Tesla Plans to Sell $2 Billion of Stock -- 2nd Update
May 18 2016 - 7:11PM
Dow Jones News
By Mike Ramsey and Tess Stynes
Tesla Motors Inc. said it would sell $2 billion in its stock to
help finance production of its Model 3 electric vehicle and to
cover tax obligations for an options exercise by Chief Executive
Elon Musk.
The Palo Alto, Calif., car manufacturer will offer $1.4 billion
in common stock to accelerate production of the coming Model 3. It
plans to build a half million vehicles by 2018. Proceeds also could
be used for working capital and other corporate purposes, the
company said. Tesla expects to raise about $1.7 billion after fees,
it said on Wednesday.
The remaining shares will be sold by Mr. Musk to cover tax
obligations associated with his exercise of more than 5.5 million
in stock options, the company said. Mr. Musk will receive no cash
through this sale, the company said.
Shares of Tesla gained less than 1% in after-hours trading after
rising $6.51 to $211.17 at 4 p.m. on the Nasdaq Stock Market. It
disclosed the share sale after 4 p.m.
Mr. Musk will owe significant taxes on his stock-options
exercise because of increases in Tesla's share price since 2009,
the company said. He paid $36.5 million to exercise the 5,503,972
options, which were set to expire by the end of the year. Those
shares were worth $1.16 billion at Wednesday's closing price.
According to a securities filing, Mr. Musk used a loan from
Morgan Stanley, which is secured against his holdings in Tesla, to
finance the purchase of the options. His total loan amount to
Morgan Stanley stood at $299 million after the share purchase.
Mr. Musk plans to donate 1.2 million shares to charity, the
company said. That would be worth $253 million based on Wednesday's
closing price.
The options exercise, despite the share sales by Mr. Musk to
cover the taxes, will result in Mr. Musk increasing his overall
holdings of Tesla stock.
Tesla has more than 400,000 reservations for the Model 3. The
car is priced beginning at $35,000, below the price tags of Tesla's
other vehicles, the Model S car and Model X sport-utility vehicle.
The Model 3 is due out late in 2017, will seat five passengers and
is capable of traveling 215 miles on a single charge.
Some analysts have expressed skepticism over Tesla's plans to
produce half a million cars during 2018, citing manufacturing
complexities.
The company ended the first quarter with $1.4 billion in cash
after tapping a credit line. It ditched its forecast for producing
positive free cash flow in 2016 and said its capital spending would
increase by 50% more than it had earlier predicted.
An infusion of $2 billion should give the company a big enough
cushion to finance growth over the next year.
Tesla has had only one profitable quarter since becoming a
public company and its losses have grown as it has invested in
growth.
Write to Mike Ramsey at michael.ramsey@wsj.com and Tess Stynes
at tess.stynes@wsj.com
(END) Dow Jones Newswires
May 18, 2016 18:56 ET (22:56 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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