Tesla CEO Elon Musk checks out the Model Y during its unveiling in March. (Tesla via YouTube)
Tesla is aiming to raise up to $2.3 billion in newly announced offerings of stock and convertible notes, just a week after CEO Elon Musk told analysts that the timing was right for raising fresh capital.
Musk himself will purchase an additional $10 million of common stock, Tesla said today in a news release announcing the offering. That would add to his status as the electric-car company’s largest shareholder, with roughly 20 percent of Tesla’s shares.
The share price was more than 3.5 percent above the previous day’s close during midday trading today. Wedbush Securities analyst Dan Ives said in a note to investors that the offerings were a “clear net positive for Tesla” because they cleared up long-lingering uncertainty over whether Tesla would have enough cash on hand to meet upcoming debt payments.
One of the offerings announced today will make $650 million in common stock available, while the second offering calls for the issuance of up to $1.35 billion in convertible senior notes due in 2024. There’s also a 30-day option for underwriters to purchase up to an additional 15% of each offering.
If all the options are exercised, the gross proceeds would come to about $2.3 billion before discounts and expenses, Tesla said. Goldman Sachs and Citigroup are acting as joint lead managers for the offering, with involvement as well from BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley, Credit Suisse, Societe Generale and Wells Fargo Securities.
The company said it would “use the net proceeds to further strengthen its balance sheet, as well as for general corporate purposes.”
In last week’s financial report, Tesla reported wider-than-expected losses amounting to $702 million for the first quarter of the year, after posting profits for the previous two quarters. Looking ahead, the company has ambitious plans to ramp up production of its Model 3 electric car and move ahead with projects ranging from its Semi truck, Model Y crossover SUV and all-electric pickup truck to electricity-generating solar roofs, a Robotaxi ride-hailing service and car insurance.
Some analysts worry about the effect of Tesla’s financial losses, the gradual fade-out of federal tax credits and rising competition in the electric-vehicle market. Such uncertainties, coupled with Musk’s management quirks, have led to dramatic ups and downs in the share price over the past year. A year ago, even Musk took note of the roller-coaster ride for Tesla’s investors: “Do not buy if volatility is scary,” he said.