Tesla Raises Equity to Finance Its New Model 3

By Emel Akan, Epoch Times
May 19, 2016 11:20 am Last Updated: May 19, 2016 3:28 pm

Tesla Motors Inc. (NASDAQ: TSLA) announced it would sell $1.4 billion in common stock to finance the production of its Model 3 electric vehicle. In addition, Tesla’s CEO Elon Musk will sell around $570 million personal shares.

“We intend to start volume production and deliveries of Model 3 in late 2017 and to accelerate our 500,000 vehicle build plan from 2020 to 2018,” stated the company in a regulatory filing on May 18.

The electric car manufacturer also said they may use a portion of the net proceeds from the offering for working capital and other general purposes.

In connection with the offering, Musk will exercise stock options to purchase 5,503,972 shares of common stock that are set to expire on December 3. Musk will then sell half of these shares, worth nearly $570 million, to finance the taxes due because of the option exercise.

So the number of shares held by Musk will increase despite the share sales and a donation of 1.2 million shares owned by him to a charity.

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The company disclosed news after 4 p.m. on March 18 and the shares opened about 2.7 percent higher the next morning, rising to $213.9 on the Nasdaq. 

Tesla unveiled the Model 3, a lower-priced sedan designed for the mass market, in the first quarter of 2016. The company now holds deposits from about 373,000 customers who have made reservations for the car.

“We have obtained this level of reservations without any advertising or paid endorsements, with only a few social media posts,” stated the company.

“Because of the significant demand that we have seen, we have decided to advance our 500,000 total vehicle build plan (combined for Model S, Model X, and Model 3) to 2018, two years earlier than previously planned.”

Tesla designs, develops, manufactures, and sells fully electric vehicles, and energy storage products. The company is currently producing and selling the Model S sedan and the Model X sport-utility vehicle with prices starting at $71,500 and $85,500, respectively. Model 3 will be offered with a price tag of $35,000.

Headquartered in Palo Alto, California, Tesla completed its initial public offering in July 2010. Its current market value is $28.3 billion.

TSLA_chart

The company had net losses in each quarter since its inception, except for the first quarter of 2013. Its accumulated deficit reached to $2.6 billion in March 2016.

Goldman Sachs, which is a co-lead on the $2 billion Tesla share sale, upgraded Tesla from “neutral” to “buy” with a $250 price target. Goldman’s report came out few hours before the share sale announcement on May 18.