Elon Musk will buy its stocks $10 million worth of stock with his own money in $1.5 billion offering of shares and convertible notes
A week after posting a huge first quarter loss, the electric carmaker Tesla is seeking to raise cash. The company said in the filing that it would seek to raise $650 million in new shares and $1.35 billion in debt and underwriters will be having the option to buy an additional 15 percent of each offering, thereby potentially raising the proceeds to $2.3 billion.
Recently, Tesla reported the reduction of $1.5 billion cash balance, to $2.2 billion. Just after it unveiled the plans, shares of Tesla, which had hit a two-year low, jumped 5 percent to $245 million in early trading which follow Musk’s hint last week that a capital raise was imminent after the lost $700 million in the first quarter.
There were predictions from analysts that Tesla would need to raise money for its expansion plans, which include the construction of a factory in Shanghai as well as the upcoming Model Y SUV.
This year, the leading electric vehicle manufacturer expects capital expenses of $2 billion to $2.5 billion and about $2.5 billion to $3 billion annually for the next two fiscal years. In first-quarter results that disappointed many on Wall Street, Musk promised the company would deliver a profit again by the third quarter of the present year. However, the company’s huge investments mean it is dripping cash swiftly. It ended its 1st quarter with $2.2 billion in cash.
Morgan Stanley analysts wrote in a note, “Both bulls and bears alike that we speak to see it as highly likely that Tesla will seek to raise equity capital sufficient in amount to quell questions about its potential financing needs.”
Till date, Tesla has raised money through bank loans, several rounds of equity sales, issued convertible notes, a $1.8 billion junk bond sale, securitization of its vehicle leases and solar asset-backed notes.
Goldman Sachs and Citigroup will be managing the offering. Likewise, BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley, and Credit Suisse will be additional book-running managers.