How Much Money Does Tesla Inc (NASDAQ:TSLA) Have Left?

Trailing twelve-month data shows us that Tesla Inc’s (NASDAQ:TSLA) earnings loss has accumulated to -US$1.96B. Although some investors expected this, their belief in the path to profitability for Tesla may be wavering. The single most important question to ask when you’re investing in a loss-making company is – will they need to raise cash again, and if so, when? Cash is crucial to run a business, and if a company burns through its reserves fast, it will need to come back to market for additional capital raising. This may not always be on their own terms, which could hurt current shareholders if the new deal lowers the value of their shares. Looking at Tesla’s latest financial data, I will gauge when the company may run out of cash and need to raise more money. See our latest analysis for Tesla

What is cash burn?

Tesla currently has US$3.37B in the bank, with negative cash flows from operations of -US$60.65M. Since it is spending more money than it makes, the business is “burning” through its cash to run its day-to-day operations. How fast Tesla runs down its cash supply over time is known as the cash burn rate. Companies with high cash burn rates can eventually turn into ashes, which makes it the biggest risk an investor in loss-making companies face. Tesla operates in the automobile manufacturers industry, which delivered a positive EPS of US$440 in the past year. This means, on average, its industry peers operating are profitable. Tesla runs the risk of running down its cash supply too fast, or falling behind its profitable peers by investing too little.

NasdaqGS:TSLA Income Statement Feb 20th 18

When will Tesla need to raise more cash?

Tesla has to pay its employees and other necessities such as rent and admin costs in order to keep its business running. These costs are called operational expenses, which is sometimes shortened to opex. In this calculation I’ve only included recurring sales, general and admin (SG&A) expenses, and R&D expenses occured within they year. Opex (excluding one-offs) grew by 42.33% over the past year, which is rather substantial. Not surprisingly, if Tesla continues to ramp up expenditure at this rate for the upcoming year, it’ll likely need to come to market within the next few months, given the its current level of cash reserves. Moreover, even if Tesla kept its opex level at US$3.85B, it will still have to come to market within the next year. Although this is a relatively simplistic calculation, and Tesla may reduce its costs or raise debt capital instead of coming to equity markets, the analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.

Next Steps:

This analysis isn’t meant to deter you from Tesla, but rather, to help you better understand the risks involved investing in loss-making companies. Now you know that if the company was to continue to grow its opex at a double-digit rate, it will not be able to sustain its operations given the current level of cash reserves. The potential equity raising resulting from this means you could potentially get a better deal on the share price when the company raises capital next. I admit this is a fairly basic analysis for TSLA’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Tesla to get a better picture of the company by looking at: NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.

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