It has been apparent for some time now that Tesla was in need of an influx of cash in order to make up for recent losses, and it seems as though the company is finally making that happen. Tesla is raising money via convertible notes and new equity; this morning they filed a registration statement with the U.S. Securities and Exchange Commission.
How much? We are talking upwards of $2.3 billion, at least before discounts and expenses.
Tesla Raising Money in Two Separate Offerings
So how are they going to do it? According to the tentative filing, Tesla plans on offering $1.35 billion in convertible senior notes which would mature in 2024. These notes would bear yearly interest to their owners until they mature.
Tesla also plans to concurrently offer additional shares of their common stock; 2,723,198 to 3,131,677 shares, to be exact.
“Concurrently with this offering of notes, we are offering 2,723,198 shares of our common stock (or up to 3,131,677 shares of our common stock if the underwriters of that offering exercise in full their option to purchase additional shares), in an underwritten offering pursuant to a separate prospectus supplement. The closing of this offering of notes is not contingent upon the closing of the concurrent offering of common stock, and the closing of the concurrent offering of common stock is not contingent upon the closing of this offering,” stated Tesla in the filing.
This stock equity would equate to approximately $650 million to $747 million in capital. These shares would not be listed on any securities exchange or automated dealer quotation system, but rather via Nasdaq.
Elon Musk Joining In
To start off the cash flow, Tesla CEO Elon Musk is already pledging to join in with other investors in this endeavor. The filing states his intent to purchase up to 41,896 shares of the company’s common stock, for a purchase price of approximately $10 million. For someone that is already estimated to own about 20% of the company’s shares (worth about $12.6 billion according to FactSet), this is still a significant pledge of support.
Impact on Tesla Stock
After last quarter’s disappointing earnings, this news may very well help pull Tesla out of the stock market slump they have been experiencing lately. Tesla shares have been down nearly 30% this year, falling to a new two year low this past week to the mid $230s.
There had been some fear that Tesla’s refusal to raise capital to help fund production would lead to serious financial troubles in the near future, but today’s news seems to have stymied some of those concerns. Shares originally fell after the initial announcement, but after Musk revealed that he would be taking part in the purchase of stock, shares rose 4.4% in midday trading.