Tesla Is Selling $2 Billion Of Stock And Debt Because Elon Musk's Big Plans Aren't Cheap

Tesla CEO Elon Musk speaks at the unveiling the Model Y hatchback at Tesla’s design studio in Hawthorne, California, just one of the company’s numerous capital-intensive projects.ASSOCIATED PRESSTesla aims to raise at least $2 billion from new stock and debt offerings–on the heels of a bigger-than-expected quarterly loss–to help fund Elon Musk’s seemingly endless push for capital-intensive plans for the electric car and solar power company.  The concurrent offerings include $650 million of common stock and $1.35 billion of convertible notes due in 2024, the Palo Alto, California-based company said early Thursday. Underwriters have a 30-day option to purchase an additional 15% of each offering, which could boost the total amount to $2.3 billion, Tesla said. CEO Musk, already Tesla’s biggest shareholder, plans to buy $10 million of the new stock offering.Musk hinted the move was coming in a results call last month, and after a disappointing first quarter that saw the company fall back into the red with a massive $702 million loss and a $1.5 billion drop in its cash to repay an earlier convertible bond obligation. Tesla also revealed this week in its 10-Q filing that those results would have been even worse had it not been for a big jump in sales of emissions credits that rose to $200.6 million from just $30 million a year earlier. In the nine years since its initial public offering, Tesla has only posted four profitable quarters, of which only two were consecutive. While Musk has promised sustainable profitability at different points, exactly when that may happen remains unclear, particularly with all the projects he’s committed the company to. Potentially more worrisome is whether demand for sleek electric Teslas is cooling, owing to a drop of more than 30% in the the company’s first-quarter vehicle deliveries. Along with the cost of funding construction of multibillion-dollar auto and battery plants in Nevada and China and expansion of solar panel production in New York, Tesla has to cover development and engineering costs for  additions to its vehicle lineup, including the Model Y hatchback, Roadster sports car and Tesla Semi, as well as the assembly equipment to make them. In April Musk also committed the company to a self-driving vehicle technology plan that includes Tesla owners making their vehicles available for a company-operated autonomous robo-taxi service that, in theory, will make money for them and Tesla. But first, it has to finish developing the technology. Workers in rain gear wait ahead of an event at the site of the Tesla Inc. manufacturing facility in Shanghai, China, on Jan. 7, 2019. © 2019 Bloomberg Finance LPGarrett Nelson, an equity analyst for CFRA with a ‘Sell’ rating on Tesla shares, noted that the timing of the offering is “inopportune” as it coincides with the stock’s steady decline so far this year.  “We expect TSLA to trade higher on Thursday, as the move is likely to prompt some short covering,” Nelson said in a research note. “However, we continue to believe TSLA will be hard-pressed to hit vehicle sales guidance in the face of the ongoing phase-out of the federal EV tax credit, and competition is a major concern with dozens of fully or partially electric vehicles set to come to market.”Tesla was up about 3% to $241.54 in midday Nasdaq trading, after declining more than 20% this year through May 1.Goldman Sachs and Citigroup are leading the offering, Tesla said. BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley and Credit Suisse are additional book-running managers, and Societe Generale and Wells Fargo Securities are co-managers.

The Source: Alan Ohnsman, Forbes Staff. The content of this article does not necessarily reflect the views or opinion of Global Diaspora News.