Musk Seeks More Money
Hot on the heels of yesterday’s Tesla cash-raising bonanza, the electric automaker is looking to boost the size of its stack once again.
After Thursday’s shelf offering of stock and convertible notes, Tesla announced Friday it wants to boost its injection of capital from $2.3 billion to $2.7 billion, issuing further common stock and debt. CEO Elon Musk now says he’ll buy $25 million of the new stock, up from $10 million yesterday.
As Tesla embarks on an expansion of its manufacturing footprint and model lineup, its first-quarter earnings report revealed cash reserves of $2.2 billion — its smallest pile in years. The company ate up $1.5 billion of its available cash in Q1, Reuters reports, leaving insufficient funds to back its promises. Investor confidence suffered.
Yesterday’s sale involved “$650 million of common stock and $1,350 million aggregate principal amount of convertible senior notes due in 2024 in concurrent underwritten registered public offerings,” Tesla said.
In a new set of filings, Tesla upped its offerings.
From Reuters:
The company said in a filing that it had raised its offer to 3.1 million shares, rising to 3.5 million including a tranche for underwriting banks, from an initially planned 2.7 million, priced at $243 per share.
The filing also showed it would place convertible debt worth $1.6 billion, up from an initial planned $1.35 billion.
The supersized offering now amounts to $860 million in new shares and $1.84 billion in debt. Currently, Tesla’s Model Y crossover is due for a late 2020 release, though the automaker still hasn’t confirmed where the new model will see assembly. Overseas, the automaker’s Chinese Gigafactory is under construction in Shanghai.
Looking further into the future, a resurrected Tesla Roadster, pickup truck, and semi trailer await further development and eventual production.
Tesla’s cash hunt agreed with investors, with the company’s stock rising nearly 8 percent in Friday morning trading.
[Image: Tesla]
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Two existential threats to Tesla, car journalists simply don't write about. 1. Way too much dependence on EV tax credits. 2. Other car makers are catching up swiftly. If you haven't invested in Tesla already, I wouldn't at this late stage. Under Trump (like under Bush Jr.) the next financial crisis is in the making; it will devastate tech funds that still haven´t found a sustainable business model.
Tesla's successful offering yesterday gives some relief to those who might have wanted to buy one but worried that Musk's "very stable genius" antics would spook investors enough to put the company in immediate mortal danger. It seems like the fundamental strengths of the cars -- better power and efficiency than competitors, better implementation of the technology than anybody else (better battery cooling, integrated modules, vastly higher computing power), the only hassle-free nationwide high-speed refueling network, over the air updates, stellar safety ratings, etc. -- outweighs nutty blather like "self-driving taxi service will make your car an appreciating asset" and "we're working on a battery that will last a million miles." Forty grand to BMW gets you a laughably inept plug-in hybrid. Forty grand to GM gets you an electric Honda Fit. Forty grand to Hyundai gets you an electric Honda fit minus the rear legroom, if you can even find one to buy. Forty grand to Tesla gets you a fast, sexy, high-tech car that can credibly function as a primary vehicle. Eighty grand to Audi or Jaguar gets you an EV that's almost as good as what Tesla will sell you for forty. I am quickly coming to believe that the strength of the product will overcome the vagaries of the personality cult, just as it did for Apple.