Tesla to raise $1 billion to strengthen business against Model 3 launch

Tesla to raise $1 billion to strengthen business against Model 3 launch

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Tesla is expected to raise more than $1 billion through the sale of common stock and senior notes, according to a Securities Exchange Commission (SEC) filing on Wednesday.

US: Tesla is expected to raise more than $1 billion through the sale of common stock and senior notes, according to a Securities Exchange Commission (SEC) filing on Wednesday, which indicates that the company will issue offerings of $250 million of common stock and $750 million in debt.

Proceeds will be used “to strengthen our balance sheet and further reduce any risks associated with the rapid scaling of our business due to the launch of Model 3, as well as for general corporate purposes,” Tesla said in its SEC filing.

Tesla CEO Elon Musk also plans to purchase $25 million of common stock, or about 10 percent of the deal. The convertible notes will change into cash or shares in 2022, with interest rates and other terms yet to be determined.

Musk alluded to the potential of a capital raise several weeks ago during the company’s fourth-quarter earnings call. He said the launch of the $35,000 Model 3 would push Tesla’s finances “close to the edge”.

To raise the money, underwriters led by Goldman Sachs will have a 30-day option to purchase up to an additional 15 percent of each offering. If they exercise their option to purchase additional shares in full, the total raise would be around $1.15 billion, according to the Palo Alto, California-based company.

The company said in its shareholder letter in February that it expects “to invest between $2 billion and $2.5 billion in capital expenditures ahead of the start of Model 3 production”.

After testing out prototypes earlier this month, Tesla said Model 3 vehicle development is under way in the Fremont, California manufacturing facility, as well as one of the company’s Gigafactories based in Reno, Nevada. Production is set to begin in July.

In February, Tesla revealed plans to construct a total of five Gigafactories to cater to increased solar panel and electric vehicle battery demands. Months earlier, Tesla completed its acquisition of SolarCity as part of its push to become a renewable-energy products company, taking on its $2.89 billion debt load.

The company reported $3.39 billion in cash and cash equivalents at the end of 2016, while total production of its vehicles rose 64 percent the same year compared to 2015.