Tesla Model 3: Nearly 63000 bookings cancelled, here's why

Tesla Model 3: Nearly 63000 bookings cancelled, here's why

Tesla Model 3: Nearly 63000 bookings cancelled, here's why

"Given the recent launch of the Model 3, scale of Tesla's battery manufacturing investments, the public perception of its technology, and its access to the capital markets, the company's financial commitments appear sustainable for now - albeit with significant execution risks".

"The move to issue junk bonds ... represents a bet by Tesla Chief Executive Elon Musk that bond investors will be as hungry as stock investors to back the company on expectations that its Model 3 will be a hit", Reuters said.

Tesla announced on Monday that it is looking to raise approximately $1.5bn via a bond offering in the lead-up to the start of production of its newest vehicle, the Model 3.

CEO Elon Musk outlined an aggressive growth plan to analysts last week, adding up to four more "gigafactories", including facilities in China and Europe. Tesla upsized that fundraising, from an initial target of $750 million in converts and $250 million in stock.

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The most costly version of the Model X, the P100D, with fastest velocity and longer range, is priced at $145,000. The interest rate has not been set yet. Tesla is targeting production of right-hand-drive cars to begin in 2019. Tesla said last week that it had 455,000 net pre-orders for the Model 3.

Tesla will raise the money by selling bonds to professional investors, despite the company having $3bn in cash. It "achieves 215 miles (346 km) of range per charge" and is "designed to attain the highest safety ratings in every category".

The basic Model 3 will retail in the United States for $35,000 a year beginning in November, the company has said, giving consumers interested in reducing their carbon footprints or simply saving on gas a more affordable option.

Following the announcement, international ratings agency Standard & Poor's (S&P) reaffirmed its negative outlook for the automaker and assigned a "B-" rating for the bond issue - deep into junk credit territory.

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