Cleveland, Ohio – Telsa plans to raise up to $1.15 billion to finish funding its high-volume manufacturing plans by offering a mix of stock and debt – up to $282.75 million from stock and $862.50 million from debt – to finance production of its Model 3 electric car.
For all of Tesla’s sales growth, jumping from fewer than 100,000 vehicles to year to about 500,000 is an expensive proposition – one that requires new manufacturing equipment, automation, materials contracts, and expertise. Company officials had been hinting for months that some form of cash raise was coming as the Tesla continues to lose money on vehicle sales.
This will be Tesla’s third billion-dollar cash raise in as many years. Despite financial losses, bullish investors have kept money flowing to the electric-vehicle maker, allowing executives to invest far more of its revenues on research and development than its peers can afford to do.
Analysts had been expecting a larger debt-and-stock offering from Tesla, given the difficulty of rapidly expanding production while still investing in new technologies. The $1.15 billion figure was less than half of what some industry watchers had been expecting. So, despite the fact that issue more shares will dilute the value of existing ones, Tesla’s stock gained Thursday, up nearly $7 in mid-day trading to $262.50, a nearly 3% increase.
About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 17 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.