Morgan Stanley sees $2.5bn equity raise for Tesla in Q4

Bloomberg

Tesla Inc. could raise funds as soon as this year as Elon Musk’s company ramps up production and prepares for maturing debt, analysts at Morgan Stanley predict.
The company, whose stock has slumped 25 percent in the past six weeks amid a string of controversies, could raise $2.5 billion in equity in the fourth quarter from investors that have a strategic interest in its business model, Morgan Stanley analysts including Adam Jonas wrote in a note dated Sept. 18 outlining various possibilities.
Musk has repeatedly said Tesla doesn’t need to raise capital as the electric-car maker’s finances improve. Musk said last month he expects the company to generate positive free cash flow in the second half of this year, and become sustainably profitable for the first time in its 15-year history. He also said he expects to be able to use cash flow to repay around $900 million of convertible debt maturing early next year.
“Bulls may say that if Tesla generates enough cash” it doesn’t need to raise equity, the Morgan Stanley analysts said. “In our view, it is far better for a company to raise when it doesn’t need to.”
The analysts said they don’t have knowledge of any specific transactions under consideration, offering the scenario as part of a forecast for an “event path” unfolding in the next several quarters that could result in Tesla’s share price fluctuating between $97 and $441.
Morgan Stanley reiterated an equal-weight rating for the stock with a target price of $291.