Tesla to raise another $500 million in stock offering

August 14 01:08 2015

Facing an array of expansion costs, electric-car maker Tesla Motors said Thursday that it is going to raise $500 million through the sale of an additional shares of common stock. In a show of confidence, Tesla’s statement also says that CEO Elon Musk says he personally plans to snap up $20 million in additional Tesla shares as part of the offering. And in addition, Tesla says the underwriters will have a 30-day option to buy up to $75 million of additional common shares.After Report of Model S Fire, Shares Of Tesla Drop 6 Percent

Tesla shares reacted positively to the news. They were up about 2.7% in midday trading, or $6.37 to $244.54. But some Tesla watchers had hesitation. “The cash infusion has been expected for some time, and is necessary to keep Tesla solvent,” says Karl Brauer, analyst for Kelley Blue Book. “Between the half-a-billion in stock offering and $750 million in credit, the company will substantially extend its financial lifeline. However, as a 12-year-old company that’s never made a profit one has to question when the pot of gold will finally materialize at the end of this long rainbow.”

Last week, Tesla reported that its second-quarter loss nearly tripled to $184.2 million compared to $61.9 million in the same quarter last year. It blamed expansion costs. At the same time, revenue increased 21% to $878 million over the same period. Tesla, based in Palo Alto, Calif., says it will use the capital infusion to open more retail stores and service centers. It says it will also enhance its network of high-speed “superchargers,” invest in development of a cheaper mass-market car called the Model 3 still a few years away and use proceeds for the sprawling battery “Gigafactory” that Tesla is building outside of Reno, Nev. Some of the money would go to general corporate purposes.

Even as it faces huge costs related to electric cars, Tesla thinks it has a lucrative side business on tap in stationary energy storage devices. These would be battery packs for homes, businesses and utilities that could store power from solar power generated during the daytime for use at night. Tesla is making the offer through two lead managers, Goldman, Sachs and Morgan Stanley.