Tesla shares slip as cash-burn raises concerns

It probably makes sense to raise capital to reduce risk, says Elon Musk

Tesla Inc's shares fell nearly six per cent as the electric car maker's freewheeling cash burn deepened concerns that the company would need to raise more capital as it pushes ahead with the production of its mass-market Model 3 sedan.

Chief Executive Elon Musk said on Wednesday the company was considering a number of options but "it probably makes sense to raise capital to reduce risk."

Analysts have estimated that Tesla would need to raise $1 billion-$2 billion in capital ahead of the launch of the Model 3 to minimise the risk of cash on hand running too low.

The company's shares fell as much as 5.8 per cent to $257.55 in morning trading - their biggest intraday percentage fall in eight months.

The stock rose three per cent in post-market trading on Wednesday after the company reported better-than-expected results.

Tesla said it plans an additional $2 billion to $2.5 billion in capital expenses before the launch and has $3.4 billion cash on hand.

Morgan Stanley analyst Adam Jonas estimates that the company will have spent about $10 billion in capital expenditures and R&D from 2014 through the first half of 2017.

"We're about to find out where this invested capital is going," Jonas added.