Tesla Embarks on Cash Hunt, Seeks to Raise $2 Billion

Financial Twitter and Tesla Twitter — groups that are often one and the same — are in hardcore prediction mode after Tesla announced plans to raise $2 billion through the sale of stock and convertible bonds.

The automaker’s move comes after a first-quarter earnings report showed a steep drop in deliveries and automotive revenue, plus a $702 million net loss. Tesla’s cash pile dwindled, quarter over quarter, to $2.2 billion — its smallest stack in years. Among those snapping up shares will be CEO Elon Musk, who promises to buy $10 million in common stock.

It’s a U-turn from last year’s repeated promises that Tesla would not need to raise cash via stock offerings or debt. Of course, things can turn on a dime at Tesla. Earlier this year, Musk expressed confidence that the two consecutive profitable quarters that ended 2018 could continue into the future.

After last quarter’s earnings report, he changed his tune, stating that Q2 isn’t likely to see black ink.

The shelf offering announced Thursday includes “$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 stated, adding, “In addition, Tesla has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering.”

While the announcement prompted a slight boost in Tesla’s stock in after-hours trading, the company’s once sky-high valuation is a thing of the past. With a share price of $243.44 at last check, Tesla’s stock has declined roughly 30 percent since the beginning of the year.

In an earnings call last week, Musk said there was “merit” in raising capital.

Speaking to Bloomberg on Wednesday, Dan Ives, analyst at Wedbush Securities, said, “Musk and Tesla looked in the mirror and realized they needed to change their tune a little on the capital raise because the math doesn’t lie. Based on the profitability trajectory and what we saw in the first quarter, the writing is on the wall.”

At present, Tesla finds itself in the midst of construction of a Shanghai vehicle and battery plant (funded through local debt) and in the early stages of preparing for production of the Model Y, a crossover due out late next year.

[Image: Tesla]