of its mass-market Model 3 sedan.

Chief Executive Elon Musk said on Wednesday the company was considering a number of options but "it probably makes sense to raise capital to reduce risk."

Analysts have estimated that Tesla would need to raise $1 billion-$2 billion in capital ahead of the launch of the Model 3 to minimize the risk of cash on hand running too low.

The company's shares fell as much as 5.8 percent to $257.55 in morning trading - their biggest intraday percentage fall in 8 months.

The stock rose 3 percent in post-market trading on Wednesday after the company reported better-than-expected results.

Tesla said it plans an additional $2 billion to $2.5 billion in capital expenses before the launch and has $3.4 billion cash on hand.

Morgan Stanley analyst Adam Jonas estimates that the company will have spent about $10 billion in capital expenditures and R&D from 2014 through the first half of 2017.

"We're about to find out where this invested capital is going," Jonas added.

(Reporting by Narottam Medhora in Bengaluru; Editing by Saumyadeb Chakrabarty)