On May 2, local time, Tesla announced that it would refinance US$ 2 billion, including the newly issued US$ 650 million common shares (about 2.7 million shares) and US$ 1.35 billion convertible bonds, to maintain the overall operation of the company.
Financing is like "tearing off a band-aid"
Tesla CEO Musk said at the investor conference that although Tesla currently has enough cash flow to support its business development, having more cash will help Tesla to buffer in order to cope with the unexpected macroeconomic situation and the potential demand headwinds in the automobile market.
Musk was finally willing to "plan ahead" to face the reality, and also let investors worried about Tesla’s tight cash flow breathe a sigh of relief. Dan Ives, managing director of the asset research department of Wedbush Securities, a wall street brokerage, believes that Tesla’s financing decision is like "tearing off a band-aid". He said: "Tesla is finally willing to listen to investors. Before, the market was worried that Tesla might not have enough cash to support it through the second quarter. The data can tell everything."
In this round of financing, Musk said that he would buy Tesla shares worth $10 million (about 41,896 shares). According to InsiderScore, Musk’s move to buy back shares implies that the market can buy Tesla shares in the short term. In the three months after Musk’s five purchases, Tesla’s share price rose by more than 40% on average.
In addition, the new documents show that Musk personally owes more than $500 million in loans to investment banks. According to Tesla’s latest submission, Musk personally owed $213 million, $209 million and $85 million to Wall Street investment banks Goldman Sachs, Morgan Stanley and Bank of America, respectively, but this was $117 million less than that of the same period last year. Last year, Musk personally owed $624 million to investment banks.
Musk holds about 20% of Tesla’s shares, with a total value of 8 billion to 12.6 billion US dollars. Tesla warned that if the stock price continues to fall and the bank forces Musk to sell some of its shares, it may in turn put new pressure on the stock price.
It is worth noting that the primary participants in Tesla’s new financing plan, including Goldman Sachs and Citigroup, have all given Tesla shares a "sell" rating, which is relatively rare on Wall Street.
The market value should reach 500 billion dollars.
After Tesla announced a $2 billion financing plan, its share price rose by 4%. However, this year, Tesla’s share price has fallen by nearly 30%, with a market value of $42 billion. Musk also told investors recently that autonomous driving will make Tesla a company with a market value of more than 500 billion US dollars.
This means that Tesla’s market value will be more than 10 times on the current basis. According to Musk, Tesla will become a "value-preserved" model. He expects that the value of each Tesla will be between 150,000 and 250,000 US dollars in three years, thanks to the upgrade of Tesla’s autopilot software. He also predicted that there will be 1 million autonomous Robotaxis on the road next year.
However, Musk’s confidence has also been doubted by analysts. For example, Jeffrey Osborne, an analyst at Cowen, a Wall Street investment bank, wrote in a letter to investors: "We believe that the transformation of Tesla’s technology and execution strategy will face great risks. If Tesla wants to compete with NVIDIA in hardware, Google Waymo in software, and the shared taxi platform that is dominant in the current market in the operation of self-driving taxis, it is very difficult to achieve."
Osborne also pointed out that Tesla did not fully plan how to operate self-driving taxis, because some basic questions have not been answered, such as pricing, insurance liability and legal supervision. Musk said after the earnings conference last month that Tesla is considering launching its own insurance financial products.
Zach Kirkhron, Tesla’s newly appointed CFO, maintained his expectations for the company’s prospects at the investor conference, that is, 90,000 to 100,000 Tesla vehicles were delivered in the second quarter and 360,000 to 400,000 Tesla vehicles were delivered throughout the year.
Qian Tongxin