Business Corpus: Tesla Equity Offering Still Expected Amid Cash Burn, Solar TroublesTesla says that higher Model 3 production in the September quarter will make a capital raise unnecessary. But, some analysts aren’t buying that and expect an equity offering. The post Tesla Equity Offering Still Expected Amid Cash Burn, Solar Troubles appeared first on Investor's Business Daily.

[Collection]

Tesla Motors (TSLA) says it will not need to raise new capital this year if its Model 3 production ramps up but its solar-energy business remains an issue and some analysts expect a new equity or debt offering in 2018.

Tesla's Solar City unit accounts for about 30% of the company's $10 billion in debt and is straining its balance sheet, Bloomberg reported. Solar City, which merged with the electric car maker in 2016, has been losing residential market share recently to Sunrun, Bloomberg reported.

The electric car maker updated Model 3 production numbers on April 3. Tesla is now making about 2,000 M3 sedans a week.

Tesla said in a release that higher Model 3 production in the September quarter would increase operating cash flow, making a capital raise unnecessary.

But, some analysts aren't buying that.

"We continue to model a $2.5 billion equity raise in Q3, 2018, despite the company's assertion that they will not require an equity or debt raise this year apart from standard credit lines," said Adam Jonas, Morgan Stanley analyst said in a note to clients.

Jefferies analyst Philippe Houchois said in his note: "We continue to forecast $2.5 billion to $3 billion will be needed this year and we would expect refinancing risk to remain high until Tesla demonstrates M3 volume approaching 10,000 units per week and improving gross margin."

"Given our forecast for a $3.8 billion cash burn in 2018, we continue to see a fund raise as necessary, modeling a $2.5 billion raise in Q3," Barclays analyst Brian Johnson said in his report. "The lack of sustainable elevated production will keep Tesla pressed on cash. Yet Tesla needs to keep the narrative positive, as its options for any capital raise will likely be limited if it is raising out of a position of weakness."

One wild card is China's Tencent Holdings (TCEHY). Tencent in March disclosed that it has bought a 5% stake in the carmaker for $1.78 billion. Baird in a report says that Tesla could turn to Tencent for more funding.

The electric car maker's shares dropped 2.1% to close at 299.30 on the stock market today.

YOU MAY ALSO BE INTERESTED IN:

Is The Road Still Clear For Waymo's Self-Driving Car?

Chart-Reading Basics: How A Buy Point Marks A Time Of Real Opportunity

Looking For The Best Stocks To Buy And Watch? Start Here

Sell And Take Profits Or Hold? Here Are Several Guidelines To Follow

The post Tesla Equity Offering Still Expected Amid Cash Burn, Solar Troubles appeared first on Investor's Business Daily.