Tesla to Raise $2 Billion in Debt and Stock Offerings


The company said in the filing that it would seek to raise $650 million in new shares and $1.35 billion in debt, with underwriters having the option to buy an additional 15 percent of each offering, potentially raising the proceeds to $2.3 billion. Stock in Tesla jumped Thursday morning by almost 5% at the news, although the company's shares recently have traded at their lowest point in more than two years. The company has plans for new models that include a large truck, the Semi, and an SUV, the Model Y. Tesla is also developing facilities in China.

Musk is also said to be participating in the deal by purchasing $10 million of common stock. Tesla also released that its cash reserves had fallen to $2.2 billion, which according to the Wall Street Journal, represents a 40-percent loss over the "previous three-month period". It ended its first quarter with $2.2 billion in cash on hand. Musk said during a conference call that Tesla might need to raise capital again. These gains came after the company's announcement that it is seeking to raise almost $2 billion by offering new shares and debt issues.

Goldman Sachs and Citigroup will manage the offering, with BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley and Credit Suisse will be additional book-running managers. This article is strictly for informational purposes only.

"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.

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Tesla had said on Thursday it would raise up to $2.3 billion in new capital through shares and debt. Hence, Tesla may have to offer a higher interest rate than in the past to entice investors to take a risk on a company whose long-term viability is far from certain. The cost to insure $10 million of Tesla bonds against a default for five years went down from $1.7 million to $1.5 million upfront.

The logo of Tesla is seen in Taipei October 7, 2017.

The announcement led to a 5 percent increase in Tesla's shares before the onset of Wall Street transactions.