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Friday 9 December 2016
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Tesla to Sell $2 Billion in Shares to Accelerate Model 3 Plans

Tesla to Sell $2 Billion in Shares to Accelerate Model 3 Plans

Can Tesla build 500,000 Model 3 sedans a year by 2018 as planned?

Probably not. For one, Tesla needs a lot more cash. To that end, Wednesday the automaker announced a $2 billion public offering – $1.4 billion from the company and CEO Elon Musk will cover the rest by exercising his stock options.

The money, Tesla says, is to help pay for the accelerated launch of the car.  It’s not a total surprise since Musk hinted earlier this month an offering was coming to raise “some combination of equity and debt and make sure the company has a good buffer of cash.”

Really no one out there thinks Tesla can pull this feat off on Musk’s outlined timetable, Wall Street analysts included. A Goldman Sachs report out Wednesday says that Tesla’s set an unrealistic goal and will probably miss 2018 production forecasts by 66 percent, according to Bloomberg. It projects Tesla will sell about 165,000 cars in 2018, not 500,000.

Our own Jerry Reynolds recently wrote about his misgivings about production plans, too. 

Still, Tesla overall remains a darling on Wall Street despite the doubt. It seems people are getting used to Tesla running behind schedule and think Musk actually does it on purpose. That is to say, he sets crazy goals he knows Tesla won’t meet as a business strategy to push his team.

The Goldman Sachs report, which still views Tesla favorably, seems to echo this theory.

“While management was not clear why goals were set so aggressively,” said Goldman Sachs analyst Patrick Archambault Archambault. “We view the adjustment as a target aimed at motivating employees and suppliers.”

There has also been a changing of the guard on Tesla’s production team of late. Two of Tesla’s top manufacturing execs left the company recently and the company’s just hired an Audi manufacturing executive to become its production chief.

Another issue is batteries. Tesla reportedly needs more of them for the Model 3, even though its building a massive “gigafactory” with Panasonic outside Reno. The automaker’s reached out to other battery suppliers like LG Chem, Samsung, and SK Innovation.

Tesla unveiled its first mass-market electric vehicle in March. The company’s already received $1,000 from 373,000 pre-orders for the Model 3. The automaker says about 8,000 people cancelled their reservations and there were 4,200 duplicated canceled by the company.

Related Video: Model S Reveal

Photo Credit: Tesla