Tesla To Raise Money Through New Stock And Convertible Debt Offerings

Tesla Inc. on Thursday filed for a capital raise, disclosing its intent to sell both common stock and convertible notes.

The stock closed 4.3% higher, its largest one-day percentage increase since late February, and was the second-best performer in the Nasdaq 100 on Thursday. The shares gained as much as 5.6% in intraday trading.

Tesla last week reported a wider-than-expected first-quarter loss and lower sales as well as pushing its promise of becoming profitable again to the third quarter rather than the second.

It also showed dwindling cash reserves, ending the quarter with $2.2 billion, $1.5 billion less than in the end of 2018, thanks in part to a $920 convertible-bond payment in March.

In a call with analysts after the report, Chief Executive Elon Musk was vague about whether the company would tap capital markets.

See also: Tesla should stick to selling cars and not insurance, RBC says

According to the Securities and Exchange Commission filing on Thursday, Tesla plans to offer about 2.7 million shares of additional common stock, with Musk expressing preliminary interest in purchasing up to 41,896 shares or $10 million.

Based on the stock’s closing price of $238.69 on April 30, as noted in the filing, the stock offering could raise $650 million. The stock closed Wednesday at $234.01, the lowest closing price since Jan. 12, 2017.

Tesla also filed for a convertible-note offering of $1.35 billion, or $1.55 billion if Tesla’s underwriters fully exercise their options to buy additional notes. The company said in its filing that the closing of each of these two offerings were not contingent on each other.

Tesla lists Goldman Sachs Group Inc. GS, +0.13%  and Citigroup Inc. C, +0.57%  units as the lead underwriters on the offerings

Asked about the potential for a capital raise on Tesla’s earnings call last week, Musk said: “I don’t think raising capital should be a substitute for making the company operate more effectively.” He continued that he saw “some merit to raising capital” but such a decision would depend on “the right timing.”

Related: Tesla’s earnings were a ‘debacle,’ says longtime bull in scorching commentary.

Bernstein analyst Toni Sacconaghi had commented after the earnings call that Tesla appeared to be “unnecessarily walking a perilously fine line between trying to grow and trying to be self-funding.”

Tesla Chief Financial Officer Zachary Kirkhorn said on the company’s call that Tesla will “be comfortable returning to a place of profitability” in the third quarter once it makes progress on “improving the cost efficiency of the business without sacrificing growth.”

Tesla shares have dropped 30% so far this year, while the S&P 500 SPX, -0.21%  has risen 17%.

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