$1.4B Won't Be Nearly Enough (And Neither Will $1.6B).

Last August, Tesla raised $773 million in net proceeds. It's long gone, just on operating losses.

Tesla lost $282 million in Q1. I am confident in forecasting sizeable losses for the balance of 2016.

The $1.4 billion to $1.6 billion from this offering will fall far short of what's required to reach Model 3 production. Tesla will need another capital raise, and that need will arise before Q1 2017 ends.

By that time, much of the money raised this week will have been vaporized by further operating losses, before ever making it to the "Property, plant and equipment" line.

Anyone who believes this capital raise will go mostly to development of the Model 3 probably also believed Tesla's 2014 promise that the $2.3 billion of convertible debt would build the Gigafactory.

So, is the Model 3 Narrative Starting To Crumble?

April 15, 2016: "…approaching 400,000…"

May 18, 2016: 373,000, after 8,000 customer cancellations.

People say that Tesla will borrow some of the money it needs.

But Tesla has a sub-investment grade credit rating, and its debt is still trading at significant discounts.

New development: Tesla and Panasonic recently signed the Factory Lease for the Gigafactory. As I expected, Panasonic pays no rent and has the right to remain in possession even if Tesla defaults or becomes insolvent.

Lots of luck borrowing much against that asset.

It's tough to make predictions, especially about the future...

On September 19, 2014, TSLA believes it could self-fund capex but is keeping funding options open depending on the pace of growth and new products it wants to undertake in the future.

Remind me: did that ever happen?

On May 7, 2015,  Tesla is investigating expanding the size of the Gigafactory to accommodate more stationary storage given the very positive order response for Powerwall/Powerpack.

There were, of course, no "orders." There were merely web site expressions of interest, some made by a variety of Disney characters. The stationary storage business is, to date, a big fat zero in terms of profits, and the most highly-touted Powerwall product has quietly disappeared.

And the Gigafactory has shrunk, not grown.

The foregoing is, trust me, just the tiniest smidgeon of the many inane statements appearing in Tesla research reports.

But at least we have Earnings Per Share nailed, right?

I In August 2014, with less than five months remaining in the year, (non-GAAP) earnings were over estimatedby a factor of more than 10.

The 2015 Forecasts largely speak for themselves. But do note that the August 2014 estimate proved to be more than $5 too high.

What could possibly account for that? Was it:

    The $282 million loss in Q1?
    The downward Q2 delivery guidance?
    The significant downturn in Q1 R&D spending?
    The slowdown in Supercharger installations?
    The reduction in planned new Service Centers?
    The continuing problems with the Model X rollout?
    News about construction workers at the Fremont factory?


The human tendency to rationalize the result we want is overwhelming. Even when we are fully aware of these cognitive biases, it's still almost impossible to overcome them.

There's just no fighting that Goldman Sachs Bank USA has loaned hundreds of millions of dollars to Elon Musk. 

There's just no fighting that Goldman Sachs Bank USA is among the syndicate of lenders under Tesla's 2015 ABL Credit Agreement (maximum borrowing capacity: $1 billion).

There's just no fighting that Goldman Sachs & Co. has earned millions of dollars in fees as lead underwriter for every major offering, from the IPO forward, of Tesla securities.

There's just no fighting that Goldman Sachs & Co. has earned millions more selling hedges (some of truly dubious value) to Tesla.

And there's just no fighting that Goldman Sachs & Co. is the co-lead book running manager for the pending follow-on offering.
   
So, what has happened?

    It was concern that Model 3 deposits would continue to erode;

    Or worry that demand for Model S cars has gone soft;

    Or anxiety that the California labor issue runs deeper than is reported;

    Or indications that Model X demand has flatlined;

     I anticipate there will be more speculation in the days ahead.

Right now, here's my vote for why this offering was launched now:

On Tuesday, the SEC issued new rules cracking down on non-GAAP reporting. Among other things, the rules serve notice that using non-GAAP financial measures to present revenue could be misleading.

This is going to be a magnitude 8 earthquake for a lot of firms. It's sure to put a serious crimp in the wild and wacky metrics that parade through Tesla's Shareholder Letters.

You may hate to hear it again, but…

The base version Model 3 will cost at least $45,000.

Tesla will be unable to deliver the Model 3 in 2017.

And don't say you weren't warned.