Tesla Needs Cash Injection To Deliver On The Model 3

When pre-orders of your new model in one day eclipse the deliveries you’ve achieved for more than a decade, you’re winning – right?

In the first 24 hours after the wraps were pulled off, 198,000 people had pre-ordered the Model 3.

That sounds amazing, considering Tesla’s total sales were less than 110,000 units since its establishment in 2003. Actually, things are not as simple as they might seem.

Musk had announced that, after all those years in the red, Tesla would be profitable this year and the surge in 3 orders could “set the stage for an equity offering” after the year’s first-quarter results are published, said Barclays analyst Brian Johnson.

If this happens, the funds raised, including the nearly $300 million (so far) collected from the deposits, will have to be invested right back so that the project will go ahead as planned.

RBC analyst Joseph Spak said the company may not be able to deliver a big number of the orders it has already received before 2019 or 2020. “Demand was never really our concern”, he told CNBC/Reuters. “It is more about execution and getting production up to meet demand.”

At the same time, he concedes high demand could be a factor in the company becoming cash-flow positive. This will help it to increase its capacity at the existing plant in California and complete the construction of the battery gigafactory in Nevada – both essential if it is to hit its sales target.

The very same day Musk tweeted his excitement, Tesla stock price hit its highest mark in six months, which was also 60 percent higher than a 12-month low in February.

Still, financial service Markit says investors expect it to fall, as the short interest this year has been around 25 percent of its outstanding shares.

Bottom line: the Model 3 is such a big endeavor it will either make or break Tesla. If it gets the money, it’ll be the former. If not…