Goldman Sees Tesla (TSLA) Requiring $10B in External Capital by 2020

Goldman Sachs analyst David Tamberrino weighed in on Tesla (NASDAQ: TSLA) capital requirements and said between its current operations, anticipated new product spend, and incremental capacity additions, the see the company potentially requiring over $10bn in external capital raises and debt re-financing by 2020.

Tamberrino expects the capital transactions may be funded through multiple avenues, including new bond issuance (secured and/or unsecured), convertible notes, and equity.

While they see several options available to the company, "issuing incremental debt (including priming current creditors with secured debt) may weigh on the credit profile of the company while issuing additional equity or convertibles at lower premiums would dilute current shareholders."

Discussing investment options, the analsyt commented: "Our preference is to express long views via the front-end convertible credit - and we continue to express a bearish view on the equity. Along those lines, we see a compelling opportunity to express a view on the company’s liquidity levels through buying the TSLA 0.25% 2019 convertible bonds and selling a March 2019 call option to isolate the credit value; as detailed within, we believe selling a lower strike $330 call against the convertible creates a 9.2% annualized yield if the stock ends the period below $330 (+15% from current) at maturity while only losing a maximum of 2.0% (annualized) if the stock reaches $359.87/share at maturity."

The firm maintained a Sell rating and price target of $195 on TSLA.

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $286.48 yesterday.

You May Also Be Interested In

• Tesla recalls nearly 3 million vehicles in China over safety issues
• Active options: TSLA NVDA AAPL SPCX MSTR PLTR MU AMZN HOOD MRNA SOFI
• Citigroup set to join top banks in Anthropic IPO - Bloomberg