DETROIT/SAN FRANCISCO Tesla Motors Inc (TSLA.O) will offer up to $1.7 billion of new common stock to finance the accelerated launch of its new Model 3 electric sedan, the electric luxury car maker said on Wednesday.
Tesla shares fell 2.2 percent following the announcement, which came after the market closed. They were $206.59 in after market trading, well below the $242 a share price at which the company last issued new shares, in August 2015.
Tesla, which has posted operating losses since its initial public offering in June, 2010, said in a prospectus it expected to sell as many as 8.2 million shares at a price of $204.66 a share.
Last month, Tesla Chief Executive Officer Elon Musk said he might need to raise additional cash after receiving 373,000 reservations for the Model 3. Musk said he would respond to demand for the Model 3 by tooling up Tesla's factories to build 500,000 vehicles a year in 2018, two years earlier than planned. The Model 3 will start at $35,000 before tax breaks.
In tandem with the sale of shares by Tesla, Musk will sell nearly 2.8 million of his own shares, which at current prices is worth almost $600 million.
Tesla must fund as much as $2.25 billion in capital spending Musk has forecast for this year, mainly to equip its factories and suppliers to build the Model 3. Tesla had about $1.44 billion in cash and cash equivalents as of March 31, including borrowing from an asset backed credit line.
Tesla reported a net loss of $282.3 million for the first quarter, and noted in its prospectus "we have a history of losses and have to deliver significant cost reductions to achieve sustained, long-term profitability and long-term commercial success."
Suppliers and analysts say Musk's timetable for reaching production of 500,000 vehicles a year is ambitious, at roughly 10 times the company's production in 2015.
The Tesla prospectus highlighted strong demand for the Model 3.
"We have obtained this level of reservations without any advertising or paid endorsements, with only a few social media posts leading up to the March 31st unveiling, without anybody but those who were in attendance on March 31st having had an opportunity to test drive the car, without yet publicly disclosing numerous features about the car," Tesla stated.
"If we wanted to, we believe that we could further increase the number of Model 3 reservations with minimal effort," the company added.
Tesla has disclosed that the final design of the Model 3 will not be completed until next month.
Tesla previously has raised more than $4.5 billion in debt and equity offerings over the past six years. Since it raised $226 million in an initial public offering in June 2010, Tesla has gone back to the capital markets several times.
Musk will sell 2.8 million of his own shares primarily to pay taxes related to the exercise of vested stock options to purchase 5,503,972 Tesla shares. Musk already controls a 26.7 percent stake in Tesla, according to the company's latest proxy statement. The exercise will increase Musk's stake in the company, Tesla said.
(Reporting by Paul Lienert in Detroit and Alexandria Sage in San Francisco. Editing by Joseph White and David Gregorio)
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Updated Date: May 19, 2016 05:15 AM