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Tesla plans US$1 billion stock, bond offering to fund Model 3

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PV Magazine

The EV, solar and battery company has filed to issue $US750 million in convertible notes, and another one million shares of stock in advance of its Model 3 roll-out.

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Photo: Ted Eytan License: CC By-SA 2.0. Original photo: https://www.flickr.com/photos/taedc/11439031614/in/photostream/

If Elon Musk has been successful at anything, it is capturing the public imagination about the future of clean energy, electric vehicles and space transportation. As part of that, he is scaling battery and solar production at record rates.

To do that inevitably takes a lot of other people’s money. Yesterday Tesla went back to Wall Street to ask for another billion dollars, through a combined bond and follow-on stock offering. The company has filed to issue $750 million of convertible notes due 2022, and one million shares of stock, which are likely to be valued in the neighborhood of $250 per share.

The interest rate, conversion price and other terms of the notes had not been determined as of yesterday’s filing. Tesla has granted an 15% underwriters option, which could make the value of the offering up to $1.15 billion, and Musk has committed to purchasing $25 million of the newly issued stock.

Tesla says that it intends to use the proceeds to strengthen its balance sheet and “further reduce any risks” associated with the scaling of its business to launch its first mass-market automobile this summer, the Model 3.

The offering follows a difficult fourth quarter for Tesla, with SolarCity dragging down the newly combined company’s financial results. Tesla reported a $121 million net loss during the quarter, and Elon Musk hinted at the plan to raise money on the company’s results call.

“According to our financial plan, no capital needs to be raised for the Model 3, but we get very close to the edge,” stated Musk. “We’re considering a number of options, but I think it probably makes sense to raise capital to reduce risk.”

And despite the fact that follow-on offerings dilute the share capital, the market has responded enthusiastically to this news. Tesla shares jumped around $5 this morning to over $261 per share.

 Source: PV Magazine. Reproduced with permission.

  

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  • john

    Here is the risk for Tesla.
    They do not manage to deliver the Model 3 in the 3rd Quarter of 2017.
    Confidence in the company will be not positive.
    Explanation the Model 3 is just about the most preordered item ever.
    Any hiccups with the delivery program will be highly detrimental.
    I think it is prudent to ensure a company has financial backing to expand and deliver the goods promised.
    That can be seen in the positive reception on the stock market.

    Once they get the Model 3 bedded down and deliver the huge number ordered I expect a totally different scene for the attitude toward Pure Electric Vehicles.
    Going forward Tesla will then be in a position to expand to another Battery Manufacturing plant and be able to then work on other vehicles perhaps a shorter range vehicle for urban commute for instance.

    • Rod

      Maybe in the US the model 3 is considered a car for the masses but I agree with you and would like to see them offer something akin to the first Volkswagon. Small and affordable and without the bells and whistles.

      Also, I really hate to see the value of shares diluted like this.