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.”
Read more "Tesla-SolarCity merger: How risky is all that debt?"
Tesla shares have declined almost 20% in the last three months, even as the automaker reported a surprisingly profitable third quarter and signaled to Wall Street that it has curtailed its cash burn and could finish 2016 with more money in the bank then expected.
The immediate problem for Tesla is political.
A Trump administration is unlikely to be friendly to electric cars — certainly not as friendly as the Obama administration. Obama was in the White House for almost the entirety of Tesla ascent as both a carmaker and a stock, with Tesla’s IPO taking place in 2010 and the Model S sedan hitting the streets in 2012.
Fortunately, Tesla is far more well established than it was when Obama took office in 2009. CEO Elon Musk’s company will sell a record-number of electric cars in 2016 — probably about 80,000 — and has a market cap of around $30 billion. It can hold on for a while, even if federal policies turn against it. And don’t forget the nearly 400,000 per-orders Tesla has for its forthcoming Model 3 mass-market vehicle.
The worry for the automaker now is that the end of the year and beginning of the next haven’t been happy financial times for the company, historically. Tesla shares have a pattern of sliding through the fourth quarter and continuing their decline into the first, only recovering once it establishes guidance for deliveries for the next year.
Read more "Tesla’s stock has had a rough 3 months — and it doesn’t look like things will get better"