Tesla offers $650M of shares, $1.35B of notes to ‘strengthen’ balance sheet
Tesla (TSLA) confirmed in a press release that it disclosed this morning offerings of $650M of common stock and $1.35B aggregate principal amount of convertible senior notes due in 2024 in concurrent underwritten registered public offerings.
In addition, Tesla has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering.
Elon Musk, Tesla’s CEO, will participate by purchasing $10M of common stock.
The aggregate gross proceeds of the offerings, assuming full exercise by the underwriters of their option to purchase additional securities, would be approximately $2.3B before discounts and expenses.
Concurrently with this offering of common stock and pursuant to a separate prospectus supplement, Tesla is offering convertible senior notes due 2024 to the public in an aggregate principal amount of $1.35B, or $1.55B if the underwriters for the concurrent convertible notes offering exercise in full their option to purchase additional notes.
Tesla intends to use the net proceeds from the offerings to “further strengthen its balance sheet, as well as for general corporate purposes.”
The notes in the offering will be convertible into cash and/or shares of Tesla’s common stock at Tesla’s election. The interest rate, conversion price and other terms of the notes are to be determined.
Goldman Sachs and Citigroup are acting as lead joint book-running managers for the offering, with BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley and Credit Suisse acting as additional book-running managers, and Societe Generale and Wells Fargo Securities acting as co-managers.
#Wolfe Research analyst Daniel Galves downgraded Tesla to Peer Perform from Outperform and cut his price target for the shares to $265 from $375. Tesla’s product is “truly differentiated” with a multi-year sustainable advantage in long-range electric powertrains and highly-assisted driving, Galves told investors in a research note. However, the analyst says it is now clear that “broad consumer awareness doesn’t happen overnight.”
In the interim, he believes shares of Tesla will be driven by investor confidence in the company’s medium-term demand and earnings power. And #Galves no longer has confidence in substantial free cash flow at Tesla until its Model 3 volumes rise to 7,000 per week. As such, the analyst moves to the sidelines saying he can no longer recommend the shares.
Shares of Tesla are up 4%, or $9.09, to $243.55 in Thursday’s trading following the news.
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