Tesla plans to sell $1.7 billion in new stock to fund Model 3

Wed May 18, 2016 6:57pm EDT
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By Paul Lienert and Alexandria Sage

DETROIT/SAN FRANCISCO (Reuters) - Tesla Motors Inc (TSLA.O: Quote) 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.   Continued...

Tesla Motors' mass-market Model 3 electric cars are seen in this handout picture from Tesla Motors on March 31, 2016. REUTERS/Tesla Motors/Handout via Reuters/File Photo