Tesla Stock Surges as It Seeks to Raise Nearly $2 Billion

Fredrick Soto
May 3, 2019

Tesla's CEO Elon Musk is likely to buy 10 million of its new share offerings.

Tesla announced in a securities filing on Thursday that it plans to raise money in stock and debt to help continue its expansion to build the Model Y, second-generation Roadster, Semi, and Pickup. The company's announcement today comes about a week after Musk said during the first-quarter earnings conference call, "I don't think raising capital should be substitute for making the company operate more effectively".

Shares in the Silicon Valley company rose more than 5 per cent on news of the capital raise plan, which follows Musk's hint last week that a fundraising was imminent after Tesla lost $700 million in the first quarter.

Tesla is planning as much as US$2.5 billion in capital expenditures this year as it develops new vehicles including the Model Y crossover, Semi truck and Roadster sports auto.

Analysts said last week that the company would probably seek between $1 billion and $3 billion dollars, and that it would cost significantly more than it would have a year ago, when some on Wall Street were already calling for a capital raise. Tesla's 31% delivery decline in 1Q vs. 4Q signaled that the United States demand isn't sustainable at the elevated 2H levels, while its global rollout is just beginning, ' said Kevin Tynan, senior autos analyst.

Tesla has reported four profitable quarters since it went public in June 2010. Only half of the entire quarter's vehicles were delivered 10 days before the period ended, according to Tesla.

Throughout its history, Tesla has raised funds through bank loans, equity sales, convertible notes, a junk bond sale, securitization of its vehicle leases and solar asset-backed notes.

It's worth noting, as Tesla pointed out, that Quebec residents get a much more selection of incentives that include other Tesla models, or makes this Model 3 a better value proposition.

In March, Tesla had to repay a $920 million convertible in cash because the stock failed to reach the conversion price of around $360 per share. Note that in the USA, this number is far lower at $4,500 - and while the US does have cheaper gas than the United Kingdom, I'm still not certain that I understand Tesla's math here. Tesla has issued convertible notes several times in the past.

Tesla has chosen Goldman Sachs and Citigroup to manage its new offerings.

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