Fulfilling the big dreams of Tesla (TSLA) CEO Elon Musk will cost the electric vehicle company a pretty penny.
$25 billion over 10 years to be exact, says UBS analyst Colin Langan. Here’s an excerpt from Langan’s latest note:
“Despite Tesla claims, we believe a capital raise will be needed, at minimum to support its ambitious plans for the Semi, Roadster, Model Y, and needed infrastructure and service center expansion. We est. these alone could require over $25bn in capex over the next 10 years. However, with H1 cash burn of ~$1.6 billion (UBSe), ~$0.5 billion in debt coming due, and ~$0.75 billion in Gigafactory related accrued liabilities, we expect Tesla will raise capital by Q3. The key question regarding a capital raise is whether TSLA approaches the market with good news or bad news. If Tesla can average an over 3k/week rate in Q3, EPS could temporally be positive due to higher priced (and margin) initial deliveries and would set up a better environment to raise capital, likely for the Model Y. If Tesla falls short, it could be forced to raise capital in a challenged position.”
To feed that capex beast, Musk better hope the company starts producing profitable cars very soon. If not, investors could easily be at risk of a dilutive capital raise.
Before You Go
TheStreet looks at the lack of leadership by Musk on the latest edition of ‘Jolt.’ Watch below.