Tesla to raise around $500 million in public offering

DETROIT — Electric car maker Tesla Motors said Thursday it hopes to raise around $500 million in a stock offering that comes as it prepares to roll out its highly anticipated new SUV.

Tesla will offer 2.1 million shares and expects net proceeds of $492.6 million. Tesla could make up to $566.5 million if the underwriters exercise their option to buy additional shares.

Tesla CEO Elon Musk intends to purchase $20 million worth of stock.

The company’s shares rose 1 percent to $240.94 in late afternoon trading.

Wall Street had been expecting the move. Asked last week during the company’s second-quarter earnings call if Tesla planned to raise capital, Musk said there might be value in doing so “as a risk reduction measure.”

“I don’t think that there’s not a need to raise equity capital,” Musk said. He said the company should have at least $1 billion in cash on hand; it ended the quarter with $1.2 billion in cash and cash equivalents.

In a note to investors, Stifel analyst James Albertine said the offering should have a minimal impact of on per-share earnings. He views Musk’s intention to purchase shares and Tesla’s plan to use the money for future growth as positives. Albertine has a “buy” rating and a $400 price target on Tesla’s stock.

The Palo Alto, California, automaker will begin shipping its third vehicle, the Model X SUV, in a few weeks. It’s also investing heavily in a $5 billion battery factory in Nevada, which will make batteries for both its cars and its Tesla Energy home battery business. The factory is set to start production in the first quarter of next year.

Tesla said it needs the cash to further development of the Model 3, a lower-cost electric car due out in 2017. The auto industry typically spends about $1 billion developing new cars and putting them on the market.

Tesla is also rapidly expanding its network of Superchargers, which can add 170 miles to a Model S battery in 30 minutes. Tesla told shareholders this month that it now has 487 Supercharger stations globally and is opening one nearly every 24 hours.

All that doesn’t come cheap. Tesla obtained a credit line of up to $750 million in June, but it spent $359 million during the second quarter. Its cash total of $1.2 billion was down from $2.7 billion a year ago.

Tesla, which was founded in 2003, has never made an annual profit under U.S. accounting standards. Musk said earlier this year that he expects Tesla to start making money in 2020, when the Model 3 is in full production.


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