If Elon Musk has been successful at anything, it is capturing the public imagination about the future of clean energy, electric vehicles and space transportation. As part of that, he is scaling battery and solar production at record rates.
To do that inevitably takes a lot of other people’s money. Yesterday Tesla went back to Wall Street to ask for another billion dollars, through a combined bond and follow-on stock offering. The company has filed to issue $750 million of convertible notes due 2022, and one million shares of stock, which are likely to be valued in the neighborhood of $250 per share.
The interest rate, conversion price and other terms of the notes had not been determined as of yesterday’s filing. Tesla has granted an 15% underwriters option, which could make the value of the offering up to $1.15 billion, and Musk has committed to purchasing $25 million of the newly issued stock.
Tesla says that it intends to use the proceeds to strengthen its balance sheet and “further reduce any risks” associated with the scaling of its business to launch its first mass-market automobile this summer, the Model 3.
The offering follows a difficult fourth quarter for Tesla, with SolarCity dragging down the newly combined company’s financial results. Tesla reported a $121 million net loss during the quarter, and Elon Musk hinted at the plan to raise money on the company’s results call.
“According to our financial plan, no capital needs to be raised for the Model 3, but we get very close to the edge,” stated Musk. “We’re considering a number of options, but I think it probably makes sense to raise capital to reduce risk.”
And despite the fact that follow-on offerings dilute the share capital, the market has responded enthusiastically to this news. Tesla shares jumped around $5 this morning to over $261 per share.