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Tesla Plans To Raise Well Over $1 Billion To Address Liquidity Concerns

TSLA – Tesla to sell $1.15 billion in stock and senior notes to strengthen its balance sheet and reduce Model 3 production risks.

Tesla Inc (NASDAQ:TSLA) is seeking to significantly boost its capital reserves by selling a combination of stock and convertible notes, as it looks to mitigate rising risks associated with its Model 3 auto production.

The company announced via press release that it’s issuing $250 million worth of common stock and $750 million in convertible senior notes due in 2022. Underwriters are being given the option to buy an additional 15% of each offering, so the total value of the capital raise will be well over $1 billion.

Tesla commented via press release:

The aggregate gross proceeds of the offerings, including the options granted to the underwriters, is expected to be approximately $1.15 billion. Tesla intends to use the net proceeds from the offerings to strengthen its balance sheet and further reduce any risks associated with the rapid scaling of its business due to the launch of Model 3, as well as for general corporate purposes.

TechCrunch has some additional detail on the move, which was widely expected, along with the aforementioned production issues:

Tesla’s decision to pad out its balance sheet with more capital was anticipated by many analysts, and a fair number of Wall Street watchers actually thought Tesla would seek more to help it grow based on recent comments made by Tesla CEO Elon Musk.

The Model 3 is set to begin full production this year, with pre-production begun in February with a temporary production line pause to help get processes ready at its Fremont factory ready for the new vehicle.

The last time Tesla announced a stock offering was back in May 2016, when it raised $1.4 billion. It used those proceeds to significantly ramp up the production of its vehicles.

Tesla Inc shares rose $8.12 (+3.18%) in premarket trading Thursday. Year-to-date, TSLA has gained 23.21%, versus a 6.97% rise in the benchmark S&P 500 index during the same period.

TSLA currently has a StockNews.com POWR Rating of B (Buy), and is ranked #11 of 24 stocks in the Auto & Vehicle Manufacturers category.

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