Billions need to be raised

Musk said earlier this month that he expects SolarCity to generate $500 million in cash for Tesla over the next three years. He predicted that SolarCity would add more than $1 billion to Tesla’s revenues next year.

Analysts at proxy advisory firm Institutional Shareholder Services, which recommends that investors approve the merger, estimate that, after the deal closes, Tesla will need to raise between $2.5 billion and $3.5 billion during each of the next two years.

If Tesla can’t raise all the money it needs, some of its ambitious plans could be delayed – or derailed. In one hypothetical scenario that SolarCity management spelled out in an August regulatory filing, if the solar installer struggled to raise new capital it might be forced to cut off funding for the Buffalo solar panel factory to reduce its cash needs by more than $400 million through the end of 2018.

State and company executives have said that’s a worst-case scenario meant to meet legal requirements that regulatory filings warn investors about all potential risks. But it also underscores the importance of raising capital to the companies.

“The issue,” the Institutional Shareholder Services analysts said, “is whether Tesla can handle these needs.”

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