I agree the last thing Tesla needs is more debt financing that leverages their balance sheet and reduces cash flow. But they should sell stock, preferably to a strategic investor who can also work with Tesla on increasing the value of that investment. Maybe there will be a good time after the Model Y unveiling to take this forward.
In the past folks here including
@Fact Checking have expressed the notion that debt financing is superior because it prevents dilution (which grows in kind if the stock goes up) but this is not a company that has a stable cash cushion for such a luxury. If they did then we would not be seeing such extreme cost cutting measures being implemented.
If Tesla could deleverage their balance sheet they would be able to invest in growth again and would likely be rewarded with a valuation increase worth more than the initial dilution.
Lastly, Elon's insistence not to raise capital is part of the bear thesis. This is the part I have a hard time disagreeing with as it makes no sense to me. Tesla has good product ideas, but they lack capital to execute them. If they want to capture these markets they need to move fast. Model S/X refresh is another great example. I'm sure Tesla would like to have funded that program but they likely had to delay it to prioritize capital for Model 3. People in the S forum have been speculating about a refresh since 2016.
Adam Jonas:
“Without an additional capital raise, we are prepared for Tesla’s gross cash to fall further below ($2 billion),” he said. The new sales model is “uncharted territory” for Tesla, a company that used to highlight its advantages in promoting the brand and engaging with customers without a middleman, he said.
Source:
Tesla stock slides to 4-month low as analysts question recent decisions, fret about cash burn
Tesla's lack of dealerships means that they require more capital for inventory because all their inventory sits on their books, instead of the dealers. They will need capital for things like spinning up the fabbing of HW3 manufacturing in volume, investing in Model Y, Semi and Roadster parts suppliers and manufacturing lines where will the capital come from for these programs to actually happen on schedule? The continued positive cashflow we've seen seems to be a big unknown to me with the huge price drops and 35k model 3.
Of course I don't deny it. But it's not sufficient to assume that your understanding of the situation is the correct one. We'll find out soon enough. Until then, you and I are both speculating. Only one of us is telling others that we're explaining the correct understanding of the situation.
