Tesla seeks to raise $ 2 billion in stock and debt sales

Tesla needs more money. A lot.

After a surprisingly weak first quarter in which it spent nearly $ 1 billion, the company announced Thursday that it would seek to raise about $ 2 billion in the markets.

The electric car maker plans to offer investors 2.72 million shares, which would generate approximately $ 650 million and $ 1.35 billion of debt securities that can be converted into shares at a later date, according to a regulatory document. The plan could generate up to $ 2.3 billion if the demand is large enough that the banks that buy it can sell additional stocks and bonds.

Wall Street analysts, noting Tesla's uncertain progress, had long expected the company to return to public markets to obtain new capital.

"It was a bit inevitable," said Vicki Bryan, general manager of the Bond Angle research company. "He was late."

This is the first time in two years that Tesla has been interested in the capital markets and its largest issue of new shares since it raised $ 2.3 billion in 2016. Since its IPO in 2010, Tesla has sold shares or convertible securities every year 2017, raising about $ 8 billion, according to Dealogic data.

Selling new shares often depresses the stock price of a company, but Tesla shares closed the day up 4.3%, a sign that some investors still believe that the company can achieve its ambitious goals and are ready to finance those dreams.

"This is very important for Tesla," said Ross Gerber, managing director of Gerber Kawasaki Wealth and Investment Management, owner of Tesla shares. "We are very excited because they are able to mobilize capital at very low cost." Tesla's shares trade at high valuations. As a result, the company actually pays little when it issues new shares.

Tesla said its managing director, Elon Musk, would spend $ 10 million to buy new shares.

A half turn for Musk

Mr. Musk had been saying for months that Tesla did not need to raise new capital. Then, when he discussed the company's first quarter results last week, he said, "The idea of ​​raising capital at this stage was interesting."

But that would probably have had more financial meaning when Tesla's share price was much higher. With the stock down more than a third from its peak of 2018, Tesla has to sell more shares to raise the same amount. When new shares are sold, existing shareholders end up with a smaller stake in the company if they do not participate in the new offer.

The fundraising plan also underscored the fact that Tesla relied on the good grace of public procurement investors. Mr Musk said last year that he wanted Tesla to remain private. Discussions with investors sparked a series of events that led Musk to say on Twitter guaranteed financing to do exactly that. The Securities and Exchange Commission said his statement was misleading and Musk then settled with the regulator, who forced him to step down as chairman of the company.