Tesla is crazy to avoid raising new capital with its stock still riding high (TSLA)

Tesla CEO Elon Musk has repeatedly said that Tesla won't need to raise funds in 2018.
But the company could run out of cash by the end of the year.
Raising now, with Tesla stock trading a high level, makes sense.

Tesla shares are down about 5% year-to-date, but over the past three years, they're up nearly 30%, and at one point in 2017, the stock was threatening $400 (it's at about $303 on Monday).

Meanwhile, Tesla has less than $3 billion in cash — and expects to spend $3 billion this year. The math doesn't actually trace that straightforward a path toward zero, but bluntly speaking, Tesla is running close to the edge.

But CEO Elon Musk says the company won't raise new funds in 2018. "I specifically don't want to," he said on a controversial first-quarter earnings call last week.

To which one might respond, "Why not?"

The stock is trading at a high level and Tesla could sorely use a cash cushion. Yes, an equity issue would further dilute existing shareholders, but with shares having recovered to about where they were before a swoon after Musk lashed out at analysts, the dilution wouldn't be too bad.

And yes, an equity raise could undermine confidence in Tesla debt. But the only liability that really open for discussion is the $1.8 billion in junk bonds the company sold last year. In any case, with some prospective appetite for new equity out there, Tesla wouldn't have to add to its debt.

The big question then becomes, "Seriously, why not raise some more money?"

If you're a cynic, you simply assume they will. Everything Tesla has said about not wanting to raise has occurred in the context of a financially dutiful obligation to make forward-looking statements. The situation could change and Tesla could conclude that it does actually need some more cash.

But if you aren't a cynic, then circumstances are a bit more mysterious. Bottom line is it makes perfect sense to sell more stock at a high valuation — and it's worked out fine in the past. So Tesla's stubborn refusal to do it is sort of crazy.

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