Tesla officials said Monday that the electric vehicle maker plans on scraping together $1.5 billion dollars through the bond market to fund production on the inexpensive Model 3.
The company’s debut in the junk-bond market marks a first for the cash-strapped Model 3 maker. The debt offering could further tarnish Tesla’s already battered financial image, because the junk bond markets are usually littered with companies that are less creditworthy and add debt faster than they can accumulate profits.
Tesla hopes the Model 3, which debuted at the end of July, becomes a trendsetting and profitable vehicle capable of rocketing the Silicon Valley company atop the electric vehicle industry for years to come. Pre-orders for the small sedan have already surpassed half a million, even as customers have started bailing on the vehicle.
Total orders for the Model 3 tumbled to 455,000 from a high of 518,000, CEO Elon Musk told reporters, but the news of the defections didn’t seem to bother the billionaire tech entrepreneur. He compared the dropped orders to customers at a restaurant that drop out of line because they’re tired of waiting for their vehicles.
Musk is expected to burn through more than $2 billion this year, which has prompted short-sellers like Greenlight Capital’s David Einhorn and Devonshire Research Group to tug down the company’s value.
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