Elon Musk's announcement that Tesla Inc. (TSLA) has 500,000 reservations for its mass market Model 3 is a reassuring sign for investors, heading into the electric car-makers second-quarter earnings call after the close on Wednesday. While the milestone bodes well for Tesla's growth, it also raises the question of whether Musk will have to raise more capital to keep production humming.
Tesla shares closed down 1.2% at on Tuesday at $319.57, as investors await Musk's read on the second quarter.
Greenlight Capital Inc.'s David Einhorn, a prominent Tesla short, predicted Tuesday that Musk will have to obtain more capital. "[Tesla] is expected to burn over $2 billion this year as it begins production of its Model 3 and is currently only capitalized for the next three quarters," Einhorn told investors during Greenlight's call. "As Tesla attempts to achieve scale for the Model 3 it will depend on the capital markets' willingness to fund it."
Einhorn has reason to hope Tesla stumbles. While a stake in German drug-maker Bayer AG (BAYRY) has paid off for Greenlight, the firm has taken a hit for his short position in Tesla, which is up nearly 50% this year.
Tesla raised close to $1.4 billion by selling convertible notes and stock in March. The company initially targeted $1 billion, but boosted the sale.
