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Tesla shares surge on $2B fundraising plans

posted onMay 3, 2019

Shares of Tesla Inc. rose by more than 5% on Thursday (May 2) after the Palo Alto, California-based company disclosed capital raising plans. 

The electric car maker said that it would raise up to $2 billion in funds from investors, including from its CEO Elon Musk.

In a filing with the Securities and Exchange Commission (SEC), Tesla said it will offer $650 million of common stock and $1.35 billion of convertible senior notes due in 2024 and give underwriters the chance to buy up to $202.5 million more of the company’s shares. 

In a separate SEC filing, Tesla said Musk intends to buy about $10 million of the company's shares in the new offering, which would amount to 41,896 shares of the total of 2.7 million. 

Tesla intends to use the net proceeds from the offerings "to further strengthen its balance sheet, as well as for general corporate purposes."

Since its initial public offering in 2010, the electric car and solar power company has posted a profit in only four quarters.  It has sold shares or convertible securities every year through 2017, raising roughly $8 billion, according to data from Dealogic. 

At the end of March, the company had $2.2 billion in cash on hand.That's down $1.5 billion from the end of 2018.

Tesla's new plans to raise fresh capital comes as the company is in the middle of some of its boldest efforts to expand its customer base and appeal to more middle-of-the road car buyers.  

According to the New York Times, analysts think the fundraising plan will probably be adequate to finance the production of Tesla’s current models, but they say the company may be back for more cash as it moves to release new vehicles. 

Goldman Sachs and Citigroup are acting as lead joint book-running managers for the offering. BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley and Credit Suisse acting as additional book-running managers. 

The filing on Thursday also showed Musk, already Tesla’s biggest shareholder, personally owes $507 million to Wall Street banks working on the capital increase.

Tesla hosted a conference call with investors on Thursday to discuss its fundraising plan. Musk told participants that self-driving will make Tesla a $500 billion company, CNBC reported, citing two people who participated in the call. 

For the year, Tesla’s shares have fallen by 28 percent. The company's current market cap stands around $42 billion. Tesla was founded in 2003 in Delaware, USA and in April 2017 passed General Motors, to become the largest American automaker based on stock market value. 

UPDATE 03/05/2019 18:07

Tesla announced on Friday it is boosting its share offering size to 3.1 million shares, from an initially planned 2.7 million, according to the company's filing. The filing also showed it would place convertible debt worth $1.6 billion, up from an initial planned $1.35 billion. Meanwhile, Musk is set to purchase $25 million in shares.