Musk suggests capital infusion after projected $700M loss

Tesla Chief Executive Elon Musk suggested on Wednesday a capital raise could be imminent, as the electric-vehicle maker posted a first-quarter loss of $700 million and predicted a return to profit in the third.

Tesla plans to resolve logistics issues with global vehicle deliveries after weathering a challenging few months, also marked by staff layoffs and a public spat between Musk and financial regulators.

Shares of Tesla, which are down 22% this year, were about flat after the results, which came more than an hour after they were expected.

Musk is still battling to convince investors that demand for the Model 3, which is considered crucial to the automaker’s future, is “insanely” high, and that it can be delivered efficiently and swiftly to customers around the world. Lower deliveries had added to worries over Tesla’s cash situation and increased speculation a capital raise was coming soon.

On an earnings call following results, the controversial CEO also stepped back from an earlier prediction that the company’s Shanghai factory, which is currently being built, would produce 3,000 Model 3s per week by year’s end. Instead, the so-called Gigafactory would build 1,000, or maybe 2,000 per week by the end of the year, he said.

Many analysts had predicted the company would need to raise funds for its expansion, including the Shanghai factory, the upcoming Model Y SUV, and other projects. Tesla said it ended its first quarter with $2.2 billion in cash after paying off a $920 million convertible bond obligation in March.

“There is some merit to raising capital,” responded Musk, after being asked why he had not done so yet. “It’s probably about the right time.”

Tesla’s results came two days after the company hosted a self-driving event, in which Musk predicted Tesla would have over a million autonomous vehicles by next year.

Some analysts perceived the presentation as a way to deflect attention from questions about demand, margin pressure, increasing competition and even Musk’s ongoing battle with US regulators.

Haris Anwar, a senior analyst at Investing.com, called its second-quarter outlook “bleak.” “I continue to see a very volatile 2019 for Tesla and its shares,” he said.

On Thursday, Musk and the Securities and Exchange Commission are expected to tell a federal judge the status of discussions to resolve their dispute over Musk’s Twitter use.

Shares fell 34 cents, to $258.31, in extended trading.