Electric car manufacturer Tesla has not only been losing money consistently but in the previous quarter it even recorded a significant drop in sales and needless to say, the poor show led to some tough questions being asked by analysts on Wall Street. However, the company is now looking to convince Wall Street and its investors that it remains an attractive investment and has the ability to drive sales through new product lines. To that end, Tesla is now looking to raise a staggering $2.3 billion, and it will not only send the message that the company can still attract capital but also ensure that it can invest heavily in new products.
The company faces a set of challenges that they would need to address to get back the confidence of many investors and those challenges might not only be restricted to new product lines. For instance, Tesla wants to create a manufacturing hub in China, and while that will be a far more cost-effective move, they will need to invest heavily to make it work. On the other hand, the retail business in the United States and Europe will also need to be overhauled to drive sales. All that will need massive investment, and hence, it is not entirely a surprise that the company is now seeking fresh capital. In the first quarter of 2019, the company had spent $1.5 billion, and plenty of experts had stated that without the injection of fresh capital, Tesla would not be able to command a dominant presence in the market for electric cars.
It wants to raise the capital through the issuance of fresh shares and also through debts that could be converted into shares at a future date. After the news broke, the company’s shares experienced a jump of 4%. An analyst at Roth Capital stated, “The market seems to be breathing a sigh of relief. Now they need to get back to work, and start selling more cars.” Last but not the least, it is also important to keep in mind that many of the car manufacturing behemoths are now slowly getting into the electric car manufacturing space and if Tesla is to maintain any competitive advantage then it would need to keep investing. Standing still is not an option for the company, and it is no wonder that the market reacted positively to the news.