Tesla to raise $500M in equity markets
Huge cash needs to develop cheaper all-electric car, build battery factory
Tesla Motors Inc. has filed notice that it will seek to raise $500 million with the offer of an additional 2.1 million shares.
Tesla plans to use the money to develop a more affordable electric vehicle, the Model 3, as well as expanding its charging network and building the world's largest battery factory, it said in a Securities Exchange Commission filing.
Later Thursday, it announced a plan to partner with two dozen garages around Manhattan to install its higher-speed, 240-volt chargers for Tesla owners.
Expanding the charging network is just one of the costs Tesla faces over the next few years that could have it returning frequently to markets for cash.
A sport utility vehicle is scheduled to be released next month.
Tesla first launched an IPO in June 2010, raising $226 million, then went to markets for an additional $1.08 billion in May 2013.
Company founder Elon Musk "indicated his preliminary interest" in buying $20 million of this offering, or around 84,000 shares, a move that reinforced for investors his commitment to the company.
Tesla stock, which is down about 4 per cent from last year, rose on Thursday. It closed at $242.51, up 1.8 per cent on the day.
The company has never made money and lost $47 million in its latest quarterly report to the end of June.
Chief Financial Officer Deepak Ahuja has said the company will become free cash-flow positive by the first quarter of 2016 as production of the Model X SUV accelerates.
Musk aims to sell 500,000 vehicles a year by 2020, a level of production that will give Tesla the economies of scale needed to be profitable, he says.
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.
In a note to investors, Stifel analyst James Albertine said the offering should have a minimal impact of on per-share earnings. He views Musk's intention to purchase shares and Tesla's plan to use the money for future growth as positives. Albertine has a "buy" rating and a $400 price target on Tesla's stock.