Tesla Rallies After Filing For Offering; Musk Could Buy Up To $10M Worth Of Shares

A Wednesday filing with the Securities and Exchange Commission revealed Tesla Inc TSLA’s new common offering of about 2.72 million new common shares at the price of $238.69 per share.

Management had warned of a potential raise in a Monday 10-Q filing, which cited a halt of SolarCity development.

What Happened

Tesla also filed a prospectus supplement, which revealed a debt offering of $1.35 billion in convertible senior notes. The notes mature in May 2024, with interest payable May 15 and Nov. 15 of each year. Management didn't report the interest rate or the conversion rate to common stock.

Concurrent with the filings, Tesla published an S-3 citing its ability to issue debt securities or common stock “from time to time, in one or more offerings.” The prospectus was an “automatic shelf registration statement” reminding of Tesla’s ability to buy or sell and of the legal procedures by which it would do so.

Why It’s Important

Despite Tesla’s resistance to confess its need for a capital raise, analysts have long expected this. Morgan Stanley had forecasted a $2.5-billion raise in the third quarter, and Bank of America and JPMorgan predicted an impending offering.

“Based on our forecasts, we do not expect TSLA to turn the corner on free cash flow until after 2020, and, as such, forecast at least one sizeable capital raise before then to make ends meet, least of all to fund its ambitious growth plans,” Bank of America wrote.

Tesla’s Model 3 ramp ambitions, Shanghai Gigafactory and new product rollouts were expected to drain too many resources to support profitability in the near term.

What’s Next

CEO Elon Musk has expressed a preliminary interest in purchasing up to 41.9 million common shares for about $10 million.

The new offering may not be Tesla’s last.

“As always, we continually evaluate our capital expenditure needs and may decide it is best to raise additional capital to fund the rapid growth of our business,” according to the company's 10-Q filed Monday.

Tesla’s stock rose more than 5 percent Thursday morning to $$246 per share.

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