Just a week after Tesla CEO Elon Musk and Tesla CFO Deepak Abuja admitted during Tesla’s Q2 earnings call that a Tesla stock sale could help it raise additional funds to keep the money flowing during a period of high capital expenditure, the Californian automaker has announced its intentions to do just that.
Early on Thursday morning, Tesla Motors [NASDAQ:TSLA] filed a preliminary prospectus supplement pursuant to rule 424 with the Securities and Exchanges Commission in which it detailed its intent to offer $500 million of new common stock at $238.17 per share — the same price recorded at the close of markets in New York on Wednesday.
In total, the document detailed, around 2.1 million shares would be released during the offering.
The same document listed the intent of Musk to buy an aggregate of 83,974 shares worth some $20 million as part of the same common stock share sale, priced at the same $238.17 dollar value per share.
That announcement, made before the opening of markets on Thursday, was enough to halt the downward trajectory of Tesla shares since last week’s Q2 earnings call, lifting them from the $238.17 price at the end of business on Wednesday to a peak of $242.51 by the end of business yesterday.
This morning, Tesla submitted a revised prospectus supplement with the SEC, detailing that it intended to up the number of shares being offered from 2.1 million shares to 2.7 million shares. Moreover, it would do so at a price of $242 per share, a slightly discount on the close-of-business share price recorded on Thursday.
Given the increased share price and the increased number of shares being offered, the common stock offering will net Tesla some $642.5 million, with Musk maintaining his $20 million investment as part of the offering.
Combined with the $500 million in lines of credit arranged by the automaker earlier this year — which can be extended to a total of $750 million if certain criteria are met — Tesla should have plenty of funds to play with as it continues to funnel funds into multiple high-cost projects.
While Tesla is still spending a portion of its funds on final preparations at its Fremont production facility ahead of the production debut of the upcoming Model X this fall, Tesla’s primary spend at the moment is construction of its massive lithium ion manufacturing and reprocessing plant — known as the Tesla Gigafactory.
Originally estimated to cost Tesla some $5 billion to build, external construction at the Gigafactory is due to finish by the end of the year, with Tesla’s battery partner Panasonic due to enter the factory later this year to install more than $1 billion of specialist lithium-ion battery manufacturing equipment.
But since Tesla launched its range of Tesla Energy products earlier this year, demand for both its domestic Power Wall and industrial Power Pack storage products have been so high that Tesla has purchased additional land adjacent to the Gigafactory to expand the facility to twice its original size.
The doubling of the Gigafactory will not only mean Tesla can produce more lithium-ion battery packs for its Tesla Energy products, but also ensure it has enough cells produced at large enough economies of scale to bring its next-generation Tesla Model 3 to market as promised by 2018. Expected to be similar in size to a BMW 3-Series sedan, the Model 3 is expected to offer at least 200 miles of range per charge at a price point of $35,000 before incentives.
Tesla also hopes to produce it in volumes in excess of half a million cars per year.
With the alpha prototype not yet complete and Tesla spending cash at a rate of around $1 billion every six months, the stock offering announced yesterday and amended this morning — along with the lines of credit secured earlier this summer — should give Tesla a fair chance to make good on its promises to revolutionize the transportation and energy worlds.
The only challenge? Ensuring that its current products continue to bring in money, its Gigafactory meets all its construction and production targets, and something nasty doesn’t happen to the company share price between now and then.
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