Tesla (TSLA) on Watch After Filing Form S-4 Discussing Cash Raise by Year End

August 31, 2016 7:46 AM EDT

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Tesla (NASDAQ: TSLA) shares were in focus Wednesday after filing its S-4 with the SEC regarding its merger with SolarCity (Nasdaq: SCTY). Some traders focused on information related to the company's future liquidity and its plans to raise additional funds by the end of this year.

From the filing:


As of June 30, 2016, Tesla had $3.25 billion in principal sources of liquidity available from its cash and cash equivalents, which included $2.76 billion of money market funds. Subsequent to June 30, 2016, Tesla has received notices of conversion from holders of approximately $422 million in aggregate principal amount of Tesla’s convertible senior notes due 2018 (“2018 Notes”), which conversions require Tesla to repay the principal amount in cash. Tesla expects to pay this amount in the third quarter of 2016 and, after giving effect to these conversions, Tesla had approximately $224 million in aggregate principal amount of 2018 Notes outstanding.

Sources of cash are predominately from Tesla’s deliveries of vehicles, as well as customer deposits for vehicles, sales of regulatory credits, proceeds from retail financing activities, sales of energy products, and non-warranty repair and maintenance services. While Tesla expects that its current sources of liquidity, including cash and cash equivalents, together with its current projections of cash flow from operating and retail financing activities, will provide it with adequate liquidity based on its current plans through at least the end of the current fiscal year, Tesla is currently planning to raise additional funds by the end of this year, including through potential equity or debt offerings, subject to market conditions and recognizing that Tesla cannot be certain that additional funds would be available to it on favorable terms or at all. For additional information, see the section entitled “Risk Factors” beginning on page 35.

Such additional funds would be used primarily for tooling, production equipment and construction of the Tesla’s Model 3 production lines, equipment to support cell production at Tesla’s Gigafactory, as well as new Tesla retail locations, service centers and Supercharger locations. Secondarily, if the Merger with SolarCity is completed, the additional funds would also be used to support the additional capital needs of the Combined Company.

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