The largest electric car making company in the world – Tesla Motors – is expecting to raise over $1.8 billion (£1.4 billion) by selling junk bonds to private investors. The amount is more than the amount that the U.S.-based automaker aimed for when it declared the offering this month.
Fundraising limited to major institutions
The money will keep its balance sheet steady as it hikes up manufacturing of its newest car. The U.S.-based automaker is aiming to make 5.000 of its mass market Model 3 a week by the end of 2017. The automaker has estimated that it is already spending over $100m a week to hit that target.
The electric car making giant said earlier this month – on 4th August – that it was looking to raise over $1.5 billion by selling bonds. However, on Friday, it said that it has now expected to raise over $1.77 billion from the sale. The fundraising of the car is limited to major institutions. Private investors are not included in the fundraising.
The ability of the electric car making giant to raise more than $1.5 billion indicates an appetite for risk among investors, said analysts. They added that risk among investors is more because low interest rates have limited returns in many other types of investments. In addition to this, high stock market valuations have made it even more difficult to make a profit as well.
Tesla plans to make more than 500k Model yearly
Warning about risks to potential investors, the analysts at Moody’s said, “Without the proceeds from the note offering, Tesla’s liquidity position would be stressed.” The U.S.-based automaker had over $3 billion in cash at the end of June, however, it spent more than $2 billion in the most recent quarter.
The company, which is headed by Chief Executive Officer Elon Musk, has often turned to investors to overcome persistent operating losses. The automaker is planning to make more than 500,000 of the new Model 3 cars a year or about 10,000 per week eventually at its Fremont factory.
The target was ambitious given the relatively small size of the electric car market of the United States, said Moody’s analysts.