Tesla is preparing to raise $2.3 billion as the Silicon Valley company struggles with the realization that its federal tax credit credits are running dry.
“Tesla intends to use the net proceeds from the offerings to further strengthen its balance sheet, as well as for general corporate purposes,” Tesla said Thursday in offering a major stock option. The decision to raise capital comes nearly a week after the company announced a $702 million first quarter loss. Tesla’s plan includes a $10 million stock purchase from CEO Elon Musk.
The negative cash flow is the greatest loss Tesla has ever posted over one-quarter. The company’s car deliveries also dropped by 31 percent from 90,700 cars in the last quarter of 2018 to 63,000 cars in the first quarter of 2019, media reports show.
Last quarter was Tesla’s first sales period after the phaseout of the lucrative federal tax credit — buyers get $3,750 from $7,500 per vehicle. The credit was halved in January, which phases out after an automaker sells more than 200,000 electric vehicles, The Wall Street Journal reported in April.
Tesla attributed the slowdown to challenges associated with taking the Model 3 to China for the first time. Only half of the entire quarter’s vehicles were delivered 10 days before the period ended, according to Tesla. The company delivered 50,900 Model 3 cars in the first quarter, down 20 percent from 63,359 the past three months. Analysts anticipated 54,600 in the latest quarter.
The turmoil comes as federal regulators continue to breath down Musk’s neck over the mercurial entrepreneur’s social media behavior. The Securities and Exchange Commission (SEC) asked a judge in February to hold Musk in contempt for violating the terms of an agreement requiring the company to pre-approve his tweets.
Regulators said he violated the agreement when he tweeted Tesla would make around 500,000 cars in 2019. Musk later corrected the tweet, saying he “meant to say” weekly production would be equal to half a million cars annually while total car deliveries would be roughly 400,000.
Musk agreed to resolve an SEC probe in October 2018 without admitting or denying wrongdoing. The plan called for their combined $40 million in penalties to be distributed to affected shareholders. He told his Twitter followers in August of that year he secured “funding” to take the company private at $420 per share, far more than the company was worth at the time of the tweet.
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