If we talk of the last quarter, Tesla Inc (NASDAQ:TSLA) ended it with $3 billion worth of cash. This was after they spent $959 million on capital expenditures in the same quarter. As it will further invest heavily in the model 3 production camp, the second half of 2017 is likely to see their capital expenditures rise to $2 billion.
This brings us to the question as to whether Tesla Inc (NASDAQ:TSLA) will need to tap capital markets in the near future. Green light Capital’s David Einhorn argued that Tesla Inc (NASDAQ:TSLA) is likely to run out of cash when it attempts the ramp model 3 production. No doubt, he is correct about the fact that Tesla largely relied on capital markets to fund their ongoing cash needs. However, one cannot underestimate the willingness of the investors to support Tesla’s capital requirements.
When the company made an earning call again, it provided some kind of details pertaining to cash flows. Further, Tesla Inc (NASDAQ:TSLA) has always managed to negotiate more favorable payment terms with their suppliers. This gives Tesla more time in order to build their car and subsequently deliver it to their customers and even collect payment from them before they need to pay it to the suppliers.
If Tesla Inc (NASDAQ:TSLA) opts for another capital raise, the good news is that the current shareholders would avoid any subsequent dilution if Tesla Inc (NASDAQ:TSLA) chooses to go with debt rather than equity. Further, there is a higher cost of capital which seems to be associated with equity when you compare it to debt. The bad news, however, remains that Tesla’s balance sheet already seems to be heavily loaded with debt. The interest piling on the debt could turn out to be a major setback. So, it will surely be tricky as to how Tesla Inc (NASDAQ:TSLA) will manage both cash deposit and cash flow without sinking further in debts.