Business
Tesla filed to sell 2.1 million shares to raise $500 million, it said on Thursday. Tesla Motors Inc CEO Elon Musk will invest $20 million as part of the company's $500 million stock offering in a show of confidence at a time when the electric car maker is burning through cash, reports Reuters. Tesla said on Thursday it would use the proceeds from the sale to help fund its upcoming Model 3 project and its battery gigafactory in Nevada. Musk is telling the market "I'm putting my money where my mouth is", Jefferies & Co analyst Dan Dolev said. "He did it so he kind of shows that he leads by example."
The offering of 2.1 million shares, Tesla's first equity sale in more than two years, comes a week after the company reported a larger quarterly loss and said it may raise more cash to offset heavy spending. Tesla's shares rose as much as 3.5 percent, before giving up some gains to trade up 0.8 percent on Thursday afternoon. Up to Wednesday's close, they had fallen 12 percent since Aug. 5 when Tesla reported results. Tesla, which has been losing more than $4,000 on every Model S electric sedan it sells, had $1.15 billion in cash and equivalents as of June 30, down from $1.91 billion as of Dec. 31. The company said in a filing that it assumed the shares would be priced at Wednesday's closing price of $238.17. The stock is expected to be priced after the market closes.
Tesla raised $226 million in its June 2010 initial public offering, the first IPO for a U.S. automaker in a half century, notes Bloomberg. In May 2013, the company raised $1.08 billion in equity and debt offerings, a move that allowed it to repay its $465 million Energy Department loan nine years ahead of schedule. In February 2014, Tesla borrowed $2.3 billion more in convertible debt to help finance the so-called gigafactory that it’s building near Reno, Nevada. In June, Tesla obtained a credit line of as much as $750 million.
Musk has been candid about Tesla’s capital expenditures and lack of profitability. Increasing battery production and developing new models will require billions in investments and delay consistent profitability. During an auto-industry event in January, Musk said the company might become profitable on a net basis by 2020, when annual sales reach 500,000.
