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Tesla to offer 2.7M shares in hopes of raising $500M to grow business

Shares will be priced at $242; offering could rise to three million shares if underwriters exercise their option to buy more stocks.


August 17, 2015
by The Associated Press

DETROIT — Electric car maker Tesla Motors hopes to raise around $500 million in a stock offering that comes as it prepares to roll out its highly anticipated new SUV.

Tesla will offer 2.7 million shares and expects net proceeds of $492.6 million. Tesla could make up to $566.5 million if the underwriters exercise their option to buy additional shares.

Tesla CEO Elon Musk intends to purchase $20 million worth of stock.

Wall Street had been expecting the move. Asked last week during the company’s second-quarter earnings call if Tesla planned to raise capital, Musk said there might be value in doing so “as a risk reduction measure.”

“I don’t think that there’s not a need to raise equity capital,” Musk said. He said the company should have at least $1 billion in cash on hand; it ended the quarter with $1.2 billion in cash and cash equivalents.

The Palo Alto, Calif., automaker will begin shipping its third vehicle, the Model X SUV, in a few weeks. It’s also investing heavily in a $5 billion battery factory in Nevada, which will make batteries for both its cars and its Tesla Energy home battery business. The factory is set to start production in the first quarter of next year.

Tesla said it needs the cash to further development of the Model 3, a lower-cost electric car due out in 2017. The auto industry typically spends about $1 billion developing new cars and putting them on the market.

Tesla is also rapidly expanding its network of Superchargers, which can add 170 miles to a Model S battery in 30 minutes. Tesla told shareholders this month that it now has 487 Supercharger stations globally and is opening one nearly every 24 hours.

All that doesn’t come cheap. Tesla obtained a credit line of up to $750 million in June, but it spent $359 million during the second quarter. Its cash total of $1.2 billion was down from $2.7 billion a year ago.

Tesla Motors is pricing an upcoming offering of its stock at $242 per share, or slightly below the most recent closing price for the electric car maker.

Tesla Motors Inc. will offer nearly 2.7 million shares or more than 3 million if underwriters exercise their option to buy more shares. CEO Elon Musk plans to buy $20 million worth of stock.

The Palo Alto, California, automaker says it needs the cash in part to help with development of its Model 3, a lower-cost electric car due out in 2017.

Tesla, which was founded in 2003, has never made an annual profit under US accounting standards. Musk said earlier this year that he expects Tesla to start making money in 2020, when the Model 3 is in full production.

© 2015 The Associated Press

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