Tesla’s Stock Soars On News Company Lost More Than $300 Million
Tesla’s stock did much better than analysts expected Wednesday following news that the electric automaker lost a record amount money during the second financial quarter.
The Silicon Valley company’s mission to provide cheap Model 3 vehicles caused Tesla to plow through more than $1 billion in cash during the last quarter of 2017. The company’s net loss increased to $336 million, yet the massive loss wasn’t disastrous for Tesla’s stock. Tesla’s stock rose to $348 per share, despite the record loss.
CEO Elon Musk told analysts Wednesday that the company is seriously considering raising money through a debt offering because it has only $3 billion in cash on hand. “This is the best I’ve ever felt about Tesla’s future,” despite the company’s financial troubles, the Tesla chairman said,
Tesla will need to boost its capital if the company intends on producing the amount of Model 3 vehicles Musk promised the nearly 500,000 people who dropped $1,000 deposits on the inexpensive automobile.
“He’s going to need capital,” Ross Gerber, chief executive officer of Gerber Kawasaki Wealth & Investment Management, told reporters after the July 30 unveiling of the Model 3. “That’s the one part of the financials that are a little bit troubling. To underestimate the cash burn over the next six months will be a mistake.”
The company must consider its options quickly if it intends on satisfying customers’ demands for the Model 3, a car that has fascinated people because of its $35,000 price tag but that also lacks the range many motorists prefer.
Tesla delivered the first 30 Model 3s to owners and claims that it will begin rolling out vehicles with 220 miles of range that start at $35,000. That may not be enough for many customers, especially those who prefer a car with a longer range. However, the Model 3 version with a 310-mile range has a $44,000 starting price tag, undercutting Musk’s promise to deliver a cheap vehicle to the masses.
The deposits that customers made last summer do not specify which version they prefer, which could force Tesla to produce more of the 310-mile range version than the lower cost versions. The increased costs could compel the company to raise more money through a debt offering than originally expected.
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