With a severe financial crunch on the horizon, Tesla Motors is planning to raise additional money within the year.
The company, through a filing to the Securities and Exchange Commission, is looking to raise cash through an equity offering or a debt offering. In the same filing, Tesla Motors revealed that it needs to pay $422 million to bondholders within the third quarter.
The money that will be raised by the planned offering will be used to help in funding the development and the production of the highly anticipated Model 3 electric vehicle. Some of the proceeds of the capital raising will also be used to help in completing the construction of Tesla Motors' massive battery factory in Nevada.
Most notable among the planned uses for the money that will be raised, however, is the proposed acquisition of home solar energy company SolarCity. Elon Musk, the co-founder, chairman and CEO of Tesla Motors, is also a co-founder and chairman of SolarCity.
The cash situation of Tesla Motors took on added urgency when the $2.6 billion deal to acquire SolarCity was announced on Aug. 1. The merging of the two companies set forward Musk's strategy to create a massive entity focused on clean energy, both for homes and for vehicles.
The Federal Trade Commission just recently approved the proposal for SolarCity's acquisition, as the merging of the companies did not present any anticompetitive issues and had little to no overlaps in their businesses.
With the FTC's approval, the only thing left for Tesla Motors to do to begin the acquisition process is to file the necessary documents with the Securities and Exchange Commission and set a date for the company's shareholders to vote on the planned merger.
The filing with the SEC, however, revealed that on the side of SolarCity, things did not go so well in the run-up to the announced merger with Tesla Motors. Over recent weeks, 15 institutional investors have passed on injecting equity into the solar power company or purchasing it outright.
SolarCity is now in a liquidity squeeze, as it is facing difficulties in tapping into public markets amid the merger talks. The cash held by the company has declined to $146 million by June 30, compared with $421 million by the end of the same period last year.
The plans of Tesla Motors to raise additional money before the year ends should not be considered as a surprise, given the company's ambitious plans. Analysts worry that whenever the company sells more stock, the share price of Tesla Motors will be affected. However, that has not been the case so far.
