Tesla taps Wall Street for $1bn cash injection
Pressure on shares eases as capital-raising less severe than expected
Tesla turned to Wall Street for another $1bn cash injection on Wednesday as it sought a bigger financial cushion for the planned launch of its mass-market Model 3 this summer.
Elon Musk, chief executive of the US electric car maker, signalled last month that the company’s ambitious launch plans would push its finances “close to the edge”, and indicated he was thinking of raising more money.
His comments at the time wiped 10 per cent from Tesla’s stock price, as investors anticipated another round of dilution to their holdings after a steady flow of capital raising in recent years. Tesla has raised around $9bn in the past five years, after netting out its repayments of convertible debt and a US government loan.
But news of the latest capital raising was less severe than Wall Street had been expecting, helping to ease pressure on its shares. The amount was below what many analysts had forecast, and Tesla said it would put hedges in place to limit eventual dilution from the convertible bonds. Its shares edged up more than 2 per cent in after-market trading.
Demand for Tesla’s shares has been one of Mr Musk’s main weapons in recent years, enabling him to race faster up an expensive production curve designed to take the company from small-scale maker of electric roadsters to a mass-market producer.
A strong share price rally that set in during December opened the way to the latest fundraising. It added 55 per cent to the company’s stock and pushed its value to $47bn by late February, when Mr Musk revealed he was thinking of raising more cash.
In a regulatory filing on Wednesday, Tesla said it was planning to issue around $250m of stock and $750m of convertible debt. An overallotment provision will allow the underwriters, led by Goldman Sachs, to sell an extra 15 per cent of the securities if demand is strong.